Deutsche Bank reverses preferences for German telcos

Telefonica Deutschland Holding AG

19/05/2023 08:48

** Deutsche Bank shifts its preferences on German telecoms
companies after Telefonica Deutschland's  O2Dn.DE  stock
outperformed 1&1  1U1.DE  by 50% over the past six months
    ** The broker raises 1&1 to "buy" from "hold", also citing
better exposure to longer-term FCF and optionality; it sees an
over 300% upside to the share price, should the group transition
back to a wholesale model or take part in M&A
    ** "The upside looks extremely high but it also reflects the
underperformance since 1&1 started talking about its network
ambitions five years ago," DB says
    ** Downside risks for 1&1 include operational risks from
losing 5G access on national roaming, higher network build costs
or expensive spectrum auctions, it adds
    ** DB cuts Telefonica Deutschland to "hold" from "buy" on
longer term FCF trends and valuation, saying the company could
face a downside if 1&1 changes wholesale provider or
consolidates with another operator

 (Reporting by Tristan Veyet)
 ((tristan.chabba@thomsonreuters.com))