Deutsche Telekom And Vodafone Struggling To Get Mergers Approved

Network investments and complicated mergers left a mark on the European telecoms sector in week 21. However, our telecoms index managed to outperform the broader market. The TPSI European Telecoms Services was down just 0.6 percent, whereas the EuroStoxx 50 lost 2.2 percent. A few micro caps did well, including Icelandic Syn (+8.4%) and German Ecotel (+6.8%). Telefonica Deutschland was the biggest loser (-11%), apart from penny stock Forthnet (-13%).

Deutsche Telekom (-0.9% for the week) found the FCC chairman on its side in the case for merging T-Mobile US with Sprint, but the Department of Justice appeared to be leaning against the deal. Vodafone (+1.5%) is having similar trouble merging its German unit with Liberty Global’s (-1.3%) Unitymedia. The EC extended the deadline for its decision to 23 July. In Australia, Vodafone’s efforts to merge VHA with TPG Telecom stranded at the ACCC, but the parties are ready to challenge the regulator in court.

In other M&A news, Tele2 (+1.8%) agreed on the proceeds it will receive from exiting Kazakhstan. Orange was stripped of its stake in Korek Telecom (Iraq), highlighting the political risk involved in investments in certain regions.

Fibre

In Italy, the CDP, holder of a 9.9 percent stake in TIM (-5.4%), proposed to sell its Open Fiber stake to TIM, which would see it end up with a 20-25 percent stake in TIM. This would pave the way for a single nationwide fibre broadband operator. Open Fiber already has several service providers on its network, among them Tiscali (-2.9%) in 150 towns by the end of the year. It will expand its services footprint along with Open Fiber’s network roll-out, aiming for 271 towns by 2023.

In the Netherlands, KPN (+0.9%) and local competitor E-Fiber (backed by Arcus Infrastructure Partners) resorted to a trench sharing deal, effectively overbuilding each other’s fibre network in one small town. KPN further sold a portfolio of data centres.

5G

BT’s (-3.2%) unit EE was among the first in Europe to launch 5G, and quite possibly the first worldwide to provide a launch date for the low latency URLCC technology (a 5G building block), albeit from 2023. 1&1 Drillisch (-2.0%) and its controlling shareholder United Internet (-0.9%) both lowered their dividends in reaction to the German spectrum auction dragging on, with Drillisch bidding as a potential newcomer. The auction crossed the EUR 6 billion mark.

In the US, the C-Band Alliance of Intelsat (-1.9%), SES (-7.5%) and Eutelsat (+1.5%), sitting on 200 MHz of 5G spectrum, formulated a proposal to transfer the spectrum to the mobile industry.

Earnings

The market could digest several earnings reports, including those from TIM, TalkTalk (-5.4%) and MTS (+1.9%). QSC (+0.4%) adjusted its guidance for the recent sale of its Plusnet unit.―Telecompaper