(Les Echos) The telecoms sector optimistic on the coming recovery

The telecoms sector optimistic on the coming recovery

After years of turmoil, the market is going to land in Europe, according to Idate.Les challenges in terms of investment in networks remain important.

European telecom operators foresee the end of the tunnel. In recent weeks, the signs of recovery are increasing in the area. According to Idate, which organized the "Forum DigiWorld" Tuesday, with many players invited, the sector is expected to experience in 2017 a "very slight growth," after years of turmoil. These forecasts confirm those of Arthur D. Little and Exane BNP Paribas, in a recent study, and are consistent with the most optimistic speeches of operators since the start of the year.

To date, the growth dynamics of the telecom sector in Europe should even be similar to that of the United States, which has not happened for years. "It is anticipated roughly 1% growth in Europe and this will be the same in the US, while in 2012 there were 8 point gap between the two continents," says Didier Warbler, telecom specialist at 'Idate. In value terms, however, the differences are obviously very important, telecom subscriptions in the country of Uncle Sam being much more expensive than in Europe.

For "telcos" European, more growth means more revenue, more margin and therefore more investment capacity. This is essential to deal with the explosion of the expected data traffic on networks. "The volume of datas in the mobile doubling every year for two years," recalled Olivier Roussat, the boss of Bouygues Telecom, guest at the Idate Forum. The fault of course to Google, Netflix and other web players are drinking ever networks more content. A boon for operators who can sell greediest packages, and therefore more expensive, but a real challenge in terms of investment to build sufficiently robust networks.

Battle networks

The rivalry between "telcos" and web giants on the investment theme is not new, the first reproaching the latter not to pay the toll to use their information highways. "In three years, web players have invested $ 100 billion globally in web infrastructure," defended Carlo d'Asaro Biondo, director of partnerships and strategic relationships of Google for Europe, at the symposium, recalling also its projects in the fiber in the United States. "The myth that the giants of not webn'investissent in networks is false," he added. Not sure that the scales are nonetheless similar. "For 2013 alone, telecom operators spent alone 250 billion euros," retorted Didier Warbler.

If operators in Europe can expect a stabilization of short-term market, they can also count on new growth as connected objects or cloud services. Margin recovery, and thus the ability to invest, also go through the maintenance of good cost discipline according to Idate. "Margins of 30% still needed for operators to finance their investments, considers Didier Warbler. When a mobile operator has an EBITDA margin of less than 20%, such as Bouygues Telecom in France, for example, is that there is a problem. " These savings can go through the sharing of networks, infrastructure sharing, or through collaboration between operators.

The consolidation will remain relevant in the coming years. "It is the sense of history. There is a real correlation between the number of operators and their ability to invest, "Judge Stephane Richard, the owner of Orange, who pleaded again and again for a return to three actors in France," in the image of the logic underway in the rest of Europe. " Even disagree with its main shareholder, the state, which does not want to hear about consolidation ... for the sake of investment.

(Les Echos) Le secteur des telécoms optimiste sur la reprise à venir

Le secteur des telécoms optimiste sur la reprise à venir

Après des années de turbulences, le marché est en train d’atterrir en Europe, selon l’Idate.Les défis à relever en termes d’investissement dans les réseaux demeurent importants.

Les opérateurs télécoms européens entrevoient le bout du tunnel. Depuis quelques semaines, les signaux de reprise se multiplient dans le secteur. Selon l’Idate, qui organisait son « DigiWorld Forum » mardi, avec de nombreux acteurs invités, le secteur devrait connaître en 2017 une « très légère croissance », après des années de turbulences. Ces prévisions confirment celles d’Arthur D.Little et Exane BNP Paribas, dans une récente étude, et sont cohérentes avec le discours plus optimiste des opérateurs depuis le début de l'année.

