We tell investors not to obsess about who is first across the start line on 5G, and then spend too much time focused on exactly that. In this weekly summary we indulge that error but also look at the longer-term outcomes that can be obscured by exciting news flow.
Tuesday, a week after MWC in Barcelona, we are hosting a 5G conference jointly with BCG in London (agenda: HERE). 5G has arguably been
subject to more hype than any other generation of wireless technology, and the issuance of 5G spectrum in Italy last year was a painful reminder
of some of the potential pitfalls around 5G, but finally the industrial reality is starting to become clearer.
There’s been a flurry of M&A activity in Latin America year to date but, despite best efforts, it’s not (yet) John Malone emerging on top.
Several LatAm-region pieces of the jigsaw are conceivably in motion this year and it’s been Telefonica’s decision to rationalise its portfolio (tick in the box for Telefonica (Buy) which reported solid numbers and issued robust guidance this week) that has triggered the latest moves. Its initial decision to sell two Central American assets (Guatemala and El Salvador) to AMX last month may not have garnered global headlines – one regional behemoth selling to another – but rather this week’s announced sale of its remaining three assets (Panama, Costa Rica and Nicaragua) to Millicom is arguably more intriguing.
This week we wrote again (HERE) on the outlook for 5G capex in China. Capex is always a (the?) key driver for the Chinese telcos, but with the National People’s Congress approaching (5th March), and the telcos likely to announce 2019 capex budgets at their full year results towards the end of March, and probably give some indication of spend in 2020, the likely shape of 5G spend is set to be the definitive catalyst for the stocks over the next few months.
The most common question we hear from clients about Cable companies concerns the threat that Wireless poses to the Broadband business. T-Mobile reiterated their home Broadband ambitions again this week, triggering a fresh round of questions. Continue reading “Continuing (Incomplete) Thoughts on the Wireless Threat to Cable”
At the end of last year, we upgraded the European telecoms sector (see LINK), and let’s be honest, over the past month it hasn’t been a great trade, as the rest of the market has ripped up with the cyclical sectors performing well (and in fact, delivering one of the best Januarys for the stock market on record), and telecoms being left in the dust. So far, YTD the European telecoms sector is down 3%, with the vast majority of that driven by Vodafone’s weak performance alone. In the near-term, this clearly leaves us a bit disappointed (about our telco call that is, rather than the wider market performance), but not yet disheartened. Continue reading “Infrastructure Value Should Still Emerge in European Telcos”
We are worried about a recession. We have no economists at New Street (at least, not practicing ones), and we claim no special insights, but many of our clients are worried, and press reports are filled with worry, and after a ten-year growth stretch and a trade war and a government shutdown, it seems sensible to worry. Continue reading “What to Buy and Sell Around the World in the Event of a Recession”
The LatAm M&A jigsaw puzzle continues to tease and while a variety of future permutations and combinations exist, we continue to wonder when the regional “roll up” will start.
Digital Realty’s guidance sent shockwaves throughout the data centers this week. We had cautioned a month ago (and again earlier this week), that guidance was likely to come in below consensus (LINK). Financial guidance came in as we expected, but two metrics were worse than we expected: 1) DLR lowered their return threshold for new data center builds; and 2) DLR guided to sharply declining lease renewal rates this year (LINK). Both of these factors demonstrate the risk of pursuing hyperscale deals with little underlying asset differentiation, a risk which extends to the entire wholesale data center industry. We believe the negative sentiment on the sector provides an opportunity to buy EQIX at depressed prices, since EQIX is largely insulated from pricing risk due to their focus on retail customers and their interconnection strategy. We see potential for 40% upside to EQIX over the next 12 months.
This week we published a series of notes looking forward to 2019 and the outlook for various markets across Asia.
Continue reading “2019 Asian Telco Outlook: Winners and Losers”