The telecom sector – off to a false start in 2014?
Since the beginning of this year, telecommunication stocks have not performed up to expectations.
There are a number of possible reasons for this:
- The European telecom market lags behind the US and Asian markets in terms of capex,
- Political interference such as antitrust laws, Lack of profitability visibility: Can fixed-line operators take advantage of super-fast broadband access and can they attract mobile market share as an add-on?
- A slow start to new capex strategies (there is an investment backlog of about €20 to €25 billion),
- Existing operators are being challenged by new entrants, who are rapidly gaining market share.
It’s estimated that a large part of the market’s value creation has already been achieved. The amount of value created in the last few years is in the region of €60 billion (€18 b from mergers and acquisitions, €18 b through cost savings programs, and €25 b due to price increases).
Nevertheless, there are still a few hidden treasures around:
- Some cable operators are better positioned to take advantage of the value creation chain and they can benefit from their technological advantage, e.g. Liberty Global,
- Challengers such Iliad S. A., are rapidly gaining market share,
- Global operators such as Telecom Italia may spin-off some of their operations.
Quick-links to company reports: Telecom Italia, Telekom Austria,
Quick-link to sector report