Deutsche Telekom, a heavyweight in our European telecoms index, reported quarterly results last week, as did its main subsidiaries and competitors Freenet and QSC. The Italian market was dominated by operators' ongoing adjustments of their pricing, in response to the new reality of Iliad in the market. The European wholesale markets also featured in the news, allowing several operators to expand their footprints. Our index ended week 32 down 1.3 percent, slightly outperforming the broader EuroStoxx 50 index's drop of 1.6 percent. Intelsat extended its lead, after a weekly gain of 12 percent, to a year-to-date performance of no less than +622 percent.
Last week's quarterly reports included:
- The Deutsche Telekom family: Deutsche Telekom (-2.0%), OTE (+2,3%), Magyar Telekom (+3.0%).
- German altnets: QSC (-2.7%), Freenet (-0.9%).
- Others: Liberty Global (-2.8%), Equinix (-4.0%), Netia (+1.4%).
Italy and 5G
Iliad (-2.0%) may not be doing very well itself (down 36% year-to-date), but its entry in Italy keeps its competitors busy. First, there was a probe into TIM's (-3.7%) winback practices, and next all three competitors, including Vodafone (-1.2%) and CK Hutchison's (+5.8%) Italian units, were fined over abusive behaviour. 3 Italia also ran a summer promotion.
Italy also saw the upcoming 5G auction attract no fewer than seven bidders, which includes Swisscom's (-1.7%) FastWeb. In Mexico, Telefonica (-2.0%) gained exposure to the 5G market by picking up spectrum in an auction and its German unit Telefonica Deutschland (-2.6%) agreed with 1&1 Drillisch (-4.3%) on providing the latter with 5G spectrum for its MVNO operations.
Wholesale deals
Finally, last week had a number of wholesale deals providing operators room for geographic expansion. The first was between Sky's (+1.2%) Irish unit and unlisted Eir, enabling Sky Ireland to provide services over Eir's growing fibre-to-the-home network. Next came Vodafone Germany, starting to resell Telekom Deutschland's faster VDSL service. Telekom DE itself, a unit of Deutsche Telekom, saw its fibre joint venture with energy company EWE approved, enabling it to expand its fibre reach in northwestern Germany. Lastly in Poland, Orange PL (-2.4%) was able to agree with Inea to use the latter's fibre network in one Polish region.
Winners and losers
The week's winner was Intelsat (+12%), followed by CK Hutchsion (+5.8%) and MegaFon (+5.5%). The worst losers were Greek Forthnet (-36%), MTS (-11%) and Turk Telekom (-10%).
Year-to-date, Intelsat leads with a share price that is more than seven times what it was at the end of 2017. Other satellite firms are also doing particularly well: Iridium (+68%), SES (+40%), Inmarsat (+14%) and Sky (+51%), if we can rank the latter among the satellite operators. Sky also benefits from the current takeover battle between 21st Century Fox, publishing its offer document last week, and Comcast. Com Hem (+23%) is also set to exit our index, once Tele2 (+10%) closes its acquisition.
At the other end, there is a remarkable number of double digit YTD losers, ranging from Forthnet (-61%) to Magyar Telekom (-11%).
A group of companies that is consistently not doing well, is the subset of challenger companies with limited infrastructure and no access network (mobile, cable, copper or fibre). The already mentioned Forthnet is at the bottom, Norwegian NextGenTel (-2.5%) on top. Obviously, they are mostly small caps and micro caps, but they also include German 1&1 Drillisch (-31.5%), United Internet (-31%) and Freenet (-21%), as well as British TalkTalk (-24%).
The incumbents' performance varies from dramatic (Turk Telekom -36%, Proximus -25%, KPN -19%) to very well (KCom +6.8%, DNA +7.4%, Elisa +12%, Telia +16%).
