Consolidation - THE theme driving improved trends for EM Telcos
Communications
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).
Edition: 212
- 30 May, 2025
Key themes driving the EM Telco & Towers sector in 2025
Communications
New Street’s thesis is that the EM Telco industry has entered an upswing, with ROIC rising and real revenue growth for the better managed companies in good markets. However, investor interest levels in the space remains low, with few long only funds retaining specialist Telco analysts. This creates a good opportunity to generate alpha as many of these stocks trade on very high equity FCF yields. As a result, they are introducing the GEM-Top 8, to point investors towards those companies set to deliver outsized returns in the next 1-2 years. Stocks featured include VEON (TP $65), Airtel Africa (TP £2.00), Singtel (TP S$4.60) and Vodacom (TP ZAR150).
Edition: 203
- 24 January, 2025
Communications
Given the cyberattack in Australia, and recent share price weakness, it is perhaps foolhardy to talk of SingTel joining a Golden Age as New Street believes has happened for Chinese, Korean and Japanese telcos. However, ROIC has inflected and almost all meaningful parts of the group have started to grow again, suggesting MSD top-line and DD EPS growth going forward. New Street expects net profit and hence the dividend to double between FY22 and FY26. If this doesn’t constitute a Golden Age for a low risk, well managed telco, what does? TP S$4.4 (85% upside).
Edition: 156
- 17 March, 2023
Communication Services
Singtel has announced the disposal of a 70% stake in its Australian tower asset for A$1.9bn – a 38x EBITDA multiple based on company commentary - and A$500mn more than anticipated. The majority of proceeds will be paid directly to Singtel, facilitating additional deleveraging and increased balance sheet flexibility. Market reaction was underwhelming and it remains a good opportunity. TP S$4.10 (~65% upside)
Edition: 121
- 15 October, 2021