EM Telcos: When does digital drive a re-rating?
Communications
New Street examines when EM Telcos transition from being “Telcos with digital assets” to “Digital-first” companies and when the market begins to re-rate them accordingly. Their analysis of Safaricom and SoftBank Corp suggests that valuation multiples expand once digital revenues reach 15-20% of total sales. New St flags VEON, MTN, Airtel Africa, Vodacom, Kyivstar and Telefonica Brasil as EM operators now approaching this threshold. Digital businesses typically command higher growth, superior ROIC and lower regulatory risk, supporting a valuation premium. Reflecting this view, New Street upgrades their price targets for VEON ($100), Kyivstar ($16.4), Vivo (R$43), AAF (GBP 380), Vodacom (ZAR 200), Safaricom (KES 32) and MTN (ZAR 245).
Edition: 223
- 31 October, 2025
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
One of Nutstuff’s “sleeping gems” - stock could treble in the next year. VEON is absurdly cheap, trading on just $40 a sub and EV/EBITDA of 2.5x. Will Nutting considers it to be a great EM proxy and it benefits from Russian Rouble (20% undervalued vs. oil) and other EM currency reflation. Demand for EM telco data services is exploding and with Capex to Sales back up to 25%, organic growth is set to accelerate. VEON can grow underlying EBITDA 5-10% p.a. and pay 20-30c in dividend. TP $6 doesn’t take into account the tower spin-off / market waking up to the JazzCash opportunity.
Edition: 118
- 03 September, 2021