This report covers changes to our model to incorporate recent management commentary at investor conferences. We have increased broadband losses estimate. We also lowered revenue and EBITDA slightly. The company needs to stabilize EBITDA and reduce leverage. Progress on the first remains sluggish and the second won’t be easy. We remain on the sidelines.
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.
Today, our colleague Chris Hoare has published two thematic notes looking at Sub-Saharan African telecoms companies. These focus on the potential for market structures and revenues to improve, and especially after periods of currency weakness (which has been notable in Egypt and Turkey).
Clearly the biggest issue for them is whether the merger with Vodafone UK will be approved or not. As one would also expect they couldn’t be drawn on any new substantive comments on this while the CMA process is ongoing. For our detailed thoughts from May on the CMA Phase 1 findings on that deal, please see our expert call on the topic.
Sotheby’s has announced that it has sold a minority stake to ADQ, an Abu Dhabi-based investment and holding company for US$1bn. Under the terms of the agreement, “ADQ will acquire newly issued shares of Sotheby’s to reduce leverage and support the company’s growth and innovation plans” – details are thin, but in this short piece we look at how the proceeds might be used and how the price compares to our valaution.
This morning Vodafone finally announced that they have sold a further 10% stake in Oak Holdings (the Vantage Towers holding company) to the consortium led by GIP and KKR, for €1.3bn of proceeds. In this brief note, we run through what this implies for Vodafone and other tower valuations.
Broadband industry growth has slowed over the last couple of quarters. For 2Q24, we expect reported broadband net adds below last year and pre-pandemic levels. We estimate that after adjusting for the one-time impact of ACP related disconnects, net adds were still below last year but were in-line with pre-pandemic levels. We think consensus expectations for the quarter are a little too negative, especially for Cable, and we expect reported adds to be slightly better than expectations.
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:
Broadband subscriber losses in 2Q24 will likely be better than we thought previously because more of the ACP impact will be in 3Q24 than we thought previously (full year estimate remains unchanged). We also lowered revenue and EBITDA slightly. The company needs to stabilize EBITDA and reduce leverage. Progress on the first is slow and the second won’t be easy as it seems debtholders have organized. We remain on the sidelines.
Vodafone’s decision to sell Softbank KK in Japan back in 2006 and swap the proceeds into Hutchison India in 2007 might well go down as one of the worst telecom M&A swaps in history. Vodafone’s exposure to India has caused nothing but difficulties for them, but this morning Vodafone announced that they have sold an 18% stake in Indus Towers through a block trade, raising €1.7bn in gross proceeds.
In this iteration of “Broadband Trends” we explore the drivers of the slowdown in the broadband market and the path ahead over the next couple of quarters as the industry works through the unwinding of ACP. We also reprise our work on the competitive positioning of the various operators based on relative NPS scores.
There has been a lot of focus on the recent change in mobile price points from SFR/Bouygues. Orange has underperformed the CAC40 by c10% over the last 10 days. Most commentary we have seen, seems to worry that the move by SFR will start a new price war at the high end. We think that is probably not going to happen, and explain why in this report. That is good news for Orange, that looks oversold in our view.
Unfortunately, this report is not available for the investor type or country you selected.
Report is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.