Telekom Austria confirmed at BUY, TP EUR 7.50 - Telecom sector becoming more defensive
We reiterate our BUY call for Telekom Austria shares. In our view, the telecommunication sector is visibly more defensive than in the aftermath of the financial crisis more than ten years ago. We especially point to a smaller impact of roaming revenues (which we now see at 4-6% of service revenues in countries with strong tourism activity vs. about 12-15% back then), new all-in tariff schemes making revenues less dependent on minutes of use and data consumption as well as a higher share of post-paid subscribers vs. pre-paid ones. In addition, the current boost to digital ways of communication should be supportive for fixed net infrastructure and bandwidth for business and retail subscribers. We set a TP of EUR 7.50 vs. EUR 8.40 before. The reduction of our TP is the result of lowered earnings estimates (EBITDA adj. revised downward by on average 3% in FY 20-22e) and taking back the intended cut of the Austrian corporate tax rate to 21% from currently 25%, which we see less likely in the current situation characterised by widening fiscal deficits.Telekom Austria is engaged as full service telecommunications providers of long distance, local and wireless services, corporate data communications services as well as internet services and television broadcasting. Co. generates revenues from fixed line services and mobile communication services to individuals, commercial and noncommercial organizations and other national and foreign carriers. To a lesser extent, Co. generates revenue from the sale of mobile communications handsets. Co. also supplies telephones and technical equipment for telephone communications. These activities are conducted primarily in Austria, Croatia, Slovenia, Bulgaria, Serbia, Macedonia and Belarus.
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
The Institutional Equity Research team consists of roughly 15 analysts, both in Vienna and the CEE countries. Our analysts provide long-standing sector expertise in tandem with profound local market know how and a sectoral approach across the entire region.
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