When was the last time we could write that the EU Telecoms sector has been the second best performing sector in the market YTD? As a result, this raises the question of whether the outperformance can continue. We believe regulation will ultimately determine the answer to this question.
Cityfibre has announced a new wholesale agreement with Sky this morning – a headline we have been waiting for over the past 3 years. Therefore, we think both our BT and Cityfibre models are well prepared for this. In this note, we run through the potential impact from the deal and its details. We then look at what next steps we should be expecting from here. (Our Cityfibre model is also available on request for those interested).
Given our recent note on Drahi switching the way he owns his BT shares, the Bharti Global announcement to buy his 24.5% stake is very timely. In this note, we run through the mechanics of how we think this will work, and what this might mean.
Ever since Drahi’s surprised people by buying a 12% stake in BT back in 2021 and scaled up to 24.5% by 2023, there has been much discussion about how Drahi owns his stake and how it might be financed. This has material implications for any potential overhang on BT’s position, and our new analysis of his structuring leads us to believe that any overhang is much lower than the market might fear.
BT reported reasonable Q1 financial results this morning, but investor focus will be on a further deterioration in broadband line losses to -196k (-122k in Q4). In this note, we take a look at where these broadband losses might be going and implications for the broader UK broadband market. This is therefore also relevant for all credit investors currently looking at TalkTalk.
European Telecoms has had a reasonable first half of 2024 – up 7% vs. the market up 9% - and is up 15% since January 2022 – bang in line with the EU market. The sector trades in line with the market on P/E for similar earnings growth, but we still see two major structural levers of upside:
Given the moving dynamics in the UK broadband market, we revisit all our bottom up assumptions for Openreach coming away more positive on the longer-term upside in the asset, despite some near-term headwinds from line losses. This remains a conviction Buy for us and we run through all our key assumptions and views in this note, and also the potential impact for VMO2.
Earlier this year, Cityfibre bought LitFibre, but over the weekend, we saw a larger UK altnet consolidation deal between Netomnia and Brsk. In this note, we review the implications of this deal, the next steps for the UK altnet landscape and what this deal might mean for Openreach/ BT.
BT has reported Q3 results marginally ahead of consensus expectations and all FY24 financial guidance has been re-iterated. Today is also the first day in the job for new CEO, Allison Kirkby, so in this note, we look ahead to what she could be focused on for the FY results in May and we review the Q3 trends in more detail and what stands out.
The start of a New Year can often herald a barrage of Look Ahead notes – and last month we published our own Look Ahead note for the telecoms sector in 2024. However, in this note, we really aim to look ahead focusing on a new technology that could potentially have longer-term and far reaching implications for the telecoms sector: stratospheric drones.
On Monday, we published our sector outlook for 2024 and one of our key supports for the sector is the idea that the regulation can act as a tailwind for the sector. Readers of our work will know we have been exploring the upper-6GHz spectrum band, and therefore we have been interested in the World Radio Congress decision taken on this last week. In this note, we review next steps on this potentially transformative spectrum band.
After many years of headwinds, the EU telecoms sector has now performed in line with the market over the past two years supported by a gradual reduction in the risk profile as regulatory tailwinds help make earnings trends more predictable. In 2023, all of the major telcos outperformed the market, with the aggregate performance held back by Vodafone. We believe the EU telecoms sector is set for a good 2024 with a continued reduction in risk perception helping to support a multiple re-rating.
We just wrapped up the second day of the BCG and New Street Research Future Series conference, which this year was focused on the Future of Mobility and Convergence in the Era of AI . The second day featured discussions with over 30 companies, including AT&T, British Telecom, Deutsche Telekom, Frontier, Globalstar, Liberty Global, Omnispace, Recon Analytics, Samsung, Telecom Italia, and Vodacom.
This morning Ofcom has announced proposals to ban in-contract inflation-linked price rises for retail telecoms service in the UK. Inflation-linked pricing mechanisms have been broadly adopted by UK operators, helping to provide much needed support to service revenue growth in recent years. This rare regulatory intervention into retail pricing makes for a bad headline, but will likely have limited impact if inflation returns to lower levels.
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