Last week showed that the telecoms sector has one drawback that distinguishes it from many other industries: intense regulation. While the high entry barriers are the flipside to this, regulation may scare off investors from time to time. The general market was down 1.0 percent in week 35, and the telecoms sector lost 2.0 percent, as measured by the EuroStoxx 50 index and our European telecoms index, respectively, amid news on regulation and new market entrants.
First of all, earnings season neared its end, with Iceland's Siminn (-1.0%) and the French conglomerate Bouygues (+1.6%) reporting. Tele Columbus (+13.3%), which had been battered before over postponing reporting, gave preliminary figures. In the coming week, the German company will publish its final results, along with France's Iliad (-9.2%).
Regulation and new market entrants
Bouygues' solid results seem to have triggered a sell-off of Iliad shares, over fears of the latter losing market share in France. The company also stated that it didn't expect any market consolidation in the short term. Meanwhile, Iliad Italy appears to be doing fine, with its first commercial offer being phased out and the second extended, implying that the company passed the milestone of 1.8 million subscribers just three months after launching as the number four mobile operator in Italy.
A fourth mobile network operator was also a topic in Germany, where the regulator leaked some early details of the 5G auction. Deutsche Telekom (-1.4%) opposed the possibility of a newcomer, as well as regional 5G licenses to be awarded in the upcoming (2019) spectrum auction.
The Dutch regulator found support from the EC for its finding of joint dominance in the Dutch market by KPN (-1.5%) and VodafoneZiggo (unlisted). Still, the EC demanded further work regarding open access to the latter's cable network. In other news, KPN shook up its management and replaced its marketing chief with one each for the consumer and business segments. And in Switzerland, challengers called on the regulator to make sure that access regulation and virtual unbundling are forced upon Swisscom (-2.3%).
Consolidation and stock market exits
Vodafone's (-6.2%) joint venture in India with Idea Cellular was officially launched as Vodafone Idea and next it's Australia's turn. Vodafone Australia's joint venture with CK Hutchison (+2.8%), VHA, agreed a merger with fixed-line operator TPG Telecom (listed). VHA aims to own a majority share in the new company, which will remain listed in Australia as TPG Telecom.
Sky's (-0.1%) time as a listed company, subject to offers from 21st Century Fox and Comcast, was possibly stretched as a result of activist shareholder Elliott Advisers getting involved. Elliott, which owns a minority share, found that an offer should value Sky at GBP. 15.01 at the least, above 21CF's and Comcast offers of GBP 14.00 and GBP 14.75, respectively.
CK Hutchison got final approval for buying out Veon (+15%) from Italy's Wind Tre. Russia's MegaFon (-20%) was seeking a stock market exit through a share buy-back, pushing shareholders to sell their stock. Finally, Com Hem (+0.1%) is set to stop trading once the takeover by Tele2 (-1.4%) is finalised. Tele2 already proposed a new management board for the merged entity.
Winners and losers
MegaFon, Iliad and TIM (-8.3%) were last week's worst losers. The winners were Veon and Tele Columbus. Year-to-date, Intelsat (+550%) is still on top, followed by Altice (+100%) and Iridium (+72%). At the bottom, we find Tele Columbus (-64%), Tiscali (-50%) and Forthnet (-44%).
