--> Very Positive read across for French Telco Sector
Europe Flash: Vodafone – TowerCo debt reduction potential
Plans by Vodafone [LON:VOD] to explore options around its mobile telecom tower operations have some significant implications for the telco’s valuation and debt position.
New CEO Nick Read confirmed at half-year results published on 13 November that Vodafone was evaluating “the optimal strategic and financial direction” for its tower assets.
Multiples attracted by tower-focused pureplay peers and precedent transactions indicate Vodafone’s directly owned masts across Europe might be worth in the region of EUR 17bn – EUR 21bn, according to estimates by the Flash, on a standalone basis.
Vodafone had a market cap of EUR 49.8bn and an enterprise value of EUR 81.9bn as at yesterday’s close (26 November). Vodafone disclosed at half-year results it had placed 57,600 assets across Europe into a Virtual TowerCo on which it is conducting legal and tax due diligence to evaluate financial options.
Financials for Vodafone’s tower assets are not separately disclosed in the telco’s accounts, so valuations prior to the unit’s carve-out are likely to be rough. In the absence of financials, Vodafone’s TowerCo valuation can be approximated from a few common data points published by Vodafone and its pureplay mobile towers peers.
Listed tower companies in Europe include Cellnex [BME:CLNX] and former Telecom Italia [BIT:TIT] unit Inwit [BIT:INW]. Cellnex, which operates across Europe, has an EUR 8.3bn enterprise value and trades at 20.5x trailing-12-month EBITDA. Inwit, which trades only in Italy, has an enterprise value of EUR 4bn and is valued at 18.5x EBITDA.
Cellnex has around 28,000 assets and an EV per tower of EUR 296,000 while Inwit has around 11,000 towers at EUR 363,000 per tower. These metrics indicate an approximate valuation range for Vodafone’s assets of EUR 17bn to EUR 21bn.
Vodafone’s 57,600 directly owned assets exclude tower joint ventures in the UK and the Netherlands that include a further 22,300 sites. Assets in the UK total 19,200 and are owned in a 50:50 joint venture with Telefonica [BME:TEF].
Read said on the 13 November results call that Vodafone was looking for partners on a range of assets that it could share without losing differentiation as a business.
Partnering on towers, for example through a 50% stake sale, would help reduce reported net debt at 30 September of EUR 32bn, which is around 3.0x pro-forma for pending M&A.
Read also said there are opportunities to increase tenancy ratios, a key of measure of performance for tower companies, as part of its initial plan to carve out the business.
Disposal of the assets, which would be similar to a sale and leaseback transaction since Vodafone would have to pay tower fees into a joint venture, might help address question marks over the sustainability of dividend payments. Vodafone’s dividend, expected at EUR 0.1507 per share for the year to 31 March 2019, is in excess of trailing-12-month adjusted earnings per share of EUR 0.088, though management says a robust free cash flow outlook justifies the payout.
WikiLeaks pushes back on report of Assange-Manafort talks
Report comes a day after Manafort accused of lying to US investigators
WikiLeaks on Tuesday hit back against a media report that its founder, Julian Assange, held secret talks with Paul Manafort, a former campaign manager for Donald Trump.
The Guardian reported that meetings between Mr Manafort and Mr Assange took place in 2013, 2015 and in spring 2016.
“Remember this day when the Guardian permitted a serial fabricator to totally destroy the paper’s reputation,” WikiLeaks tweeted. The organisation added that it “is willing to bet the Guardian a million dollars and its editor’s head that Manafort never met Assange.”
Mr Manafort in September agreed to co-operate with Robert Mueller’s probe into possible links between Donald Trump’s presidential campaign and Russia after pleading guilty to conspiracy and witness tampering.
In a court filing on Monday, US prosecutors accused Mr Manafort of lying to federal investigators in violation of his plea agreement. Mr Manafort has denied the allegations.
Why Oil Prices Took Such a Tumble—and What Comes Next
Investors and oil traders had a sudden rethink about how much oil would be pumped onto world markets. Rising inventories could weigh on prices.