A cette date, la dynamique de croissance du secteur télécoms en Europe devrait même être similaire à celle des Etats-Unis, ce qui n’est pas arrivé depuis des années. « On prévoit plus ou moins 1 % de croissance en Europe et cela sera pareil aux Etats-Unis, alors qu’en 2012, il y avait 8 points d’écart entre les deux continents », explique Didier Pouillot, spécialiste des télécoms à l’Idate. En valeur, cependant, les différences restent évidemment très importantes, les abonnements télécoms au pays de l’Oncle Sam étant beaucoup plus onéreux qu’en Europe.

Pour les « telcos » européens, plus de croissance signifie plus de revenus, plus de marges et donc plus de capacités d’investissement. C’est essentiel pour faire face à l’explosion du trafic de données attendu sur les réseaux. « Le volume de datas dans le mobile double chaque année depuis deux ans », a rappelé Olivier Roussat,le patron de Bouygues Telecom, invité au Forum de l’Idate. La faute évidemment aux Google, Netflix et autres acteurs du web qui abreuvent les réseaux de toujours plus de contenus. Une aubaine pour les opérateurs qui peuvent vendre des forfaits plus gourmands, et donc plus chers, mais un véritable défi en terme d’investissement pour construire des réseaux suffisamment solides.

Bataille des réseaux

La rivalité entre « telcos » et géants du web sur le thème de l’investissement n’est pas nouvelle, les premiers reprochant aux seconds de ne pas payer le péage pour utiliser leurs autoroutes de l’information. « En trois ans, les acteurs du web ont investi 100 milliards de dollars au plan mondial dans les infrastructures du web », s’est défendu Carlo d’Asaro-Biondo, directeur des partenariats et relations stratégiques de Google pour l’Europe, lors du colloque, rappelant aussi ses projets dans la fibre aux Etats-Unis. « L’idée reçue selon laquelle les géants du webn’investissent pas dans les réseaux est fausse », a-t-il ajouté. Pas sûr que les échelles soient néanmoins comparables. « Pour la seule année 2013, les opérateurs télécoms ont dépensé à eux seuls 250 milliards d’euros », rétorque Didier Pouillot.

Si les opérateurs en Europe peuvent espérer une stabilisation du marché à court terme, ils peuvent aussi compter sur de nouveaux relais de croissance comme les objets connectés ou les services cloud. Le redressement des marges, et donc la capacité à investir, passera également par le maintien d’une bonne discipline des coûts selon l’Idate. « Des marges de 30 % restent nécessaires pour les opérateurs pour financer leurs investissements, considère Didier Pouillot. Quand un opérateur mobile a une marge d’Ebitda de moins de 20 %, comme Bouygues Telecom en France par exemple, c’est qu’il y a un problème ». Ces économies peuvent passer par la mutualisation des réseaux, le partage des infrastructures, ou encore par des rapprochements entre opérateurs.

La consolidation restera d’actualité dans les années à venir. « C’est le sens de l’histoire. Il y a une vraie corrélation entre le nombre d’opérateurs et leur capacité à investir », juge Stéphane Richard, le patron d’Orange, qui plaide encore et toujours pour un retour à trois acteurs en France, « à l’image de la logique en cours dans le reste de l’Europe ». Quitte à être en désaccord avec son principal actionnaire, l’Etat, qui ne veut plus entendre parler de consolidation... pour le bien de l’investissement.

>>> Vivendi considering increasing stake in Telecom Italia to 10-15% - report (t

Vivendi considering increasing stake in Telecom Italia to 10-15%

Listed French media group Vivendi is understood to be considering increasing its stake in Telecom Italia to 10-15%, French daily Les Echos reported. The report referred to information from Reuters claiming that businessman Vincent Bollore, who is the main shareholder in Vivendi, wants to become the “key man” in Telecom Italia as the latter has been mooted as a potential takeover target.

