Jump to content

European Telecoms


Packer16
 Share

Recommended Posts

This appears to be a bombed out sector.  Has anyone looked at these?  It looks like Telecom Italia, OTE and Telefonica still have growth due to their emerging market exposure.  These have EV/EBITDAs in the 4s to 5s range and FCF yields in the low 20%. 

 

Packer

Link to comment
Share on other sites

This appears to be a bombed out sector.  Has anyone looked at these?  It looks like Telecom Italia, OTE and Telefonica still have growth due to their emerging market exposure.  These have EV/EBITDAs in the 4s to 5s range and FCF yields in the low 20%. 

 

Packer

 

There is a Telefonica thread.

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/tef-telefonica/msg74763/#msg74763

 

Portugal Telecom is another one. The main risk is their Euro debt if those countries leave the Euro, the debt load is huge.TEF and PT have large Latin American operations but still something to handicap.

 

A good case study is the Telecom Argentina default of 2002.

 

http://news.bbc.co.uk/2/hi/business/1907607.stm

Link to comment
Share on other sites

kpn could also become an interesting opportunity.....

 

the combination of right issue dilution, proceeds being used to pay off debt and the pressure from slim could generate an interesting opportunity

 

regards

rijk

 

 

http://www.reuters.com/article/2013/02/20/us-kpn-americamovil-idUSBRE91J0ZN20130220?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28Business+News%29

 

 

Link to comment
Share on other sites

I believe France Telecom is the cheapest EU telecom by far with the least debt load (around 2 Net debt/EBITDA) and the longest fixed rate debt maturities (9 years).

 

They usually generate EUR 8-9B in EBITDA-CAPEX per year, pay 1.5B in interest, and 1B in cash taxes, leaving around 5.5-6.5 FCF per year.

 

Market cap is EUR 20B, so the FCF yield is somewhere around 30% at current share price.

 

 

Link to comment
Share on other sites

Slim backs KPN €4bn rights issue

http://www.ft.com/intl/cms/s/0/d08da50c-7b45-11e2-8eed-00144feabdc0.html

 

Under the agreement KPN will execute a €3bn rights issue and issue hybrid bonds making up the additional €1bn. The agreement is subject to shareholder vote on April 10.

 

América Móvil’s support came as a surprise to some analysts and bankers who expected Mr Slim to make more demands from KPN’s management. The rights issue, originally earmarked for €4bn, prompted speculation that Mr Slim would consider buying the company or seek to uproot senior management.

 

“Any investor when faced with a company’s decision to issue €4bn when it has a market capitalisation of less than €5bn will ask: is this management credible?,” one person close to the deal said.

 

“They [AMX] certainly weren’t handled in the best way in terms of getting information,” the person said, adding there was still tension between the two companies over KPN’s failure to inform América Móvil ahead of its decision to seek a rights issue.

 

The move will dilute Mr Slim’s stake in KPN. He has already lost €1.7bn since he battled with KPN management last year to acquire a 27.5 per cent stake in the company.

 

Link to comment
Share on other sites

  • 2 weeks later...

 

 

Surprising there's no Vodafone thread. Considering their Verizon Wireless stake they look pretty cheap too.

 

Vitaliy Katsenelson

 

Vodafone Group is one of the largest global mobile phone companies in the world and yields more than 8 percent, counting annual recurring “special” dividends. It has an A-rated balance sheet, and it can pay off any annual debt maturity from its ample free cash flow. In addition, at some point Europe will come out of what seems to be a perpetual recession, and Vodafone’s earnings growth will accelerate. The company’s crown jewel — its 45 percent stake in Verizon Wireless — will be monetized. The Indian market, where Vodafone is a big player, will continue to improve, and the company will start earning a reasonable return on investment there. Last, our societal addiction to being able to access the Internet anywhere at any time on any device will kick into ever-higher gears, and data sales will accelerate Vodafone’s revenue growth.

Link to comment
Share on other sites

Talk stays cheap for Vodafone and Verizon

http://www.ft.com/intl/cms/s/0/2131d3ba-8682-11e2-ad73-00144feabdc0.html#axzz2MzskH3GK

 

The Verizon management has made no secret of its desire to buy a business that generated an $8.5bn dividend last year. Fran Shammo, Verizon chief financial officer, again told a conference this week that “there was nothing new to report on the Vodafone venture”, repeating that “Verizon has always been interested in owning all of the US wireless business.”

 

Vittorio Colao, Vodafone chief executive, has also been consistent in his message about the stake in Verizon Wireless, describing himself as the custodian of an asset that sits outside core operations. The sale of the 45 per cent stake could raise as much as $115bn for Vodafone.

 

In Barcelona last week, Mr Colao again said that he kept “an open mind” to a situation that is reviewed at length in a board meeting twice a year.

 

As such, in theory, there is a willing buyer and a potentially willing seller. The conditions have also improved for a deal – certainly much better than during the fractious relationship that existed between the two companies’ previous managements that saw the Verizon Wireless dividend frozen for many years.

Link to comment
Share on other sites

I have been looking at the telecoms for quite some time - as there seems to be opportunity.

Traditionally - after the TMT bubble, they were seen as poor in share appreciation/high in dividend yield.

I think a lot of investors have kept these shares for its defensive character and yield, just as to

realize that they are also impacted by the european crisis (especially in the 2nd half of 2012).

Many institutions have thrown in the towel.

Currently the cheapest seems to be Telecom Italia, but as has been pointed out, there is the

euro exit risk. So France Telecom seems the best in terms risk/reward - also KPN, once

the dilution is factored in. While looking at the FCF yield is important, one should not forget, that

some of them underinvest vs the traditional line like 15-20% capex requirement.

Further, in many countries the telecoms have been loosing ground to the cable companies

for the fixed line triple play business, but in some countries like the Netherlands this seems to

be reversing as FttH is coming, which puts the telcos in advantage again.

Down the road, the 4G rollout could bring devastating competition - especially in the low end space.

There will be essentially 3 ways to reach the customer - cable, telephone, 4G - and all will be

able to stream movies. I guess many people will then cut the cord and have all over their wireless

for a all-flat rate which is lower than the combined rates are now. That's as commodity like is it may

become....yet it may take a few years for the 4g to reach that capacity.

 

Link to comment
Share on other sites

  • 1 month later...

I bought some France Telecom because of the relative low price for the cash flow and on the speculation that bond investors will allocate more funds to stocks. I also believe that the switch to mobile computing will continue creating demand even in a recession. The stock price may dip on crises in Europe and a cheaper Euro so I left room to add. There seemed to be plenty of room to cut costs and a willingness to lower prices to compete. I have a general bias favouring French management.

Link to comment
Share on other sites

  • 2 months later...
  • 2 years later...

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...