It was only at the start of October that analysts were wondering if oil would soon cost $100 a barrel. Then a trap door opened and oil prices have been in a rapid descent since, losing nearly a third of their value in about eight weeks, a wild slide that is reminding investors of the great oil price collapse between 2014 and 2016.
What sparked the reversal? Investors and oil traders had a sudden rethink about how much oil would be pumped onto world markets in coming months. The main factors: booming U.S. output, more Iranian oil supply being available than had been expected because of U.S. sanctions waivers, plus major producers Russia and Saudi Arabia ramping up production since the summer.
Inventories Rising
The surge in supply has reversed a key trend that underpinned the oil bull camp: inventories, or the amount of oil stored in tanks and on ships, looks to be rising again.
The International Energy Agency now predicts oil inventories will exceed their five-year average in OECD countries imminently. If they keep rising, that could put even more pressure on prices to fall the way they did in 2014 when inventories swelled.
“There is a determination from Saudi and OPEC to target inventories to avoid a big build like it happened back then (2014-2016),” said Giovanni Serio, head of research at Vitol Group, the world’s largest independent oil trader. ”If OPEC continues to respond to fundamental conditions, we should be fairly confident that stocks are not going to explode.”
America Pumping
The most recent glut has been centered in the U.S., where crude inventories have built up for nine consecutive weeks as output hit record levels. The U.S. is heading toward becoming a net energy exporter by 2023, according to the International Energy Agency. Weekly crude exports peaked at 3 million barrels a day in June this year, their highest level since a ban on exports was lifted in 2015, according to data published by the Energy Information Administration.
Supply Bottlenecks
America’s rise to become one of the world’s top crude producers has outpaced the infrastructure needed to export the oil. That is led to a divergence in the price of oil in the U.S., measured by West Texas Intermediate, the U.S. benchmark oil price, which has suffered more than the global Brent benchmark, as stronger than expected U.S. supply weighed on prices.
The two benchmark prices could converge late next year however, after additional export infrastructure comes on line, enabling more U.S. barrels to hit the global market. Three major new pipelines are set to open up, adding a combined capacity of about 1.8 million barrels a day that will be aimed at Corpus Christi on the Gulf Coast, the largest export location for U.S. crude.
“Once the U.S. connects the Permian to the Gulf that oil could move to the international market in regular larger volumes,” said Harry Tchilinguirian, head of commodity market strategy at BNP Paribas.
Oil Price Drama
The recent collapse in the oil price has sparked higher volatility in the markets. Generally there is an inverse relationship between oil price direction and volatility—as prices fall volatility rises. And prices are expected to remain volatile in the lead up to the OPEC meeting in early December, when it will become clear whether the cartel is prepared to remove more oil from the global market.
OPEC members are “staring at what oil producers fear the most, huge inventory builds and price collapse,” said Bob McNally, president of Rapidan Energy Group.
The fall in oil prices should follow through to gasoline, a welcome development for U.S. drivers. It could also give a boost to consumer spending and other parts of the economy.
Carlos Ghosn’s Lawyer Is Familiar With Prosecutors’ Tactics
Motonari Otsuru once headed the office taking on the former Nissan chairman and has spoken out about society’s ‘evil spirits’
TOKYO—When he was a prosecutor, Motonari Otsuru warned that “evil spirits” were eating away at Japanese society with their greed for huge profit, and he urged his colleagues to get tough even if they were pursuing charges with no precedent.
More than a decade later, prosecutors have arrested Nissan Motor Co.’s NSANY 2.84% Carlos Ghosn on suspicion of hiding tens of millions of dollars in income, citing a securities law that lawyers say hasn’t been tested in court.
However, Mr. Otsuru isn’t in a position to cheer on the government—because he has been hired to defend Mr. Ghosn and visited the suspect in jail, a person familiar with the matter said. Mr. Ghosn also has hired U.S.-based law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP to assist with the defense, this person said.
