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Research Tree provides access to ongoing research coverage, media content and regulatory news on TELEFONICA DEUTSCHLAND HOLDI. We currently have 3 research reports from 1 professional analysts.
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TELEFONICA DEUTSCHLAND HOLDI
TELEFONICA DEUTSCHLAND HOLDI
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.
Making Mobiles Better
17 Jan 17
Mobile phones are increasingly the key connection for the modern world. This means that the performance of mobile phones, and their networks, is going to become more critical for all the apps and businesses that rely on them. New technologies such as VR, AR, and AV will need better, more reliable connections to really move into the mainstream. In this thematic piece we attempt to identify some of the most important issues facing mobile phone networks and their users, and start to identify solutions and enablers that will solve these problems and create value by doing so.
Small Cap Breakfast
19 Jan 17
SuperAwesome — The London based specialist in e-compliance is considering an IPO in its home town according to City A.M. Eco (Atlantic) Oil & Gas—TSX-V listed oil and gas exploration has announced its intention to float on AIM. Assets in Guyana and Namibia. Proposed £2m-£3m fundraise. Diversified Gas & Oil—According to LSE website first day of trading on AIM now expected for 30 January
£6.5bn of market cap goes up in smoke
24 Jan 17
BT previously announced on 27 October 2016 that an initial internal investigation of accounting practices in its Italian business had identified certain historical accounting errors and areas of management judgement requiring reassessment. At that time, they announced the write-down of items on the balance sheet by £145m, being the then best estimate of the financial impact of these issues. Since then, BT has progressed with the investigation, which has included an independent review by KPMG of the accounting practices in the Italian operations. These investigations have revealed that the extent and complexity of inappropriate behaviour at the Italian business were far greater than previously identified and have revealed improper accounting practices and a complex set of improper sales, purchase, factoring and leasing transactions. These activities have resulted in the overstatement of earnings in the Italian business over a number of years. The investigation into the financial position of the Italian business is now substantially complete. The adjustments identified have increased from the £145m to a total of around £530m. In addition, BT would expect these matters to result in a reduction in the Q3 revenue and EBITDA of around £120m, and in a reduction in Q3 normalised free cash flow of around £100m. For 2016/17 as a whole, BT would now expect a decrease in revenue of around £200m, in EBITDA of around £175m, and of up to £500m of normalised free cash flow due to the EBITDA impact and the one-off unwinding of the effects of inappropriate working capital transactions. For 2017/18, BT would expect a similar annual impact to revenue and EBITDA as in 2016/17, with the EBITDA impact flowing through to normalised free cash flow.
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.
Small Cap Breakfast
23 Jan 17
Jackpotjoy — Prospectus now approved by the FCA. Admission to Official List expected 25 January. Eco (Atlantic) Oil & Gas—TSX-V listed oil and gas exploration has announced its intention to float on AIM. Assets in Guyana and Namibia. Proposed £2m-£3m fundraise. Diversified Gas & Oil—According to LSE website first day of trading on AIM now expected for 30 January.
Small Cap 2017 - The only certainty is uncertainty
18 Jan 17
AIM will turn twenty-two this June and it is fair to say it has had its fair share of ups and downs, with 2016 being a case in point. We ask what will the rest of 2017 hold in store? Arguably the US dollar, Brexit, bonds, and banks will be the four big themes for the new year.