Morningstar | Proximus' Shares Suspended Pending News; No FVE Change
Proximus' stock has been suspended from trading on Jan. 9 due to rumours regarding a pending restructuring announcement. The Belgian media has reported that Proximus will announce layoffs of around 650 employees. While such layoffs would require upfront costs and reduce Proximus’ short term free cash flow, they should allow greater cost savings later, beyond what we already anticipate. Thus, we don’t anticipate a change to our EUR 28 per share fair value estimate. We also think this is a bit of a shot across the bow at the government’s proposal of setting aside spectrum for a fourth wireless operator in the auctions due later this year.We don’t think a small market like Belgium can support a fourth operator. Part of our narrow moat rating is based on efficient scale, our view that additional operators won’t enter the market due to their inability to generate a fair return on investment. If a fourth operator entered we would review our narrow moat rating and fair value estimate for possible downgrades. As the government owns about 53% of Proximus and has elections coming in May near the time companies must announce their intention to participate in the auction, concerns of additional layoffs and increases to unemployment could change the government's mind to set aside low-cost spectrum for a new entrant.
Proximus supplies integrated telecommunications services on the Belgian market. Co.'s activities are divided into four segments: Consumer Business Unit (CBU), which sells voice products and services, internet and television, on fixed and mobile networks, to residential customers; Enterprise Business Unit (EBU), which caters to professional customers; Service Delivery Engine and Wholesale, which centralizes all the network and IT services and costs, provides services to CBU and EBU and sells these services to other telecom and cable operators; and International Carrier Services, which focuses on international carrier activities.
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