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Research Tree provides access to ongoing research coverage, media content and regulatory news on TELEFONICA DEUTSCHLAND HOLDI. We currently have 4 research reports from 1 professional analysts.
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TELEFONICA DEUTSCHLAND HOLDI
TELEFONICA DEUTSCHLAND HOLDI
Slight upgrade in the synergy target for 2019
22 Feb 17
Q4 revenues showed a slight continued decline with a yoy decrease of 6% to €1,936m (vs a 5.7% yoy decline during the first 9m). Note that, as in the previous quarter, this is mainly a result of the decline in handset revenues. Handset revenues fell by 17.6% yoy, reflecting longer replacement cycles and handset saturation in the German market. The key point is that Mobile service revenues (which represent 75% of the global business) declined by only 2.1% yoy in Q4, as in previous quarters, and by only 0.9% excluding the effects of the mobile termination and roaming rate cuts. As in the previous quarter, the good news is the EBITDA growth of 5.3% yoy (+3.8% for the whole year), thanks to the successful capture of synergies (mainly related to employee restructuring). Management has given its outlook for 2017: absolutely no surprise with slightly negative to flat yoy mobile service revenues and a flat to mid single-digit percentage growth for EBITDA.
Improvement in EBITDA margin but until when?
26 Oct 16
Q3 revenues showed a slightly improving trend with a yoy decline of 5.2% to €1,876m compared to -5.9% yoy in Q2. Note that as in the previous quarter this is mainly a result of the handset revenue declines. Handset revenues fell by 24.5% yoy (-25.5% in Q2) reflecting longer replacement cycles and handset saturation in the German market. The key point is that Mobile service revenues (which represent 75% of the global business) declined by only 1.8% yoy in Q3, as in Q2, and by only 0.9% excluding the effects from mobile termination and roaming rate cuts. Like the previous quarter, the good news is the EBITDA growth of 3% yoy, thanks to the successful capture of synergies (mainly related to employee restructuring). Management has reiterated its full-year outlook for 2016: a slight decline in mobile service revenues and a low to mid single-digit percentage growth for the EBITDA.
Pushing ahead with the integration of E+
01 Aug 16
H1 revenues totalled €3.69bn, lower 4.1% yoy. Handset revenues fell by 15.9% yoy to €493m (-25.5% yoy in Q2), reflecting longer replacement cycles and handset saturation in the German market in line with broader European markets. The key point is that Mobile service revenues (which represent 75% of the global business) declined by 1.7% yoy in Q2 (vs -1.3% in Q1). Like in the previous quarter, the good news is the EBITDA growth of 1.2% yoy, even if it is lower than in Q1 (+6.2%!), thanks to successful synergy capture. The group has reiterated its full-year Mobile service revenues outlook, but has narrowed the range from “slightly negative to broadly stable” yoy to “slightly negative” yoy on the back of increased competition, especially in the non-premium end of the market. Note, however, that data usage and the LTE customer base continue to grow: the group still expects it will drive an inflection point in the revenue trajectory in the future. The narrowing of the revenues outlook range has no impact on the EBITDA outlook, as it continues to benefit from the roll-over effects of the successful integration initiatives in 2015, as well as pushing ahead with employee restructuring, customer migration and network integration efforts in 2016. But the group has also adjusted positively its capex outlook from “percentage growth in the low tens to mid” to “high single-digit growth”. This is largely the result of more efficient capex spend as well as phasing topics related to the network integration.
The new German mobile leader
19 Feb 16
h1.Business After the acquisition of E+ from KPN, Telefonica Deutschland has become the largest mobile operator in Germany with c.43m customers. Its two main competitors are Deutsche Telekom and Vodafone with respectively 39-40m and 31m mobile subscribers (at end 2015). The mobile market in Germany is perfectly mature and we don’t expect any major changes in the respective market shares of the three main competitors in the near future. There is no real mobile price war in Germany (Deutsche Telekom is not required to offer the latest wireless technologies, such as LTE, to cut-rate MVNOs, which undermines the competitiveness of discounters) and the mobile bundles are quite similar. The main issue for a pure mobile telco like Telefonica Deutschland is the strategy on Fixed as in some European countries the quadruple play (which links mobile with broadband fixed services) is the only way to move the lines and win new customers thanks to attractive bundles. TEF Deutschland is the German mobile player which is not really present on Fixed while its two main competitors could be more aggressive with attractive bundles thanks to the comfortable margin they generate on their Fixed activities (ultra-fast broadband networks need perhaps huge capex but they generate impressive EBITDA margins above 45%). In a mature mobile country like Germany, TEF Deutschland should maintain its market share at 35-40% and record slight growth over the next three years thanks to an ARPU which is relatively stable with the wide use of 4G. Note 5G should be deployed from the end of the decade and will allow the rise of the IoT (Internet of Things). h1.Recommendation and upside We are initiating coverage of Telefonica Deutschland (with a market cap of €13.5bn and a float of c.23%) with a add recommendation and 15% upside. h1.Slowly but surely improve the EBITDA margin With market shares which are unlikely to move in the short term and stable prices, the only way for the group to improve its margins is to increase productivity. The EBITDA margin of the new group should be 22.5% in 2015 and the objective is clearly to raise this quickly towards the 25% level thanks to the productivity gains due to the merger. It will probably be difficult to go beyond 25% if the group is still present only on the mobile side in Germany and can not rely on stronger margins on Fixed to develop profitable quadruple play offers. Note that at the end of the decade with the emergence of the IoT (Internet of Things), growth could be higher and margins could improve further. h1.Need to know Telefónica controls 62% of the group and a third of the supervisory board is made up of managers of Telefonica not working in its German subsidiary. Telefonica is a quite heavily-indebted group; its net debt before the approval of the sale of its UK subsidiary (O2 UK) was more than 3x its EBITDA. The listing of its German subsidiary (which represents 15% of its overall turnover) is aimed primarily to allow it to raise funds in case of an external growth transaction. Thus the acquisition of E+ has brought KPN to hold a 20% stake in Telefonica Deutschland (15% at end 2015). This may allow the latter to mix paper and cash in the case of a large scale operation with a Fixed operator in Germany (the group could be interested in a partnership with United Internet or Unitymedia, the two Fixed players which are not really present on the mobile side). Meanwhile, Telefonica should impose on its subsidiary to pay a substantial annual dividend.
