Re/Code.net : A new generation of 5G will change everything from platforms to se



From: LAURENT CHEKROUN (MAKOR SECURITIES LO) At: 10/12/16 23:08:03
Subject: Re/Code.net : A new generation of 5G will change everything from platforms to se
A new generation of 5G will change everything from platforms to self-driving cars
The high-speed wireless network will be a critical component in the federal government’s agenda to develop the next level of U.S. innovation.

This week, President Obama will arrive in Pittsburgh to convene the first-ever White House Frontiers Conference. The conference will bring together innovators from across the country to focus on how science and technology is shaping the 21st century, and particularly the role of innovation in building smarter and more inclusive communities. It will be an important discussion, and a timely one, as we are on the cusp of a key technological revolution that will change everyone’s lives in ways we can only dimly envision today.

Back in the 19th and 20th centuries, the railroad, the telegraph and the telephone vastly expanded the scope of commerce and transformed our conceptions of time and space. Now, the next generation of mobile networks holds a similar promise.

In each case, the infrastructure created by these earlier innovations became platforms on which others could build new enterprises and reach new markets. Built on clear standards and protocols (e.g., the gauge of railroad tracks, Morse Code, dial tone and phone numbers), they provided powerful capabilities that could be used by others for their own value-added purposes.

Those who built and operated these platforms did well, but they enabled many others to flourish, as well. As John Hagel from the Deloitte Center for the Edge has noted, successful platforms create rich ecosystems of resources that benefit all participants.

Platforms have emerged as one of the most significant models for internet-based businesses at the heart of our modern digital economy. Apple’s iTunes transformed the way music is distributed, while its App Store is responsible for creating an entire “app economy” that sustains tens of thousands of app developers. Facebook provided a framework that is being used by more than a billion people to share their lives with others and that has become a powerful channel for everything from news to advertising and commerce. Amazon not only sells merchandise directly but has also provided a platform that connects many other sellers to customers.

The growth of wireless broadband networks greatly amplified the reach and impact of platforms like these. The smartphone has become the primary means by which people stay connected, get information and conduct business in their everyday lives. There are currently some three billion smartphones in use globally today, and the number is projected to reach six billion — 70 percent of the world’s population — by 2020. Because these devices are used on the go, people depend on the simplicity, consistency and reliability that established digital platforms can provide.

And now wireless networks are on the brink of becoming exponentially faster, more pervasive and more versatile. The arrival of next-generation 5G-based networks in the next few years will provide what has been described as a uniquely powerful “platform for platforms” and is notably the foundation for the personal, local and national frontiers of innovation the Obama administration seeks to advance.

Offering “perceived infinite capacity,” 5G will provide the basis for the emergence of ubiquitous new wireless platforms that, in turn, will support the creation of an array of new services and businesses.

For example, the speed and responsiveness of 5G networks will be critical for supporting fleets of self-driving vehicles that will depend on getting instantaneous guidance “from the cloud.” The Internet of Things, which will put billions of devices online, will also make use of 5G’s capabilities, as will a rich new world of augmented reality (of which Pokémon Go provides a simple but compelling preview).

Beyond these much-heralded uses, we are likely to see the development of platforms to support everything from wireless payments and remote medical monitoring to the on-demand delivery of education and government services.

And while we may be able to discern the broad contours of this emerging hyper-connected world, it is a safe bet that it will also provide surprises that are the product of imaginative entrepreneurs who know how to leverage the power of platforms.

To realize this 5G future, policymakers at all levels of government and the private sector will need to address unprecedented challenges — some known, some not — that come with laying the technical foundation of this new technology. It will take real work and close cooperation, but the potential value of 5G to society and the economy is too great to delay.

