TalkTalk fell on Friday as RBC Capital Markets cut the stock to 'sector perform' from 'outperform' and reduced the price target to 125p from 140p.
While TalkTalk has performed well since its equity placing, the bank is concerned that BT is about to reboot its consumer strategy with a primary focus on convergence.
“Having stepped back from a converged strategy using an mobile virtual network operator, we think TalkTalk is relatively defenceless against any aggressive BT bundling, which could lead to heavy subscriber losses,” RBC said.
The bank also highlighted pricing issues, saying that although TalkTalk remains value-oriented it is not the cheapest, with Vodafone undercutting it in both slow and fast fibre.
“We believe TalkTalk needs to demonstrate continued growth in its core residential subscriber business. Average revenue per user needs to stabilise, following recent weakness (wholesale dilution/mix effect) and the impact of resetting (down) subscriber prices.
“Potential risks for TalkTalk include an increase in competitive intensity at the low end of the UK market through either new entrants or existing players replicating TalkTalk offers at lower price points.”
At 1050 BST, the shares were down 1.3% to 122.50p.