Report by Aitken Advisors

Long credit is fundamentally an embedded short volatility position. As realised and implied volatility rises, there is some pressure on some parts of the credit markets, corporate bond prices down, credit spreads wider. James Aitken notes the iTraxx Europe Crossover Index is at 315 basis points, out from 240 basis points in early July, but the acute strain sits where one or two leveraged players have been heavy sellers of the first loss tranche (0%-10%) and recycled the premium received into other credit exposures. The recent mark to market on these short credit protection exposures has been rough, ditto the decline in Virgin Media and Multiversity bonds. However, James expects it is not a systemic issue; the two most aggressive leveraged players hold abundant capital, maintain stable clients, and one just raised another USD$1.5bn. Expected European nominal GDP growth picking up means you cannot quit on European credit. Overall, it should be ok.

Communications

Report by New Street Research

TEL has announced that it has agreed to buy GlobalConnect's (GC) Consumer Business in Norway. Not that many mature fibre assts have been sold in Europe, and so this deal is interesting on quite a few levels: for those thinking about what FastFiber in Portugal is worth or what Virgin Media might sell a stake in NetCo for, or what price Zegona / MasOrange might achieve in Spain, then this deal has relevance. Indeed, one could even argue that there is a read across for the incumbents themselves, as their fixed businesses will eventually broadly resemble GC. In this report New Street looks at what the deal means for fibre valuations, fibre capex assumptions and for TEL itself.

Technology

Report by Paragon Intel

Evidence suggests CEO Schulman is not the leader to put out the fire he started - has missed numerous opportunities to keep the company ahead of an ever-rising competitive intensity in the fintech space. Schulman is a chronic underperformer who has destroyed (72%) alpha during his CEO tenures at PYPL and Virgin Mobile USA. His ManagementTrack Rating is well-below average at 3.0 (vs. median rating of 4.9 across Paragon's platform) and he has 18 level "2" or "3" audit, financial, and governance red flags identified including material impairments, Benford's Law, Financial Restatements, and Internal Controls during both of his CEO tenures.

Communications

Report by New Street Research

Further signs of an over-heated sub-sector - Axione (the French fibre JV between Bouygues and Mirova) has announced plans to build FTTP to 4m premises in the UK in sub-urban and rural areas. New Street believes the company is entering an increasingly crowded UK FTTP market (estimates there is already c.15% overlap among the altnets today); argues the economics looks very challenging and consolidation among the players is long overdue if they are ever going to improve their returns and stop competing against each other, as well as Virgin and BT.