>>> Delta Air Lines beats by $0.05, reports revs in-line; sees Q4 PRASM down 3-5

Delta Air Lines beats by $0.05, reports revs in-line; sees Q4 PRASM down 3-5%; sees 4Q16, FY17 capacity +1%
  • Reports Q3 (Sep) earnings of $1.70 per share, $0.05 better than the Capital IQ Consensus of $1.65; revenues fell 5.6% year/year to $10.48 bln vs the $10.5 bln Capital IQ Consensus, of which $100 million was due to the outage and $70 million was from prior year Yen hedge gains.
  • Passenger unit revenues declined 6.8 percent, including nearly 2 points of impact from the outage and Yen hedges, on a 1.5 percent increase in capacity.
  • Sees Q4 PRASM down 3-5% with operating margin 14-16%, capacity +1%, CASM +1-2%. For the December quarter, Delta is expecting a slight decline in margins year over year, as savings from lower fuel prices and productivity initiatives will be fully offset by declines in unit revenues that the company continues to address through its capacity actions and revenue management initiatives. The projections for the December quarter do not include any estimates for the company's potential agreement with its pilots.
  • "While we were encouraged by our unit revenue trends through the September quarter, we have more work ahead of us to achieve our goal of positive unit revenues," said Glen Hauenstein, Delta's president. "With further slowing of our capacity growth in the December quarter and additional traction on our revenue management initiatives, we should make progress against that goal and we expect our December quarter unit revenues to decline by 3 -- 5 percent year over year."
  • "With our focus on building a more sustainable and durable business, we will be taking a cautious approach to 2017 by keeping our capacity in line with the December quarter's 1 percent growth level."

(Exane) Nokia /Ericsson : Further deterioration in EMs, European mix worsens

Further deterioration in EMs, European mix worsens

Ericsson issued a major sales and profit warning
Ericsson pre-announced Q3 Sales down 14% y/y to SEK51.1bn (4% below cons.) with Networks
down 19%. Gross margin declined c4pp seq. to 28%. We believe a third of this GM slip is due to a
worsening Networks v. Services mix. Low spending on capacity in Europe and EMs, and lower
scale likely explain the rest of GM deterioration. Op. income reached SEK0.3bn v. SEK4.5bn cons.

Current environment likely to prevail until mid-2017 according to Ericsson
Ericsson cited Brazil, Russia, and the Middle East as the chief culprits. To a lesser extent, capacity
sales declined in Europe y/y. Ericsson highlighted that market conditions deteriorated quickly in
September, notably demand for software-rich capacity additions.

We lower our dividend expectations
We lower our estimates to reflect softer sales and gross margin (see inside). We now expect FCF
to reach SEK6.0bn in 2016 and SEK6.3bn in 2017 before rebounding to SEK15.4bn in 2018 (cost
reductions). ERIC could still afford to cash out cSEK11.5bn of dividends next year equating to DPS
of SEK3.5 in 2016 v. SEK3.70 in 2015. This would leave ERIC with SEK30bn net cash at end-17.

Nokia likely affected as well: we lower our estimates
Nokia generates c15% of its sales from Brazil/Russia/ME v. 20%+ for ERIC. Nokia’s main
customer in Brazil was already weak in Q2 and management indicated that they had passed on
some aggressively priced deals in ME. Russia could still hurt. Also, gross margin could suffer from
slow capacity additions in Europe. We lower our estimates (inside) and TP (-5% to EUR5.3).

Ericsson could be pushed to radical decisions; we still believe Nokia is safer short term
Tough market conditions and weak performance had already pushed Ericsson to up its
restructuring ambitions in July, and to let go of the CEO. With demand worsening further and
reference shareholders increasingly disgruntled, ERIC might decide to radically refocus on its core
activities, thereby kicking off a turnaround story. Shorter term, we continue to prefer Nokia.