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.
Visible benefits from restructuring
23 Feb 17
In our view, Monitise’s H1 17 results demonstrate the benefits of management’s ongoing transformation programme. EBITDA profitability was sustained, and accompanied by cash outflow more than halving vs H1 16A. With gross cash at £27.3m, the group’s financial position remains strong. Initial FINkit sales are under “active discussion” and ongoing regulatory initiatives (CMA, PSD2) give further grounds for optimism in the outlook.
Small Cap Breakfast
16 Feb 17
Saffron Energy—Schedule One update. Raising £2.5m, expected Mkt Cap £7.7m. Admission due 24 Feb. Italian Oil & Gas Play Guinness Oil & Gas Exploration—Publication of prospectus. Seeking to raise £50m and invest in 15 exploration companies at launch, with plans to grow the portfolio to 30 positions during its lifetime. Issue closing 23 Feb. Arix Bioscience — Intention to float on the main market from the global healthcare and life science Company supporting medical innovation. Raised £52m in Feb 16 with investors including Woodford Investment Management
Ready to dominate TV distribution and prepared for new competition from Iliad
20 Feb 17
TI has released a good set of Q4 results: Revenues were up organically by 0.8% yoy (vs -5.2% in Q1, -4.2% in Q2 and -1.2% in Q3) while the EBITDA (excluding the negative impact of non-recurring items) has increased sharply by 5.9% yoy as in Q3 but vs a decline of 1.7% in H1! EBITDA has clearly benefited from the actions implemented in the “cost recovery plan” that started in Q2 in the Domestic Business and in Q3 in the Brazil Business. In Italy, revenues were up by 2.7% yoy (vs +1% in Q3 and -1.7% in the H1). The solid, structural recovery of Mobile revenues was confirmed, thanks both to the maintenance of market share and the stabilisation of ARPU levels. But the key point is the EBITDA which has grown by 8.4% (vs 7.9% in Q3, +6.9% in Q2 and -5.2% in Q1). Excluding non-recurring restructuring charges, EBITDA would have grown by +4.5% in 2016, with an EBITDA margin of 45.9%, up 1.9ppts on 2015. In Brazil, Q4 revenues were down organically and at constant change by only 1.7% yoy (vs -5.2% in Q3 and -14% in H1)! The main issue is that the total number of subscribers (c.63m with a market share of 26%) was still down by 4.3% vs end 2015. Note, however, that like its competitors the group has seen its prepaid customer base contract sharply in 2016, due to the adoption of a restrictive policy for the disconnection of inactive customers according to Anatel’s new criteria (the Brazilian National Telecommunications Agency). Q4 EBITDA was up by 2.8% yoy (vs +0.5% in Q3 and -10.9% in H1) with the start in Q3 of cost-cutting operations.
Ronez performing, debt facilities agreed
21 Feb 17
Confirming our view that Ronez is a high-quality maiden acquisition, SigmaRoc today announces that trading and operational performance at the verticallyintegrated aggregates business on the Channel Islands has been strong in the first few weeks of trading since the deal completed in early 2017. January sales volumes are reportedly above budget, a healthy order book is in place for the remainder of the quarter, and requisite back-office systems are being developed faster and at lower cost than initially anticipated. Furthermore, SigmaRoc has agreed terms with Santander Bank for a £2m revolving credit facility and is close to agreeing an £18m term facility – once finalized these debt facilities should see SigmaRoc sufficiently capitalized to progress initial projects in management’s pipeline of growth opportunities. We thus continue to believe that Ronez has potential to generate EBITDA to the group of at least £6m pa as efficiencies continue to be unlocked under the new independent ownership structure, providing SigmaRoc with a firm platform from which to leverage more acquisitions and/or organic investments and thus deliver further earnings growth as it progresses its niche buy-and-build strategy.
New Screen – Consistent Growth + “11 with legs”
17 Dec 15
To represent the theme of “Consistent Growth”, we introduce our second basket of small-cap stocks selected by a screening process. This will sit alongside our first (deep value) basket introduced and described in our note dated 26th May 2015 (Our first screen – 10 deep value stocks to consider). The screening criteria address both the extent AND the quality of growth in EPS and sales, which we consider add a worthwhile additional element to stock selection. The process results in a basket of 25 stocks, the performance of which we will track over time, allowing comparison of investment styles, but also highlighting interesting companies. We have taken a closer look at 11 stocks “11 with legs” (see list on the right) in this screen.