Les Echos

>>> What to look at today - 17th of June 2015

Dow+0.64% S&P+0.54% Nasdaq+0.51% Russell+0.63% VIX 14.81 ...Market is waiting for FOMC
US market closed higher, settle above 100d MA, Equity indices began the day near their flat lines and rallied throughout the day, unperturbed by the lack of progress between Greece and its creditors. Furthermore, the rhetoric in Athens intensified with Greek Prime Minister Alexis Tsipras saying the International Monetary Fund bears "criminal" responsibility for the current state of the Greek economy. Mr. Tsipras' remarks were made in front of the Greek parliament with the premier adding that another round of elections is not in the cards. Volume were above average @ 640mil shares US After Hours BOBE +4.0%, ITI +1.1%, DTEA -11.0%, LZB -4.2%, NR -3.5%, ADBE -1.6% following earnings/guidance...Asian indices remain mixed going into Wednesday's crucial FOMC policy update, with Australia outperforming and Shanghai Composite extending its decline to a 2-week low below 4,800. Losses on the mainland remain heavy despite outsized gains for one of China's top banks - BoCom - receiving approval from regulators to optimize the shareholding structure...Japan May merchandise trade deficit was smaller than expected, but both import and export components undershot expectations, revealing continued hardship in Asia's 2nd largest economy in spite of the recent acceleration in yen selling. Exports growth of 2.4% also marked a 9-month low, with exports to US slowing to just 7.4% v 21.4% prior and exports to Europe remaining nearly flat. Shipments from Japan to China also slowed from 2.4% to 1.1%.

Nikkei -0.16% Hang Seng +0.71% Shanghai -0.18%

Eur$ 1.1245 JPY 123.54 GBP 1.5634 EURCHF 1.0475 RUB $53.82 WTI $60.04 (+0.12%)

S&P +0.08% EuroStoxx +0.32% DAX +0.53% SMI +0.10%

Macro :
- France’s Sapin Says Greece Agreement Needed by June 30: Figaro

Keep an eye on :
- ABI BB : AB InBev CEO Prefers Acquisitions That Are ‘Near Beer,’ FT Says
- AIR FP : Airbus to Scale Back Job Cuts by About 14%, FT Says
- AF FP : Air France Wants Govt to Cut Airport Fees, Les Echos Says
- ALU FP : Alcatel CEO Says Seeing Nokia Deal Through ‘Only Priority’
- AIE LN : *KEYSIGHT TECH OFFERS 126P IN CASH PER ANITE SHR !!!!!
- BMW GY : Rolls-Royce Won’t Sell Car for Less Than EU200,000: Handelsblatt
- BMPS IM : Monte Paschi Could Name Modiano New Chairman: Messaggero
- DTE GY : German Mobile Spectrum Auction Reaches EU4.2b After 154th Round
- EUCAR FP : Europcar IPO Covered on Full Deal Size, Terms Show
- IMT LN : *IMPERIAL TOBACCO MAY BECOME TGT FOR FURTHER SECTOR M&A: GOLDMAN --> Added to conviction Buy List
- LIN GY : Linde Seeks to Enter China Market Using Lincare Business: FT
- NESN VX : Nestle Cuts African Workforce by 15%, FT Says
- NOK1V FH : Nokia CEO Says Strategic Analysis Ongoing for Co.’s Here Unit
- OMV AV : OMV Said to Work With Barclays to Sell Stake in North Sea Field
- PNN LN : *SELL PENNON, SHARES ABOVE PRIVATE EQUITY VALUATION: GOLDMAN
- RXL FP : *REXEL PULLBACK AN ATTRACTIVE ENTRY POINT, MORGAN STANLEY SAYS
- RCO FP : Remy Cointreau FY Current Oper. Profit Beats Ests.
- SIE GY : Siemens Unlikely to Make Large Software Acquisition Soon: CEO
- GLE FP : SocGen Aims for ‘Strict Discipline’ in Costs and Risks
- TLV1V FH : Finnish Govt Funding to Talvivaara May Rise: Helsingin Sanomat
- VIV FP : Vivendi Plans to Raise Stake in Telecom Italia to 10%-15%: Rtrs

>>> Europe : Brokers Upgrades & Downgrades - 17th of June 2015

(Research note attached Barcap on French Banks & European Energy, Deutsche Bank on European Banks, GS on European Strategy)

