European Telecoms: A Convergence Play
CNBC analyst Keith Woolcock, director at Westhall Capital, opines that European telecoms shares are poised for growth, citing the convergence of mobile and fixed-line networks. This trend, he believes, favors fixed-line players, which will capture the benefits of increased broadband speed, high-definition television, and internet connectivity.
Key Takeaways:
- Fixed-line telecoms, exemplified by Deutsche Telekom, offer a cheaper and attractive play, with low EBITDA margins and low broadband penetration in Germany.
- The convergence of mobile and fixed-line networks will benefit companies with a strong local connection to homes, such as Deutsche Telekom.
- Intel, despite being battered this year, may see a turnaround in the second half of 2006 due to its ability to work through excess inventory and management improvements.
- Doosan Heavy in South Korea is an attractive stock due to its involvement in water and energy themes, providing a connection to infrastructure expenditure worldwide.
- Key stocks to watch include Deutsche Telekom, Intel, and Doosan Heavy, each providing a convergence play in the European telecoms sector.
Statistics:
- Intel is trading on 19 times reduced earnings, while Doosan Heavy is selling on 15.5 times earnings.
- Deutsche Telekom has EBITDA margins of 38% and sells at one times sales.
- The Nasdaq has reached a five-year high, despite Intel's woes.
- US private equity firm Blackstone has acquired a 4.5% stake in Deutsche Telekom.
- Fixed-line telecoms will see increased upside with the advent of high-definition television and internet connectivity.
Sources:
- CNBC/DOW JONES BUSINESS VIDEO ANALYST INTERVIEW
- Keith Woolcock, Director, Westhall Capital
- Deutsche Telekom
- Intel
- Doosan Heavy
- Blackstone