The top five European telcos by revenue at the end of 2021 were Deutsche Telekom, Orange, Vodafone, BT and Telefonica, according to a new ranking from analyst firm MTN Consulting.
It’s a bit surprising to see Comcast ranked as No. 6 on the list, but that’s because of its $39 billion acquisition of London-based Sky in 2018.
The only other non-European company in the Top 20 is AT&T, ranked No. 20.
New Street sees upside on European telcos
According to an analyst note over the weekend from New Street Research, EU telecom companies are up 8% year-to-date in total returns.
“We still see good absolute upside (+24% on average): top picks are DT, Vodafone, BT and Orange,” wrote New Street. And it says the telecom sector has good defensive characteristics with a variety of levers, including price increases, package mix and promotional activity. So far, Q1 has been supportive of this thesis, with 13 of the 18 — or 72% — of the listed telcos posting better service revenue growth year over year than in Q4 21.
Of Deutsche Telekom, New Street said the majority of its value lies in T-Mobile US, “and we see significant upside here from their spectrum advantage combined with Sprint synergy delivery. The implied German business trades at a 30%+ discount to the EU sector, which we see as wholly unjustified for a rational market structure.”
And of Vodafone, New Street said, “Going into results, there seems to be a high degree of skepticism about their operational performance, but as of last quarter, Vodafone’s outperformance vs. the major peers was an all-time high, and we see a high degree of M&A optionality around towers, the U.K. and Italy.”
Finally, New Street said, “BT is arguably one of the purest large cap infrastructure plays in the sector with a clear FTTH regulatory structure in place. Furthermore the U.K. market seems best placed to pass on inflationary price increases to consumers.”