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Developments in Telecoms Capital Markets. 3 June 2002. Contents. What happened? What was the role of Government and regulator? What are investor attitudes to telecom stocks now? How should Government and regulators react?. 260. 240. 220. 200. 180. 160. 140. 120. 100. 80. 60. 40.

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Presentation Transcript
contents
Contents
  • What happened?
  • What was the role of Government and regulator?
  • What are investor attitudes to telecom stocks now?
  • How should Government and regulators react?
what happened

260

240

220

200

180

160

140

120

100

80

60

40

1999

2000

2001

2002

Europe-DS Telecom, Media, IT - Price index

Europe-DS market - price index

Europe-DS Telecom,Wireless - price index

What happened?

1.1 European TMT sector 1999-2002 ytd

European performance

Source: Datastream

slide5

1.3 Equity and equity linked issuance 1999 – 2002 ytd

European telco sector equity issuance

European telco sector equity linked issuance

slide6

1.3 Capital markets highlights

  • European DS Telecoms, Media and IT Index is
    • >70% lower than June 2000
    • >50% lower than 2001 high
    • >25% lower than 2002 high
  • CEE

Values are lower…

slide7

Capital markets highlights

  • Fixed: 4.5x EBITDA nowvs nearly 4x Revenues then
  • Mobile: 6-7x EBITDA now(– fixed line valuations at peak)
  • Issues by BT and KPN account for 70% (€15bn) of European equities issuance in the last 12 months
  • Convertible/exchangeable issuance rose in 2001 in response to low prices and interest rates and high volatility

Valuations are lower…

ˆ

New issuance is down…

slide8

Capital markets highlights

  • Further growth possible towards European levels

BUT

  • Cannibalisation of fixed revenues in voice
  • Ceiling of  2.5% mobile spend/GDP
  • Concerns about 3G
  • Disappointing volumes

Mobile exceeded expect-ations…

until 2001

Data, broadband…

in a nutshell 1

350

300

250

200

150

100

50

1997

1998

1999

2000

2001

2002

BT GROUP

In a Nutshell - 1

Source: Bloomberg

in a nutshell 2

BT Group

Vodafone Group

In a Nutshell - 2

800

700

600

500

400

300

200

100

0

1997

1998

1999

2000

2001

2002

Source: Bloomberg

in a nutshell 3

6000

5000

4000

3000

2000

1000

0

1997

1998

1999

2000

2001

2002

BT Group

Vodafone Group

Colt Telecom

In a Nutshell - 3

Source: Bloomberg

what was the role of government and the regulator
What was the role of Government and the regulator?

Faster liberalisation

Slower liberalisation

  • Consumer choice/business needs
  • New entrant push
  • EU accession
  • FCC pressure on settlement rates
  • Network development obligations
  • Digitalisation/broadband vision
  • Tariff rebalancing/price control
  • Labour issues
  • Privatisation proceeds

Most CEE Governments/regulators favoured infrastructure based competition model

what are investor attitudes to telecoms stocks now
What are investor attitudes to telecoms stocks now?

Institutional investors

Strategic investors

Private equity

  • Wary, especially of 3G cost/benefits
  • Visibility/momentum of earnings…
  • Driving dividend
  • High liquidity/free float requirements
  • Where are they now?
  • Highly geared
  • 3G write offs
  • Strategies under attack
  • Beginning to play
  • But still relatively few in CEE
  • High rates of return
  • Stability of cashflow

The telco reinvented as a utility?

how should governments regulators react
How should Governments / regulators react?
  • Infrastructure as a utility
    • Services based competition over incumbent network
      • Interconnection
      • Carrier (pre) selection
      • Local loop unbundling
      • Number portability
    • “Second National Operators” rarely succeed
    • MVNO for 3G?
  • Regulatory (transparent) bite
  • Temper price / other ambitions