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Following a disappointing Q4 and a poor outlook for 2022-24, TI’s case is still fundamentally despairing. But KKR’s offer is still there and it is not uninteresting to invest at the current price knowing that even if the offer is not made, the current value of the group does not reflect the value of the group’s assets, although it is true that the group will not pay any dividends for several years.
Companies: Telecom Italia (TIT:BIT)Telecom Italia S.p.A. (TIT:MIL)
TI’s stock tumbled yesterday by c.3% following rumours about the plan to be presented by the future new CEO in one week’s time. The probability that KKR’s offer will materialise decreases and, anyway, it would be a long time before it can be formalised. It is therefore quite logical that the stock is now trading 20% below KKR’s offer price.
We maintain our opinion at Buy but TI’s stock should, however, remain volatile according to the wanderings in KKR’s offer.
Well, although a merger between FiberCop (owned at 58% by TI and at 37.5% by KKR) and Open Fiber could antagonise Mario Draghi and Vittorio Colao, it is increasingly clear that KKR’s offer should be successful. An increase in the purchase offer is in our opinion possible. TI’s stock should, however, remain volatile according to the wanderings in KKR’s offer.
KKR’s deal could take time as Mario Draghi certainly wants to keep an eye and a stake in TI’s fibre network, while Vivendi won’t accept the offer at this price. But this deal could reconcile each other’s objectives.
TI’s stock is currently up by c.25% but it should also be interesting to buy telcos like Orange, Proximus, KPN, Vodafone, Swisscom or Deutsche Telekom. Their governance is less open-minded to private equity but they conceal hidden infrastucture treasures.
Telecom Italia released, at the end of October, a poor Q3 release and, last week, the Board met at the request of some directors (Vivendi).
Concerning the operations, the main issue is that things are not improving in Italy. Revenues are not stabilising and capex increased by 40% yoy to €2.23bn during the first nine months.
And, renewed boardroom tension came to a head last week: Vivendi tried once again, and failed, to depose CEO Luigi Gubitosi.
A disappointing release as the return to normalcy recorded by most of its peers is clearly offset by competition as well as a reduction in ARPU. It is EBITDA which is the most disappointing as it was down by 5.8% yoy.
We maintain our opinion at Buy. The investment case is certainly complicated and quite desperating, but TI does its job and has crystallised its assets: all that is missing is to become a modest growth story again.
Q1 revenues were stable yoy and lfl and slightly better than expected. As a reminder, Italy suffered more than other countries from the pandemic with a a more significant loss in roaming but the group has recorded 3% revenue growth in Italy on the fixed side thanks to the migration toward fibre.
The stock is coming back from hell (+50% since October). We believe that, like BT, the stock has reached a long-term bottom and we maintain our Buy opinion.
The group released a solid and better than expected Q4. The recovery is on track as revenues were only down by 2.1% yoy and lfl, while the EBITDA margin improved thanks to effective cost containments.
Slowly but surely, TI rolls out the strategic plan decided in 2019 by Elliott and the CDP under Vivendi’s auspices. The COVID-19 crisis did not help it to hit the growth path again in 2020 but the objectives of TI’s 2021-23 strategic plan look achievable.
The national plan to fibre up Italy as quickly as possible, with a reasonable number of retail players providing services to consumers, is moving slowly but surely. Last week, the EC gave the green light to TI’s FiberCop creation.
We still believe that TI will have, in the end, the most significant market share in TV distribution in Italy and will also benefit by taking part of the margin of other providers if TI’s and Open Fiber’s networks merge.
Companies: Telecom Italia S.p.A.
During the first 9m, TI has been impacted by the Italian lockdown and roaming falls but also by the natural decline of revenues from voice services which is still not offset by a pick-up in broadband and TV services. The group is, however, investing to increase the capacity and coverage of its networks.
We still believe that TI will have, in the end, the most significant market share in TV distribution in Italy and we remain at Buy on the stock.
While the group is suffering more than its peers from the COVID-19 crisis, things are accelerating on the merger front of its fixed network with Open Fiber. The Italian government would like to create a monopoly independent from TI but it will probably come to its senses and let TI take the lead after the recent deal between TI, KKR and Fastweb.
An expected release, reflecting the resilience of the group in a competitive Italian mobile market, a correct ongoing ultrafast broadband deployment on the fixed side and a slightly disappointing performance in Brazil.
Remember that in a surprise move Telecom Italia had released its 2018 preliminary results on 18/1. So the annual release of this morning is not a surprise.
Q4 revenues were down by 2.5% yoy in organic terms:
- Italian activities were down by 4.1% yoy and nevertheless suffering from regulation and from the entry of Iliad into the Italian mobile market;
- the Brazilian unit has seen its revenues grow by 5.1% (a good number compared to Telefonica Brazil) in BRL (they were down by 2.5% in report
No surprises in Q3 (except for a goodwill write-down of €2bn).
The group still has an attractive strategic plan for the coming years. Although domestic service revenues are expected to remain broadly stable over the life of the plan, domestic’s EBITDA should, however, slightly grow.
We maintain our Buy on the stock which is still, however, a proxy of the Italian flag and whose governance is a real mess with a useless and unnecessary fight between Bolloré and Elliott.
Q2 revenues were flat yoy lfl and at constant change. This is a lower performance than in Q1 (revenues were up by 2.7%) but note that, on the domestic side, service revenues held, despite the impact of the return to monthly billing, reaching a figure broadly in line with the same period last year (-0.4% yoy organically vs +1.7% in Q1). In reported terms, global Q2 revenue was down by nearly 4% yoy due to the Brazilian unit whose revenues were down by nearly 13% yoy, a decline however entirely at
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Finals from Trakm8 Holdings plc (TRAK.L), the global telematic and data insight provider, were in line with previous guidance with revenue increasing 13% to £18.1m and a £0.3m positive swing in adj. PBT to breakeven. Momentum built during FY22 with a number of contract awards and extensions secured in H2 and the outlook is positive although the company must navigate the challenges around component supply and inflationary pressures. Trakm8’s integrated model (software and hardware, design, manufa
Companies: Trakm8 Holdings PLC
tinyBuild— a leading video games publisher and developer with global operations. tinyBuild's strategic focus is in creating longlasting IP by partnering with video games developers, establishing a stable platform on which to build multi-game and multimedia franchises is to join AIM. Offer details TBC. Due mid-March. AMTE Power, a developer and manufacturer of lithium-ion battery cells for specialist markets, announced its intention to seek admission to trading on AIM. Admission is expected to ta
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Stock up by 5% following the Q2 release.
The market welcomes indeed the return of dividends and the effective deployment of BT’s ultrafast fibre network. Moreover, the group has hit its £1bn cost savings target 18 months early and now brings forward its 2024/25 target for £2bn of savings to 2023/24 with further savings in 2024/25.
Here is the rub: the sales recovery is still not there. We maintain therefore our opinion at Add on the stock.
Companies: BT Group plc
A correct release globally in line with expectations (slight slowdown in revenue growth in Q4 but a slightly better than expected FCF for the full year) but the outlook given by management for 2022/23 is quite cautious (this is the upper range of the guidance which corresponds to our estimates).
We maintain our opinion at Buy. Note, however, the CEO Nick Read is rather under fire after missing opportunities in Italy (Iliad), Spain (Orange-Masmovil merger) and with Vantage.
Companies: Vodafone Group Plc