Investors in Europe's biggest telecom operators have had a stomach-churning ride for the past three-and-a-half years, as the chart published below indicates. Every one of the region's "big six" telcos has witnessed a double-digit percentage fall in its share price since December 2015, with the long-suffering BT and Telecom Italia experiencing the most vertiginous drops.
The loss of shareholder value reflects the difficulties companies face in some of the world's most competitive markets, where authorities sticking up for consumer interests remain stubbornly opposed to merger activity. Competition may grow fiercer with the launch of next-generation 5G networks, too. Italy's Fastweb this week secured a license to build a fifth mobile network after Germany's Drillisch recently picked up the 5G spectrum it needs to erect a fourth German network.
In a downbeat assessment of Europe's telecom market, Mark Habib, a telecom analyst with S&P Global Ratings, said the industry had underperformed its broader index by more than 20% in the last three years. In the face of weak growth prospects, operators are aggressively cutting costs to boost profit margins, with some companies now exploring asset sales, he said in a research note issued today.
UK-based Vodafone provides an example of both activities. CEO Nick Read, who took charge in October last year, is taking an axe to headcount in Italy and Spain, where Vodafone has struggled against its rivals, and pursuing the "automation" of customer service and other tasks. Last week he announced plans for a towers spin-off that could be valued at more than €18 billion ($20 billion). "Tower and fixed-line assets can yield mid-teen multiples, double that of integrated telecoms," said Habib. Such divestment efforts are attracting interest from hedge funds and infrastructure buyers, he said, but warned of a "potential loss of differentiation" for operators, with "negative consequences for business profiles."
light reading |
.jpg)
