Telecoms shares were generally down last week (week 5), in step with the overall markets. Performances diverged widely, however. As Virgin Media (Liberty Global) apparently abandoned plans to launch a budget brand, in the face of intense market competition, TalkTalk (-12% for the week) ended up in a sell-off after being downgraded by several banks, according Telecompaper. At the same time, BT (-4.8%) hinted at increased fibre investments. And then, at the end of the week, the Financial Times broke a story of resumed merger talks between Vodafone (-2.7%) and Liberty Global. The former put out a release, after the close of the market, confirming the talks and Liberty Global (+0.8%) was among the few telecoms shares ending the week in the black. CityFibre (-7.8%) may have suffered from the market questioning whether the FTTH agreement with Vodafone will come under pressure, should the talks lead to a merger of Vodafone UK and Virgin Media.
Major news from Scandinavia
Positive news also came out of Finland, with both DNA (+13.3%) and Elisa (+8.3%) going up sharply on strong results. Telia (+2.0%) was also up, but Telenor (-2.6%) couldn't benefit, despite raising its dividend and possibly finding a buyer for its Serbian unit. Tele2 (-0.9%) was down as well after reporting steep mobile losses in Sweden and uninspiring developments in the Netherlands. KPN's (-3.6%) Q4 report was in line with market expectations. Technology developments in its fixed-line network, involving advanced VDSL-technology, couldn't prevent the share ending the week down.
A major and groundbreaking merger involved Danish TDC (-6.9%), which will absorb most of the Modern Times Group in the Nordics. It appears to mimic similar converged cable/media conglomerates in both the US (Comcast/NBCU) and Belgium (Telenet/DVM). Judging by the stock's decline, the market wasn't impressed favourably by this news and the accompanying Q4 results and 2018 outlook.
Altice (-6.2%) was among the weakest performers last week as it unveiled an investment plan for its Dominican Republic unit, leaving the market wondering how this relates to an earlier announcement, last month, when the unit was labeled non-core.
Telecoms underperform YTD
In the year-to-date performance, we encounter double digit movements up at MTS (+19%) and down at TalkTalk (-19%) and CityFibre (-15%). Our pan-European telecoms basket (-2.8%) held up a little better against the Eurostoxx 50 Index (-3.4%). Year-to-date however, our basket (-1.3%) underperforms the general market, or at least the Eurostoxx 50 Index (+0.6%).