Bernstein downbeat on European telecos pricing, but embraces capex
23/01/2025 13:35
** Bernstein cuts it estimates on most of European telco
companies in its coverage, citing its downbeat view on the
pricing outlook, but calls for embracing capex
** "We do not expect earnings' momentum to improve as the
pricing power of (most) incumbent operators remains low", it
says
** It notes that many telcos are sitting on a "time bomb"
where pricing for existing customer is higher than that for new
customers
** It also says that pinning hopes on M&A in the sector to
change pricing is risky, as several stakeholders have opposed
the change
** Still, and in contrast to the consensual view, Bernstein
says that the telco capex should be embraced
** "Our analysis shows that markets with high capital
intensity also have lower competition. High capex is the real
barrier to entry" - Bernstein
** Broker says Deutsche Telekom DTEGn.DE remains its
top pick, and it also advises exposure to Cellnex CLNX.MC and
Swisscom SCMN.S
** It adds it would stay clear of Vodafone VOD.L and
Telia TELIA.ST given their structural issues
** It cuts Liberty Global LBTYA.O , Orange ORAN.PA and KPN
KPN.AS to "market perform" from "outperform" due to pricing
pressures in Netherlands and France along with structural
changes to cable communications business model
** It upgrades though Telenor TEL.OL to "market perform"
from "underperform" after a bottom-up review and tail winds from
a change to Norwegian regional fibre regulations
(Reporting by Hugo Lhomedet)
((hugo.lhomedet@thomsonreuters.com))