(GS) Nokia - Off Conv. Buy List - Still a Buy

Global wireless capex declines further; NOK off CL; lower ERIC ests

We introduce 2017 Global wireless capex forecasts
We remove Nokia from the Conviction List (but retain our Buy rating) and remain Neutral on Ericsson with lower estimates following its profit warning on October 12, 2016, and based on our updated Global wireless capex estimates. Our aggregation of GS analysts’ estimates for Global wireless capex points to a further decline in global wireless capex of 3% in 2017, following on from our estimate of a 10% decline this year. We remain of the view that 4G rollouts are relatively advanced in several markets, and that growth will be scarce given large-scale spending associated with 5G is
not expected until 2019/20. While commentary from several vendors and ecosystem participants suggests 4.5G solutions, small cells and public safety could provide a certain level of support to the market in 2017, we expect few regions to see growth overall. GS expects wireless capex in China and Europe (combined c.40% of Global wireless capex) to decline 13%/5% next year, with Japan flat and growth in the US largely due to normalisation to 2015 levels (post declines in 2016). In this environment we favour cost-cutting stories with fixed-line exposure and remain Buy on Nokia.

Lowering estimates to reflect expectations for wireless market
We lower our Nokia Networks revenue estimates by 1.6%/2.1% in 2017/18 driven by our new wireless capex forecast for 2017 (which causes us to forecast a decline in the wireless segment next year), and hence Networks EBIT falls by 6.1%/5.4% in 2017/18. We lower Networks revenue estimates for Ericsson by 2.9%/5.8%/5.8% in 2016/2017/18 and Networks EBIT by 14%/26%/23%, following ERIC’s profit warning and commentary suggesting it will experience persistent weak margins in the next 2-3 quarters.

Implications and valuation for European CommTech
We lower our 12-month PT for Nokia (Buy) to €5.8/US$6.40 (from €6.50/ US$7.20). We reduce our 2017E EV/EBITDA multiple to 7.5x (8.0x) based on lower margin forecasts. Key risks include lower wireless capex, integration risk, pricing. We are Neutral rated on Ericsson and lower our 12-month PT to SKr48/US$5.4 (from SKr57/US$6.7) based on 7.0x 2017E EV/EBITDA. Key risks include better/worse-than-expected cost cutting, patents growth. We value Nokia on a premium to Ericsson (7.5x EV/EBITDA vs. 7.0x for ERIC), given NOK’s exposure to fixed line plus higher growth/margins. NOK’s 11.5x 2017E ex-cash P/E is attractive vs. Ericsson’s 14.6x.

(CS) Nokia : Can Nokia Be Immune to Ericsson Woes?

NOKIA (OP, TP EUR6.75): Given the magnitude of Q3 EBIT miss at Ericsson clearly it raises concerns around demand trends for telecom equipment market, and Nokia in particular. We estimate Nokia has ~10% of sales exposure to these regions where Ericsson saw weaknesses. In fact, we believe there could be multiple company-specific reasons for weak Q3 at Ericsson: a) Material headwind likely in its US business; b) Lack of operational control given CEO departure in July and ongoing changes in organizational structure; c) Negligible exposure to Fixed/Optics Networks, which are seeing increased investments (Nokia's wireless exposure is 60% vs. Ericsson at >90%).

(CS) French Infrastructure : Driving towards value accretion

* We initiate coverage of Vinci with an Outperform rating and an €80 target price. Vinci is the market leader in French toll road concessions where we see upside from traffic growth and new stimulus plans. Margins in construction look to be at troug

* We initiate coverage of Eiffage with a Neutral rating and a €74 target price. Eiffage has a less attractive business mix, in our view, with more construction exposure and less diversification. We estimate that expensive legacy debt maturing over 2015-18E supports a c13% three-year EPS CAGR, but consensus already reflects even more than this

>>> Ubisoft shareholder Vivendi not planning hostile takeover

Ubisoft shareholder Vivendi not planning hostile takeover (translated)
13 OCT 2016
The French media group Vivendi [EPA:VIV] is not planning to make a hostile takeover attempt for French videogames publisher Ubisoft [EPA:UBI], French daily Le Figaro reported.
Stephane Roussel, head of operations at Vivendi, was quoted for the information in the article.
As previously reported, Ubisoft was seeking to prevent attempts of a creeping takeover by 22.72% shareholder Vivendi. The French media group was reportedly asking to have representatives seating at the board of the group.