Bouygues (EN FP) France
Industrials
New Street initiates coverage with a Buy rating, citing increased prospects for French Telecom M&A as a key catalyst. They consider a Bouygues-SFR deal to be the most likely as the GUPPI is probably too high for an Iliad-SFR merger and Iliad-Bouygues is unlikely as there is no natural seller. New Street suggests an SFR-BTel deal could unlock €8–9bn+ in synergies. Regulatory remedies would likely be manageable amid current political sentiment. Drahi may now face pressure to provide lenders with an exit from SFR. New Street assigns a 56% probability of a merger in their SOTP model and sees 43% upside; they would be a Buyer ex M&A, but M&A could be a game-changer, especially as the dividend can increase by over 50% as well.
Edition: 211
- 16 May, 2025
Communications
With Liberty Global recently taking a 4.9% stake in its rival, it means there are now three major shareholders on VOD’s register who might be interested in acquiring assets. With the next CEO likely to be given a mandate to radically simplify the business, Alex Pound examines the impact of several deals that could be made include selling Vodacom to e& and reopening discussions with Iliad to sell Italy, with VOD aiming to slim down to an EU footprint spanning 6-8 geographies. His transaction-boosted fair value is 159p (~60% upside).
Edition: 155
- 03 March, 2023
Communications
1&1 and United Internet both had a poor 2022 as concerns and lack of visibility on the network build continue to grow. New Street believes the situation is misunderstood - as either 1&1 goes ahead with the network build which should generate long-term EBITDA growth and mirror what Iliad has been doing in Italy (their base case), or it walks away and reverts to being an MVNO which would also generate substantial upside. An IONOS IPO could also be a further support for United Internet. An expected CMD in March could finally be a catalyst to bring this to a head. If the market continues to disbelieve after that, the case for a minority buy-in becomes even more compelling. TP €31 (150% upside).
Edition: 152
- 20 January, 2023
Telecoms M&A Set to Continue…
Communications
Public market valuations do not reflect private valuations - the market is overly focused on very near-term FCF and capex gyrations without giving benefit for “good” capex or a likely return on capex spend. Iliad is a prime example of this. Xavier Niel recently made an offer for Iliad minorities at €182 - a sizeable 61% premium. While telecoms multiples remain low and fundamentals remain sound, such deals are easy to justify for any potential acquirer taking a medium to longer-term view. 1&1 Drillisch is likely to be the next takeover target.
Edition: 116
- 06 August, 2021
Iliad (ILD FP) France
Communications
Mounting evidence that a large buyback is imminent - New Street notes that the last time ILD bought shares in the market (July 2019), an offer from Xavier Niel was made for 20% of the freefloat a few months later. New Street also address concerns surrounding the company's new capex strategy (a return on this capex is effectively a free option in the current share price). Trades at ~3-yr low in multiple terms, and in-line with incumbents on EV/EBITDA multiples despite much better growth (+8.3% 20-23 CAGR vs. incumbents +3.8%). TP €220 (85% upside).
Edition: 115
- 23 July, 2021