EARNINGS PREVIEW: European Telcos Seen Reporting Data Revenue Spike
February 01 2011 - 11:08AM
Dow Jones News
TAKING THE PULSE: European telecom companies are expected to
report a spike in data revenue due to the rising popularity of
smartphones and tablets, but landline operations will remain
sluggish.
The performance of the world's biggest mobile operator, Vodafone
Group PLC (VOD), will come under scrutiny Thursday given the
U.K.-based group's extensive operations, particularly in
Europe.
Many analysts expect France Telecom to underperform the telecom
sector in 2011 due to the tough competitive environment in France,
with Exane BNP Paribas preferring Deutsche Telekom AG (DT) and BT
Group PLC (BT.A.LN) among the European incumbents.
COMPANIES TO WATCH:
---Vodafone Group PLC (VOD) 3Q results--- (Feb. 3)
MARKET EXPECTATIONS: Vodafone is expected to report a 1.9% rise
in group service revenue--one of the key figures tracked by U.K.
analysts--to GBP10.9 billion for the fiscal third quarter from
GBP10.7 billion a year earlier. The mobile giant may also name a
new chairman following heightened speculation that Chairman John
Bond is leaving.
MAIN FOCUS: Investors and analysts are anxious to hear about
current trading conditions, and the expected sale of its 44% stake
in French telecom operator SFR to partner Vivendi SA (VIV.FR). Any
comments on the situation with its partners in the U.S. and India
will also be closely watched.
---BT Group PLC (BT.A.LN) 3Q and 9 month results--- (Feb. 3)
MARKET EXPECTATIONS: BT is expected to report a 3.2% fall in
revenue to GBP5.03 billion in the fiscal third quarter from a
restated GBP5.20 billion a year earlier as customers use their
landlines less in favor of mobile phones. But analysts forecast a
4.9% rise in adjusted Ebitda to GBP1.45 billion from a restated
GBP1.39 billion due to further cost cutting. BT restated its fiscal
2010 numbers as it changed the way customer accounts were treated
in its BT Retail and BT Wholesale divisions, effective from April 1
2010.
MAIN FOCUS: The market will be looking for an update on the
group's broadband customer numbers, after rival British Sky
Broadcasting Group PLC (BSY.LN) reported higher-than-expected
take-up, as well as details on the group's cash flow position.
France Telecom SA (FTE) 4Q and FY results --- Feb. 24
MARKET EXPECTATIONS: France Telecom's fourth-quarter results are
expected to have benefited from a continued improvement in domestic
sales after the group repositioned its offers and prices in the
summer. France Telecom raised its full-year guidance in October,
saying it expected full-year revenue to grow slightly compared with
last year, excluding the hit from recent regulatory measures,
notably due to the improvement in France, its largest market.
However, analysts say competition in France has intensified over
the last quarter and the competitive environment is expected to be
even tougher in 2011, which is likely to be a drag on 2011
earnings.
MAIN FOCUS: France will be the key focus for analysts, which
will closely eye management comments on recent developments in the
market. Exane BNP Paribas estimates earnings before interest,
taxes, depreciation and amortization in France to decline by more
than EUR600 million, or 7%, in 2011 amid increasing competition in
the broadband market as well as increasing pricing pressure in
mobile. Analysts also say the recent hike in value added tax could
lead to higher churn and commercial costs in the first half of
2011.
---Telecom Italia (TI) 4Q and FY results--- (Feb 24)
MARKET EXPECTATIONS: Analysts expect a tricky top line in 4Q,
but strong savings with signs of debt reduction in 2010. Service
revenue is expected to fall a further 8% in the fourth quarter,
despite an easier comparison. However, domestic savings and growth
in Brazil are expected to stay strong in line with full-year
guidance. Analysts also note that a realistic industrial plan is
needed to show management understands problems and can manage
competition.
MAIN FOCUS: The market focus will remain on the domestic
operations' performance and the trends reported in the division, as
well as the outlook for 2011.
---Deutsche Telekom AG (DT) 4Q and FY results---(Feb. 25)
MARKET EXPECTATIONS: Deutsche Telekom's management reconfirmed
in recent weeks that Germany's incumbent telecom provider has
achieved its 2010 target of adjusted earnings before interest,
taxes, depreciation and amortization of around EUR19.5 billion and
free cash flow of at least EUR6.2 billion, hence analysts see no
major surprises and the declared dividend policy is not at risk.
The drastic cut in German mobile termination rates, which came into
effect Dec. 1 will likely weigh on the results and Germany's fixed
line revenue is seen down. Some analysts think Deutsche Telekom may
have scaled down marketing activities in order to hit the prior
year's targets.
MAIN FOCUS: The main concern will be the turnaround of Deutsche
Telekom's U.S. operations which has been under investor scrutiny
for the last two years. That is despite T-Mobile USA's investor day
on Jan. 20 where not all analysts were convinced by the turnaround
plan that was presented.
--- Telefonica SA (TEF) 4Q and FY results --- (Feb. 25)
MARKET EXPECTATIONS: Telefonica earnings should remain on solid
footing, as strength in Latin America offsets weakness in European
markets, particularly crisis-hit Spain. Brazil's Vivo-- which is
likely to be fully consolidated in the quarter for the first
time--and Telesp may remain as the company's top success stories,
while Mexico is still a bit of a laggard. The U.K.'s O2 may also be
a reason for optimism, as the launch of the iPhone 4 boosts sales
and network usage.
MAIN FOCUS: Telefonica's capital expenditure is likely to be in
focus, as it normally picks up in the second half of the year.
Spanish 4G rollout still appears distant, but the company is
expected to talk up growth opportunities in Brazil after the Vivo
purchase late last year left it in a solid position to benefit from
the booming economy and higher consumption. Any comments on
dividends and shareholder returns may be in focus, as Chairman
Alierta has already warned that the M&A era may have been left
behind as the company's footprint looks sufficient to maintain its
dominant position in target markets.
-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290;
lilly.vitorovich@dowjones.com
(Ruth Bender in Paris, David Roman in Madrid, Archibald
Preuschat in Duesseldorf, Giada Zampano in Rome contributed to this
article.)