Communications

Report by New Street Research

New Street expects many markets to consolidate further to just two operators, and in smaller, poorer countries, possibly a single network. Consolidation underpins much of the sector's improvement - most notably through reduced capex, as seen in Brazil, where industry capex dropped from $7bn to $4bn. Countries where further consolidation is likely include Colombia, Peru, Chile, Malaysia and many in sub-Saharan Africa. Key beneficiaries include Millicom, Airtel Africa, MTN, VEON and Entel. EM Telcos remain substantially undervalued on double digit equity FCF yields. Top regional picks include Singtel and KT (Asia), IHS Towers and Vodacom (Africa), and Liberty Latin America and TIM Brasil (LatAm).

Communications

Report by New Street Research

Despite the ~45% rally YTD, New Street continues to like the Brazilian Telco stocks. Wireless operator dynamics remain very favourable with FCF supported significantly for TIM in the near-term by Oi tower decommissioning, with a potentially broader reset for the industry relative to the Tower cos over the mid-term (part of a broader EM theme perhaps following IHS in Nigeria). New Street has lifted their estimates again after TIM's Q3 results (particularly EBITDAaL). With the IOC tax issue (elimination of tax deductibility) likely a 2025 issue at the earliest they see the stock continuing to run into 2024. TIM is preferred over Vivo at these levels on valuation and with higher wireless exposure.