>>> Up
*BRITISH AMERICAN TOBACCO RAISED TO NEUTRAL VS SELL AT GOLDMAN
*SEB RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
*TITAN CEMENT RAISED TO BUY VS HOLD AT DEUTSCHE BANK
*WHITBREAD RAISED TO OVERWEIGHT VS EQUALWEIGHT AT MORGAN STANLEY

>>> Down
*AMLIN CUT TO SELL VS NEUTRAL AT UBS
*ARYZTA CUT TO HOLD VS BUY AT BERENBERG
*KERING CUT TO UNDERPERFORM AT CREDIT SUISSE (YEsterday)

>>> PT Change


>>> Initiation
*BEAZLEY RATED NEW NEUTRAL AT UBS
*FERROVIAL RATED NEW BUY AT GOLDMAN, PT EU22.9
*IMPERIAL TOBACCO REINSTATED CONVICTION BUY AT GOLDMAN
*JUST EAT RATED NEW EQUALWEIGHT AT MORGAN STANLEY, PT 450P
*MORRISON RATED NEW NEUTRAL AT CREDIT SUISSE, PT 176P
*OCADO RATED NEW OUTPERFORM AT CREDIT SUISSE, PT 466P
*SAINSBURY RATED NEW UNDERPERFORM AT CREDIT SUISSE, PT 219P
*SUBSEA 7 RATED NEW MARKET PERFORM AT COWEN, PT NOK76
*TECHNIP RATED NEW OUTPERFORM AT COWEN, PT EU84
*TESCO RATED NEW UNDERPERFORM AT CREDIT SUISSE, PT 169P
*WINDELN.DE RATED NEW BUY AT DEUTSCHE BANK; PT EU17
*ZALANDO RATED NEW BUY AT UBS, PT EU43

>>> Call
>> Stock
*DEUTSCHE POST ADDED TO CITI FOCUS LIST EUROPE

(DBK) European banks : Basel 4: another capital hill to climb. Some look well pl

The “Basel 4” package aims to strengthen the risk weight system
New regulation in the seven years since the Global Financial crisis has primarily aimed at increasing the quantity and quality of equity banks hold against losses. The next steps, coming to be dubbed “Basel 4”, look to change
how banks measure the “riskiness” of their balance sheets and “advertise” their capital ratios. Last year, in our European Banks report Truth in Advertising 9 June 2014, we looked at how this could happen. We have since had detailed proposals published from the Basel Committee. In this report, we evaluate the impact of Basel 4 by using European banks’ pillar 3 data, giving us the most granular and up to date bank by bank analysis available.

The key changes in the Basel 4 package of measures
In our framework to think about RWA inflation from Basel 4 we consider four
key proposal; i) Credit risk – revisions to standardized approach; ii) Market risk - Fundamental review of the trading book. We wrote about this extensively recently in our report 9 April report, Driving change at Credit Suisse: the FRTB and RWA inflation; iii) Operational risk – revisions to simpler approach; and iv) Capital floors – for banks that use their own internal models to calculate balance sheet risk. We also take into consideration further steps to “clean up” banks’ regulatory equity base.

Basel 4 is broadly manageable but outcomes could vary widely
Depending on calibration of capital floors and other measures, Basel 4 could potentially have a wide range of outcomes. In our base case of a risk-category based floor of 75%, we expect the sector to see 14% RWA inflation. On 2015balance sheets, this would add EUR 1.2tn to listed European banks’ risk weighted assets. This would reduce our B3 forecast from 11.6% to a B4 figure of 9.9% including further measures on equity. However if capital floors are applied more granularly under the so-called portfolio-based measures, RWA inflaton could rise to 22% and impact core tier 1 ratio by a further 0.6%, reducing the sector figure to 9.3%.

Granular analysis by bank, where some may face more payout constraints
In this report we include a detailed template of RWA inflation for each bank under our coverage, with commentary on sensitivities. We summarize in the table on the next page the impacts of the various proposals on core tier 1 ratios for each bank in our universe. Compared to a doubling of equity requirements under Basel 3, the Basel 4 package of measures is likely to be more manageable. However, some banks’ ability to raise payouts will be constrained as they retain capital, thus disappointing market expectations.

