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MILAN\/LONDON: Investors have poured money back into unloved European telecoms<\/a> stocks on expectations that costly investments have peaked and that a resurgence in mergers and acquisitions could lead to fatter returns.
The return of inflows could signal a turning point for a sector that as recently as February logged its worst underperformance against the market in more than three decades.
Telecoms' high debt levels are one factor that deter many fund managers. But growing cash flows and a potential softening in the European Union's historically tough stance on mergers in the sector means prospects for these shares look brighter.
\"Some of the historical headwinds are fading away,\" said Luca Fina, head of equity at Generali Insurance Asset Management<\/a>, which is now selectively overweight in telecoms, having been underweight in 2021 and neutral last year.
\"The capex cycle is mostly behind us, leading to an improved free cash flow generation, inflation is leading to price increases and (there's) an apparent more favourable stance from regulators on consolidation,\" he added.
So far in 2023, telecom sector funds have seen $1.8 billion worth of net inflows, recovering more than 80% of last year's outflows, data from fund tracker EPFR showed. Finland, Italy, Norway, Austria, Germany and France rank among the top 10 countries for the biggest rises in telecoms inflows this year. Since February's record low relative to the broader market, the sector has staged a recovery and the STOXX Telecoms index is up 11% year-to-date, having risen as much as 17%. That compares to a 10.7% peak gain for the region-wide STOXX Europe 600.
M&A TEST AND PRICING POWER
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Investors are also eagerly waiting to hear whether the European Commission<\/a> will approve the 18.6 billion-euro ($20.47 billion) merger between Orange<\/a> and MasMovil<\/a> in Spain. The ruling, expected in September, is seen as a test case that may even prompt sceptics to rethink their negative view on the industry<\/a>.
\"We don't see much value in the sector. The only opportunity would be market consolidation,\" said Ludovic Labal<\/a>, portfolio manager of Eric Sturdza Investments' Strategic Europe Quality Fund<\/a>.
His fund does not invest in telecoms because of concerns about high leverage and slow growth.
Others are already becoming more positive, including the equity research team at Amundi, Europe's largest asset manager, which has recommended an overweight allocation since the second half of 2022.
Luca Corona, Amundi senior telco analyst, said price increases for telecoms services do not appear to have been followed by smaller players taking the opportunity to undercut their larger rivals, as has been seen in the past.
He also noted that France and Italy are two other markets that would both benefit from consolidation.
At an enterprise value of 5.8 times core earnings, European telecoms trade at a 21% discount to their 30-year average valuation, according to Refinitiv Datastream. Relative to the market, they trade at a 31% discount on the same metric.
Telecoms is a highly fragmented industry, with four players competing in many domestic markets. Price wars have squeezed margins over the years, just as fixed and mobile networks needed huge investment to meet booming demand for data.
But the investment cycle is turning. France's Orange has completed more than 90% of its fibre rollout and is reducing capital expenditure. Spain's Telefonica<\/a> and Norway's Telenor<\/a> have said they are past, or near, peak capex.
That is supporting margins, along with price hikes put in place in the face of soaring inflation, which could help gradually change the downbeat narrative.
\"The sector is no more perceived as a 'no pricing power' one,\" said Olivier Baduel, director of European equity management at Ofi Invest Asset Management.
Also on the horizon is a potential windfall from a European Commission consultation, launched in February, on who should foot the bill for billions of euros of investments in Europe's telecoms network. Operators have lobbied for decades for leading technology companies to contribute to 5G and broadband roll-out.
UBS analyst Polo Tang estimates that could raise up to 4 billion euros or ease pressure on capex by optimising network traffic.
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米兰/伦敦:投资者把钱回不被青睐的欧洲人电信股票预期昂贵的投资已达到顶峰,复苏在并购可能导致胖的回报。
流入的回归可能表明一个转折点的部门就在2月记录最严重的表现不佳对市场在超过三十年。
电信的高债务水平的一个因素阻止许多基金经理。但是增长的现金流和一个潜在的在欧盟历史上强硬立场软化行业并购意味着这些股票看起来前景光明。
“一些历史的阻力消失,“卢卡国际泳联说,股票主管忠利保险资产管理现在在电信有选择地超重,体重不足2021年和去年中性。
“背后的资本支出周期主要是我们,导致一种改进的自由现金流,通货膨胀导致物价上涨,(有)一个明显更有利的立场从监管机构整合,”他补充道。
2023年迄今,电信行业看到了价值18亿美元的资金净流入,恢复80%以上的去年的外流,基金追踪公司EPFR的数据显示。芬兰、意大利、挪威,奥地利,德国和法国跻身前10个国家增长最大的电信今年流入。自今年2月以来的纪录低位相对于整体市场,该行业已经举行了恢复和斯托克电信指数今年迄今上涨了11%,上涨幅度高达17%。相比之下,10.7%的峰值增益的区域性斯托克欧洲600指数。
并购测试和定价权
投资者也急切地等待是否欧洲委员会将批准18.6欧元(204.7亿美元)合并橙色和MasMovil在西班牙。执政党,预计在9月,被看作是一个测试用例,甚至可能促使持怀疑态度的人重新思考他们的负面看法行业。
“我们没有看到多少价值。唯一的机会将是市场整合,”说卢多维奇Labal投资组合经理Eric Sturdza投资的战略欧洲质量基金。
他的基金不投资于电信因为担心高杠杆和缓慢增长。
其他人已经变得更加积极,包括证券研究团队在Amundi,欧洲最大的资产管理公司,建议2022年下半年以来一个超重的分配。
Amundi资深电信分析师Luca电晕表示,电信服务价格上涨不似乎是紧随其后的是小公司机会削弱较大竞争对手,已经过去。
他还指出,法国和意大利两个其他市场都将受益于整合。
企业价值的核心盈利的5.8倍,欧洲电信贸易30年的平均估值折扣21%,据Refinitiv Datastream数据。相对于市场,贸易在同一指标在一个31%的折扣。
电信行业是一个高度分散的行业,四名球员在许多国内市场竞争。价格战已经多年的利润率受到挤压,就像固定和移动网络需要巨大的投资,以满足数据需求旺盛。
但是投资周期正在转向。法国的橙色已经完成90%以上的纤维推出,减少资本支出。西班牙的西班牙电话公司和挪威的Telenor说他们的过去,或附近,最大资本支出。
支持的利润,随着价格上涨在面对通货膨胀,这将有助于逐步改变悲观的故事。
“部门不再被视为一个“没有定价权”、“Olivier Baduel说,欧洲股票管理主任Ofi资产管理投资。
还在地平线上是一个潜在的意外从欧洲委员会协商,2月份启动,谁应该买单数十亿欧元的投资在欧洲的电信网络。运营商已经游说了几十年,领先科技公司为5 g和宽带。
瑞银分析师马球唐估计,可以提高至多40亿欧元或放松对资本支出的压力,优化网络流量。
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