Entering text into the input field will update the search result below

Europe's quad plays likely leading to better margins, moats

Jul. 08, 2015 11:58 PM ETTelefónica, S.A. (TEF) StockVOD, ORAN, TEF, LBTYA, LBTYK, KKPNY, KKPNF, LBTYB, VODPF, TIGOBy: Jason Aycock, SA News Editor
  • Europe is leading the world in telecoms moving to "quad-play" bundling -- adding wireless to fixed-line telephones, broadband and pay TV -- which should mean a big opportunity for firms to drive margin improvement and build some competitive moats, says Morningstar's Allan Nichols.
  • Both in-country consolidations and convergence mergers are helping build moats, he says -- the latter because it tends to lower churn as people subscribe to more services. And with lower churn, companies can lower subscriber acquisition cost.
  • His favorites in the space: Telefonica (NYSE:TEF), already a leader in triple-play and convergence in Spain and Brazil; Orange (NYSE:ORAN), leading a fiber buildout in France; and Millicom International Cellular (MIICF), with a high organic growth rate but low EV/EBITDA.
  • About 16% of Virgin Media customers were taking four services when it was acquired by Liberty Global (NASDAQ:LBTYA) in summer 2013, which Nichols thinks was a key factor. Liberty is now offering wireless services as an MVNO in several markets, and has agreed to buy Royal KPN's (OTCPK:KKPNY) wireless business Base.
  • From the wireless direction, Vodafone (NASDAQ:VOD) is also acquiring assets to offer other services, particularly after it bought Cable & Wireless Worldwide in the UK, and later Kabel Deutschland in Germany.
  • Europe would benefit from more cross-border mergers, Nichols says, but they're unlikely due to political constraints, and German cable consolidation is likely to run into regulatory opposition as well.

Recommended For You

More Trending News

About TEF Stock

SymbolLast Price% Chg
Market Cap
PE
Yield (TTM)
Rev Growth (YoY)
Prev. Close
Compare to Peers

Related Stocks

SymbolLast Price% Chg
TEF--
Telefónica, S.A.