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.
Telia has reported a solid set of Q3 numbers, with numbers in-line adjusting for a one-off in Sweden, but has changed guidance to now exclude energy costs, which were a 3.8pp drag to EBITDA in Q3, and are currently expected to be c2pp drag to 2023 EBITDA.
We recently published a deep dive into inflationary cost pressures, focusing specifically on energy and wages, looking at how the sector might mitigate some of the risk – read that report HERE. In this piece, we update our thoughts given the fall in electricity wholesale prices, and the announcement of several Governmental support packages.
One of the most common questions we have received over the past few months is how the European telcos will be able to cope with rising energy prices. This deep-dive note sets out our answer to this; the broader impact of inflation on their businesses and which companies are best & worst positioned.
The Equity earnings season is in full swing, and so far, there have been some encouraging prints, with Elisa (HERE), Telia (HERE), Orange (HERE), Tele2 (HERE), Swisscom (HERE), KPN (HERE) and Proximus (HERE) all posting good numbers.
If truth be told, before writing this report we were sceptical about the financial merits of ESG investing; however, in doing the research, we found clear evidence of better TSR from Telco ESG leaders compared to laggards, that those with better Governance (no Government ownership) outperformed the others, and that ESG can help companies in the sector have a lower cost of borrow – these three things alone are good reason enough to look at ESG from a financial perspective in our view.
The last 10 days have been busy for sector newsflow - and on top of that, we also held our 6th NSR/ BCG 5G conference. One of the topics to come out of company commentary last week was a sharp increase in the rhetoric around the potential for in-market consolidation - both between operators and tower companies. In case you missed it, our Global Weekly published over the weekend ran through our latest thoughts on this as it pertains to the European telecoms operators. It probably wasn't at the to...
If truth be told, before writing this report we were sceptical about the financial merits of ESG investing; however, in doing the research, we found clear evidence of better TSR from Telco ESG leaders compared to laggards, that those with better Governance (no Government ownership) outperformed the others, and that ESG can help companies in the sector have a lower cost of borrow – these three things alone are good reason enough to look at ESG from a financial perspective in our view.
October hasn’t been a great month for the European telecoms sector. Up until the end of the September, the telecoms sector has been up 13% total return (vs. the market up 17%), but during October, the sector has been down 3%, vs. the market up 5%, opening up a sudden period of wider underperformance. Is this justified?
Telia has reported a mixed set of Q3 numbers, with a good SR performance (good KPIs and ARPU), but an in-line (inc media) to weak (telecom) EBITDA result (albeit ahead if one adjusts for pension phasing), and Telia now say that FY21 EBITDA will be in the low end of the range for the full year.
Private Equity has a long and good track record in the sector, with an average unlevered return of 21% per annum compared to the sector at 2% over the same comparable periods. We think that they will continue to do deals – the most recent rumour being a Telefonica fibre deal. We think that there are still opportunities for them to make a good return, be it buying whole businesses, TowerCos or FibreCos. However, given the lower number of direct takeovers now available following recent deals (only...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
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