2019 implementation, but the market may fully load the impact quicker
Most of the proposals we consider will come into effect in 2018/ 2019. A key piece of feedback from our DB Global Financials Conference is that Basel 4 as a topic is increasingly being discussed by management teams and investors. As such we have an expectation that pressure will increase to guide on the potential impact with the full year results or over the course of the year. The market, as with previous regulation, is likely to fully load the impact into valuations. We have already seen the potential of Basel 4 to drive share prices.
In the table below we detail the impact on capital ratios we expect to see from each source given our base case assumptions.

>>> Asian Update

Asian Mid-session Update: Shanghai continues slide; Japan exports growth slows further


***Economic Data***
- (JP) JAPAN MAY MERCHANDISE TRADE BALANCE: -¥216B V -¥259BE; ADJ TRADE BALANCE: -¥183B V -¥-184BE
- (SG) SINGAPORE MAY ELECTRONIC EXPORTS Y/Y: -2.5% V -2.6%E; NON-OIL DOMESTIC EXPORTS M/M: -3.1% V -3.2%E; Y/Y: -0.2% V 2.3%E
- (AU) AUSTRALIA MAY WESTPAC LEADING INDEX M/M: -0.1% V +0.1% PRIOR
- (NZ) NEW ZEALAND Q1 CURRENT ACCOUNT BALANCE (NZ$): 0.66B V 0.28BE; first surplus in a year

***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -0.3%, S&P/ASX +1.1%, Kospi flat, Shanghai Composite -1.8%, Hang Seng +0.3%, Sep S&P500 flat at 2,089

***Commodities/Fixed Income***
- Aug gold -0.1% at $1,180/oz, Jul crude oil +0.2% at $60.07/brl, Jul copper +0.1% at $2.62/lb
- (US) API Petroleum Inventories: Crude -2.9M (2nd straight draw) v -1.5Me; Gasoline -2.9M v -0.5Me; ; Distillate +1.6M v +1Me
- (JP) BOJ offers to buy ¥375B in 1-3yr JGBs, ¥400B in 3-5yr JGBs, and ¥400B in 5-10yr JGBs
- (AU) Australia MoF (AOFM) sells A$900M in 3.25% 2025 Bonds; avg yield: 2.9799%; bid-to-cover: 3.74x

***Market Focal Points/FX***
- Asian indices remain mixed going into Wednesday's crucial FOMC policy update, with Australia outperforming and Shanghai Composite extending its decline to a 2-week low below 4,800. Losses on the mainland remain heavy despite outsized gains for one of China's top banks - BoCom - receiving approval from regulators to optimize the shareholding structure, explore the introduction of private capital, and consider mechanism of shareholding by senior management and employees. Reform of human resources and remuneration would also be implemented in what appears to be a test of westernized financial institution on the mainland.

- Japan May merchandise trade deficit was smaller than expected, but both import and export components undershot expectations, revealing continued hardship in Asia's 2nd largest economy in spite of the recent acceleration in yen selling. Exports growth of 2.4% also marked a 9-month low, with exports to US slowing to just 7.4% v 21.4% prior and exports to Europe remaining nearly flat. Shipments from Japan to China also slowed from 2.4% to 1.1%.

- Australia's Westpac leading index slowed with a 0.1% decline, and resident economist noted the "stalling momentum mid-year is a concern given the recent reduction in interest rates and hopes that this would help generate a more convincing upswing in Australia's consumer and non-mining business sectors." Australia stock index was still higher, as investors cheered the formal signing of a free trade agreement with China, its biggest trading partner. PM Abbott called the signing, estimated to allow more than 85% of Australian goods to enter China without penalties, a "milestone in bilateral relations". Australia's top retail name Woolworth offered a trading update, and despite cutting its FY15 outlook shares were up on resignation of company CEO perceived to be ineffective.