In the 63-year-old Mr. Otsuru, Mr. Ghosn is getting someone steeped in the tactics of the prosecutors now weighing whether to charge him with financial crimes. Mr. Otsuru once headed the special-investigations section of the Tokyo prosecutor’s office, the same unit taking on Mr. Ghosn.
Prosecutors say they suspect Mr. Ghosn of causing Nissan to file incorrect reports with regulators by failing to disclose some $44 million in income over five years. Mr. Ghosn, who remains in custody and hasn’t been charged with a crime, has denied wrongdoing, according to Japanese public broadcaster NHK. He would face up to 10 years in prison if charged and convicted of financial crimes.
Mr. Otsuru’s office declined to make him available for comment for this article.
When in government service, Mr. Otsuru led one of the most prominent investigations of a Japan-based CEO in this century—the prosecution of internet entrepreneur Takafumi Horie in the mid-2000s. Mr. Horie was convicted in 2007 of manipulating earnings at his company, Livedoor Co., and spent nearly two years in prison.
Mr. Horie, then in his 30s, denied the charges, and some of his defenders said he was made a scapegoat in a society that frowns on brash displays of wealth, especially by younger people.
“Mr. Otsuru is one of the most ideal choices as Mr. Ghosn’s lawyer because he knows prosecutors’ techniques,” said Yoji Ochiai, a former prosecutor now in private practice. He said Mr. Otsuru would be an especially valuable go-between with prosecutors if he and the defense team want to seek a deal.
Although suspects can’t make formal plea bargains in Japan, informal deal-making is possible before charges are filed in court—say, if a person is willing to admit guilt to some charges in exchange for prosecutors’ not pursuing others.
Another former prosecutor, however, said Mr. Otsuru’s past may not be a help because in private practice he hasn’t focused on battling to save defendants from prison.
“For Ghosn to win his innocence, you have to fight claiming that this case is totally wrong from the beginning. But [Mr. Otsuru] isn’t that kind of guy,” said Nobuo Gohara, who worked with Mr. Otsuru.
Mr. Otsuru’s work in private practice, which began in 2011, has focused on helping corporations conduct internal investigations into wrongdoing. In one case, he investigated gambling in Japan’s professional baseball league, and his findings led to several players being banned for betting on games, although he found games weren’t fixed.
The special-investigations section of the Tokyo prosecutors office is known for tackling the biggest corporate and political scandals. Mr. Otsuru, a graduate of Tokyo University’s elite law department, was more affable than his typically dour colleagues and sometimes entertained them by playing the recorder, people who knew him when he was a prosecutor said. He shared their view of the section as the last bastion of justice against evildoers.
In an essay written when he was head of the section from 2005 to 2007—“Fighting Against the Darkness of Injustice”—Mr. Otsuru said prosecutors should think of “people working hard by the sweat of their brow” and victims of corporate layoffs when targeting wealthy suspects.
“In the quest for giant profit, people we may call evil spirits perform their dark dance, continually gnawing away at society,” he wrote.
He said prosecutors shouldn’t hesitate even if there was a lack of precedent.
“Those people who gluttonously grasp for profit use clever tricks to avoid pursuit, so if you give up the investigation after encountering some difficulties, you are playing right into their hands,” he wrote.
Masaru Wakasa, who worked closely with Mr. Otsuru in the early 2000s, recalled that in one probe involving bid-rigging, Mr. Otsuru worked hard to add a charge of breach of trust, which was rare for such cases. “He is an honest and hotblooded man, but he makes calm judgments based on the evidence,” Mr. Wakasa said.
Mr. Otsuru suffered a setback late in his government career. As a top prosecutor, he was involved in a drawn-out probe of a political heavyweight’s funding body, but prosecutors ultimately dropped the case. A court-appointed citizens’ panel later ordered the case to be reopened, and the politician was found not guilty.
EU lawyers tell ECJ Article 50 cannot be unilaterally revoked
Blow for anti-Brexit campaigners led by a group of Scottish MPs and MEPs
The EU’s top lawyers have said the UK’s decision to leave the bloc cannot be unilaterally withdrawn, in a blow for anti-Brexit campaigners.
