'The name is Bond…..Telco bond,' DB says on 2025 outlook for European telcos

Optronics Technologies SA

05/12/2024 09:46

** Deutsche Bank sees European telecoms groups returning
their "bond proxy" characteristics in 2025, citing improving
cashflows, stronger balance sheets, higher returns and growth
visibility
    ** It expects to see valuation multiples expanding modestly
in 2025, with the sector trading at an average EV/EBITDA of
5.5x, supported by improving cashflows and reduced capex
intensity
    ** The broker expects "growing solace for telco investors in
2025" with regulatory shifts favouring investment over consumer
surplus and improved cashflow generation
    ** DB says stocks with potential to extend the rally include
Orange  ORAN.PA , Vodafone  VOD.L , Telenor  TEL.OL  and Liberty
Global  LBTYA.O  benefiting from operational improvements and
easing competitive pressures
    ** Its top large-cap picks include Deutsche Telekom
 DTEGn.DE , with its U.S. exposure and robust returns, and KPN
 KPN.AS , benefitting from reduced capex and shareholder returns
post-fibre rollout
    ** Among mid-caps, the broker prefers OTE  OTECr.AT  and
Sunrise  SUNN.S  for their cashflow visibility, with Gamma
 GAMA.L  leading UK mid-caps
    ** Tower companies like Cellnex  CLNX.MC  are expected to
recover later in 2025, DB notes, as rate-sensitive valuations
improve
    ** Its least-preferred stocks include Telefonica  TEF.MC 
and Eutelsat  ETL.PA , weighed down by structural and
competitive challenges
   
 

 (Reporting by Johan Bodinier)
 ((Johangeorgesroger.bodinier@thomsonreuters.com))