yesterday we were hearing that the road-show in New-York with CEO S. Richard had just been cancelled. The CEO and the CFO have to stay in Paris. No details given by Orange......Yesterday night, the French President François Hollande and the Italian PM, Matteo Renzi, spoke in a press conference in Venice; Mr Hollande argues the aim of possible Orange-Telecom Italia merger must be “to have champions in Europe”, adding he spoke w/ Renzi about “what we could do, allow, on the industrial front”, suggesting partnerships, alliances between Italian, French cos. already exist in defense sector and same applies to telecommunications, “if we want to have an influence on this market, if we want to have the necessary size”. Finally, he stated that deciding majority, minority stakeholder is up to companies, what’s needed is “capacity to have an influence”. Mr Renzi added “we would be happy if a hub that can value the Latin, French-Italian culture could be created, but we need to let the market doing its part”.
View/Action As suggested in our last report on TMT sector (“A challenging year, some nice surprises ahead”, Jan. 15, 2016, attached) in the long term, we see the European telecom market as a single legal entity (as the EU Commission seems to have taken a more proactive stance on consolidation, given the investments needed to sustain innovation - fiber/5G): in this scenario, there would be room for just a few players. TI, supported by VIV as a core shareholder, could play a key role in this scenario (set to involve Vodafone, Liberty, DT, Orange and Telefonica). Having said that, we would add that cross-border deals could happen once consolidation is implemented on a country-specific basis. We reiterate our Outperfom on TIT, €1.32/sh TP.
Last report from the 15/01 attached