European Stock Markets and Recent Developments By : Suchaya Hongstong.
Developments in Telecoms Capital Markets
14
Developments in Telecoms Capital Markets 3 June 2002
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Developments in Telecoms Capital Markets. 3 June 2002. Contents. What happened? What was the role of Government and regulator? What are investor attitudes to telecom stocks now? How should Government and regulators react?. 260. 240. 220. 200. 180. 160. 140. 120. 100. 80. 60. 40. - PowerPoint PPT Presentation
Transcript of Developments in Telecoms Capital Markets
Developments in Telecoms Capital Markets
Developments in Telecoms Capital Markets
3 June 2002
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ContentsContents
What happened?What happened?
What was the role of Government and regulator?What was the role of Government and regulator?
What are investor attitudes to telecom stocks now?What are investor attitudes to telecom stocks now?
How should Government and regulators react?How should Government and regulators react?
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What happened?What happened?
European performanceEuropean performance
1.1 European TMT sector 1999-2002 ytd1.1 European TMT sector 1999-2002 ytd
Source: Datastream
Europe-DS market - price indexEurope-DS Telecom,Wireless - price indexEurope-DS Telecom, Media, IT - Price index
1999 2000 2001 200240
60
80
100
120
140
160
180
200
220
240
260
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1.2 TMT Incumbents in CEE 1999-2002 ytd1.2 TMT Incumbents in CEE 1999-2002 ytd
CEE operatorsCEE operators
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1.3 Equity and equity linked issuance 1999 – 2002 ytd1.3 Equity and equity linked issuance 1999 – 2002 ytd
European telco sector equity European telco sector equity linked issuancelinked issuance
European telco sector equity European telco sector equity issuanceissuance
02,0004,0006,0008,000
10,00012,00014,00016,00018,00020,000
Q1
1999
Q3
1999
Q1
2000
Q3
2000
Q1
2001
Q3
2001
Q1
2002
Eur
o (m
)
0
5
10
15
20
25
30
35
No.
of
issu
es
Volume - Euro (m) No. of issues
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Q1
1999
Q2
1999
Q3
1999
Q4
1999
Q1
2000
Q2
2000
Q3
2000
Q4
2000
Q1
2001
Q2
2001
Q3
2001
Q4
2001
Q1
2002
Eur
o (m
)
0
1
1
2
2
3
3
4
No.
of
issu
es
Volume - Euro (m) No. of issues
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Values are Values are lower…lower…
European DS Telecoms, Media and IT Index is
>70% lower than June 2000
>50% lower than 2001 high
>25% lower than 2002 high
CEE
1.3 Capital markets highlights1.3 Capital markets highlights
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Valuations Valuations are lower…are lower…
Fixed: 4.5x EBITDA now vs nearly 4x Revenues then
Mobile:Mobile: 6-7x EBITDA 6-7x EBITDA nownow (( –– fixed line valuations at peak) fixed line valuations at peak)
Issues by BT and KPN account for 70% (€15bn) of European equities issuance in the last 12 monthsIssues by BT and KPN account for 70% (€15bn) of European equities issuance in the last 12 months
Convertible/exchangeable issuance rose in 2001 in response to low prices and interest rates and high volatilityConvertible/exchangeable issuance rose in 2001 in response to low prices and interest rates and high volatility
Capital markets highlightsCapital markets highlights
New New issuance is issuance is
down…down…
ˆ
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Mobile Mobile exceeded exceeded expect-expect-ations…ations…
until 2001until 2001
Further growth possible towards European levels
BUT
Cannibalisation of fixed revenues in voice
Ceiling of 2.5% mobile spend/GDP
Concerns about 3G
Disappointing volumes
Capital markets highlightsCapital markets highlights
Data, Data, broadband…broadband…
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In a Nutshell - 1In a Nutshell - 1
Source: Bloomberg
1997 1998 1999 2000 2001 2002
50
100
150
200
250
300
350
BT GROUP
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In a Nutshell - 2In a Nutshell - 2
1997 1998 1999 2000 2001 20020
100
200
300
400
500
600
700
800
BT Group Vodafone Group
Source: Bloomberg
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In a Nutshell - 3In a Nutshell - 3
1997 1998 1999 2000 2001 20020
1000
2000
3000
4000
5000
6000
BT Group Vodafone Group Colt Telecom
Source: Bloomberg
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What was the role of Government and the regulator?What was the role of Government and the regulator?
Faster liberalisationFaster liberalisation
Consumer choice/business needs
New entrant push
EU accession
FCC pressure on settlement rates
Slower liberalisationSlower liberalisation
Network development obligations
Digitalisation/broadband vision
Tariff rebalancing/price control
Labour issues
Privatisation proceeds
Most CEE Governments/regulators favoured infrastructure based competition Most CEE Governments/regulators favoured infrastructure based competition modelmodel
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What are investor attitudes to telecoms stocks now?What are investor attitudes to telecoms stocks now?
Strategic investorsStrategic investors Where are they now?
Highly geared
3G write offs
Strategies under attack
Institutional investorsInstitutional investors Wary, especially of 3G
cost/benefits
Visibility/momentum of earnings…
Driving dividend
High liquidity/free float requirements
Private equityPrivate equity Beginning to play
But still relatively few in CEE
High rates of return
Stability of cashflow
The telco reinvented as a utility?The telco reinvented as a utility?
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How should Governments / regulators react?How should Governments / regulators react?
Infrastructure as a utilityInfrastructure as a utility
Services based competition over incumbent networkServices based competition over incumbent network
InterconnectionInterconnection
Carrier (pre) selectionCarrier (pre) selection
Local loop unbundlingLocal loop unbundling
Number portability Number portability
““Second National Operators” rarely succeedSecond National Operators” rarely succeed
MVNO for 3G?MVNO for 3G?
Regulatory (transparent) biteRegulatory (transparent) bite
Temper price / other ambitionsTemper price / other ambitions
