ALL EDITORIAL

Huawei: Escalation or a deal, but not life on the Entities List

Huawei: Escalation or a deal, but not life on the Entities List

The interventions by ARM and Google illustrate very clearly how very little Huawei’s dilemma has to do with the level of ‘chip inventories’ in its warehouses.  The global technology ecosystem is a web of continuous engagement between firms whose subsystems must function together through continuous change.  Interleaved intellectual property sharing is the lifeblood of this ecosystem.  The Entities List is choking off this lifeblood for Huawei.

What does this mean for Huawei?

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Could Vodafone Be AT&T’s Next Big Deal?

AT&T would tell you that they have created value over the last 20 years by doing deals.  We aren’t sure they have created value over the last 20 years, but if they have, it certainly isn’t through operating prowess.  So, sure…let’s say they have a special competence in acquiring things.

AT&T closed the Time Warner deal in June 2018, after a longer than expected fight.  We are coming up on the one-year anniversary, which means we are probably a year or so away from them looking for their next deal.

Finding deals is getting harder for AT&T as they swell in size and as their multiple swoons relative to assets they might like to buy.  They are hobbled by an enormous dividend and a core business that has been declining.  Whatever they buy has to be cheap.  Very cheap.  AT&T is trading at less than 10x earnings and FCF.

So, could Vodafone be next?

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Infrastructure Deal Bonanza: What It Means For Towers Globally

Nearly $20BN of telecom infrastructure changed hands this week through two large deals: Cellnex acquired all of Xavier Niel’s towers in Europe, and a consortium of private equity funds acquired Zayo in the US.  In this weekly review, we discuss the implications of these deals on the communications infrastructure landscape globally, and why they support our stance that SBAC is the most compelling opportunity within towers.

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What happens to Sprint if the deal is blocked?

The deal review doesn’t seem to be going Sprint’s way. The agencies could still approve the deal as it has been proposed. If they don’t, the companies could offer an alternative structure that passes muster. We offered thoughts on workable alternatives in a report we wrote two weeks ago (LINK). T-Mobile may prefer to walk away than accept the alternatives we suggested. It is worth considering what happens to Sprint if they end up in this situation. Continue reading “What happens to Sprint if the deal is blocked?”

Positively becalmed: Checking the pulse on European Telecoms

In December last year, we upgraded the European telecoms sector (LINK) to a more positive stance and four months on we revisit that call. While the market has been on fire since – up 16% largely backed by a change of view at the Federal Reserve helping reverse cyclicals’ underperformance in Q4 – the European telecoms sector is only up 1%. So, although the sector hasn’t done as well as the wider market in the last four months, let’s be grateful for small mercies – at least the European telecoms sector isn’t down – having seen declines of 12%, 4% and 8% in 2016, 2017 and 2018 respectively. We might be only 4 months into the year, but we already see this as a reversal of a historic trend.

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Cable’s Broadband Growth Set to Accelerate in The US

In our last weekly comment on the broadband market we sketched a decade-away view of a single connectivity market with whatever remains of today’s wireless and wired companies competing for the entire market. We argued that cable is best positioned for the fight given that they are attacking a market that is twice the size of the one they are defending, and they have time and infrastructure advantages. This week we focus on more proximate trends in the run up to the first set of results in what we believe will be a strong year for Cable broadband growth and for Cable equities. Continue reading “Cable’s Broadband Growth Set to Accelerate in The US”

T-Mobile / Sprint: Regulators And Investors May Be Making The Same Mistake

If the DOJ or state attorneys general really are preparing to sue to block the deal, we think they would be making a mistake. They would be missing the fact that the distribution of capacity across market participants could have a far bigger impact on competition and pricing than the number of participants. Prices are likely to increase if the deal is blocked, particularly for low income customers. Prices are more likely to stay low or head lower if the deal is approved.

Investors and some of the market participants appear to be making the same mistake. Verizon and AT&T are better off if the deal is blocked. These companies would face tougher competition if the deal is approved. In fact, it could be devastating for them. Verizon and AT&T should be fighting approval viciously (and perhaps they are, quietly).

We lay out the argument in this iteration of the Global Weekly review.

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Creative Disruption

It has been a long time since a single presentation has created as much of a stir among global telecom investors as Hiroshi Mikitani’s, the founder and CEO of Rakuten, on the entry strategy of the Japanese e-commerce leader into the mobile industry at MWC this year. Following a deluge of client interest, we have carried out a deep dive into what Rakuten is doing (HERE).  What we found out has the potential to be scary for the incumbent Japanese mobile operators, but may be rather less of a fright for the rest of the global industry.

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5G & Wireless Capacity

We have written three reports that have expanded on the theme of 5G and its impact on wireless capacity in the US in the past couple of weeks.  In this Global Weekly Review, we highlight our expectations for how the C-Band and other sources of 5G spectrum may transform the wireless, cable, and tower industries.

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Spanish Unicorns

It’s been a busy week for coverage at New Street, having initiated on five companies across the telco, media and tech space: Softbank (Japan), Chorus (New Zealand), MultiChoice (South Africa) and MASMOVIL and Euskaltel in Spain.

We aim to have something different to say on all the names but in the case of Spain it’s more a case of pointing out the obvious whilst reassuring investors that recent fears are overdone.
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