In a hearing at the European Court of Justice to decide whether the EU’s exit clause can be cancelled by the UK, lawyers from the European Council and Commission insisted that European government had to unanimously agree to any move from Britain to reverse its decision to leave the EU.
The case is being heard after anti-Brexit campaigners led by a group of Scottish MPs and MEPs, have argued that the “Article 50” process can be cancelled by the British government without any approval from the rest of the EU. Today’s hearing in Luxembourg was referred to the ECJ by Scotland’s highest court.
Hubert Legal, the European Council’s top lawyer, insisted that unlike the voluntary decision to trigger Article 50, cancelling it would require the unanimous support from all 27 governments in order to protect the interests of the EU as a whole.
“There is no parallelism between the right to notify and the right to take back”, said Mr Legal. “National processes cannot suffice to pull the carpet on which everyone has been forced to stand on,” he said.
The crux of the EU’s argument is that allowing a government to cancel the exit process would encourage member states to abuse the process in order to gain concessions from the bloc on better terms of membership.
In such a situation, the two-year clock that is started under Article 50 would be transformed from a process to organise a country’s exit, into a negotiation to “charm the notifying sheep back to the flock” on terms that would weaken the EU project, said Mr Legal.
Anti-Brexit campaigners are hoping a decision in their favour would influence UK MPs to reject Theresa May’s withdrawal deal and ultimately reverse Brexit.
But it is unlikely that the ECJ will issue any final verdict before the House of Commons “meaningful vote” on December 11.
During the case, the UK government said the case was purely “hypothetical” as it had no intentions to cancel the Article 50 process and stay in the EU. It said the petitioners were seeking to use the ECJ to get “political ammunition to pressure the UK parliament”.
“Pandora was given a large box on her wedding which she was told not to open”, said Lord Keen of Elie, QC for the UK government. “We respectfully plead the court should not open this box”.
Trump Blasts Mueller & "Angry Democrats" - "Go Back To The Clinton Foundation"
In a trio of increasingly angry tweets this morning, President Trump raged at special counsel Robert Mueller as "a conflicted prosecutor gone rogue" lambasting him for "doing TREMENDOUS damage to our Criminal Justice System" because of his one-sided investigation.
"The Phony Witch Hunt continues, but Mueller and his gang of Angry Dems are only looking at one side, not the other. Wait until it comes out how horribly & viciously they are treating people, ruining lives for them refusing to lie. Mueller is a conflicted prosecutor gone rogue......The Fake News Media builds Bob Mueller up as a Saint, when in actuality he is the exact opposite. He is doing TREMENDOUS damage to our Criminal Justice System, where he is only looking at one side and not the other. Heroes will come of this, and it won’t be Mueller and his......terrible Gang of Angry Democrats. Look at their past, and look where they come from. "
The Phony Witch Hunt continues, but Mueller and his gang of Angry Dems are only looking at one side, not the other. Wait until it comes out how horribly & viciously they are treating people, ruining lives for them refusing to lie. Mueller is a conflicted prosecutor gone rogue....
....The Fake News Media builds Bob Mueller up as a Saint, when in actuality he is the exact opposite. He is doing TREMENDOUS damage to our Criminal Justice System, where he is only looking at one side and not the other. Heroes will come of this, and it won’t be Mueller and his...
Trump went on to reference the FBI's shuttered investigation into Hillary Clinton's emails, which chastised the former Democratic nominee as "extremely careless" for her use of a private email server to do official business at the State Department.
"The now $30,000,000 Witch Hunt continues and they’ve got nothing but ruined lives.Where is the Server? Let these terrible people go back to the Clinton Foundation and “Justice” Department!"
....terrible Gang of Angry Democrats. Look at their past, and look where they come from. The now $30,000,000 Witch Hunt continues and they’ve got nothing but ruined lives. Where is the Server? Let these terrible people go back to the Clinton Foundation and “Justice” Department!
Trump has attacked and criticized Mueller's investigation into members of his campaign for months, but this outburst comes a day after Roger Stone associate Jerome Corsi refused to sign a plea deal with Mueller.