- USD majors saw their typically low pre-FOMC volatility. AUD/USD and NZD/USD were down less than a third of a percent with respective lows below 0.7730 and 0.6970, USD/JPY up a marginal 0.1% above 123.40, and EUR/USD rising about 25pips above 1.1260.

***Equities***
US equities / ADRs:
- BOBE: Reports Q4 $0.56 (adj) v $0.44e, R$332M v $331Me; +4.4% afterhours
- ADBE: Reports Q2 $0.48 v $0.45e, R$1.16B v $1.16Be; -1.4% afterhours
- LZB: Reports Q4 $0.39 v $0.38e, R$375M v $380Me; -4.1% afterhours

Notable movers by sector:
- Consumer discretionary: Zhonghe Co 002070.CN -6.5% (profit warning); China Eastern Airlines 670.HK +1.7% (private placement); Fast Retailing 9983.JP -0.6% (strike in China)?Tsuruha Holdings 3391.JP -4.8% (FY14/15 result)
- Consumer staples: Woolworths Limited WOW.AU +1.8% (CEO to retire, cuts guidance)
- Financials: Bank of Communications 3328.HK +3.5% (approval for deepening reform); China Merchants Bank 600036.CN +0.8% (cooperation with Anbang Insurance); Bank of China 601988.CN +3.5% (participation in gold price auction); Pudong Development Bank 600000.CN -0.4% (to acquire Shanghai Trust); Sunac China Holdings 1918.HK +2.4% (terminates target company acquisitions from Kaisa); PICC Property & Casualty 1339.HK +2.8% (YTD premium income)
- Industrials: WDS Ltd WDS.AU -10.3% (lowers guidance); Austal Ltd AUB.AU -0.7% (awarded contract); GUD Holdings GUD.AU +1.2% (private placement)
- Technology: Shaanxi Broadcast & TV Network Intermediary 600831.CN +10.0% (private placement); Sharp Corp 6753.JP +0.6% (plans for capital replenishment and potential management changes)
- Materials: Metallurgical Corporation of China 601618.CN +0.9% (YTD contracts); Medusa Mining MML.AU -0.6% (guidance)

>>> US After Hours

After Hours Summary: BOBE +4.0%, ITI +1.1%, DTEA -11.0%, LZB -4.2%, NR -3.5%, ADBE -1.6% following earnings/guidance
After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: BOBE +4.0%, ITI +1.1%

Companies trading higher in after hours in reaction to news: ANTH +2.9% (announced that it has met the enrollment target of its CHABLIS-SC1 Phase 3 clinical trial evaluating blisibimod for the treatment of lupus. Final data from the trial is expected in the second half of 2016), RLH +2.8% (HNA Group acquired ~3 mln shares of RLH's common stock), directly from Columbia Pacific), FFIC +0.9% (announced authorization of 1 mln share stock repurchase program), SRE +0.2% (announced Board authorization to pursue the formation and IPO of a publically traded partnership, called Sempra Partners)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: DTEA -11.0%, LZB -4.2%, NR -3.5%, ADBE -1.6%

Companies trading lower in after hours in reaction to news: AZUR -8.5% (announced public offering of 3.5 mln common units; provided quarterly update), NR -3.5% (provided operational update: seen a modest reduction in Fluids Systems revenues since May, driven by continued slide in U.S. rig counts and weather-related delay), ARNA -2.3% (announced that CFO Robert Hoffman has decided to leave the company to pursue another opportunity in the biotechnology industry, will remain in role until July, 2015), VEC -0.9% (disclosed that Theodore R. Wright, EVP and Chief Operating Officer will retire effective June 30, 2015), ADES -0.5% (provided accounting update; appointed A. Bradley Gabbard as CFO), EGN -0.4% (announced that over the past week, it has entered into swap contracts for approximately 1.1 million barrels of 2016 oil production at an average NYMEX price of $63.80 per barrel)

>>> Adobe Systems beats by $0.03, reports revs in-line; guides Q3 EPS below cons

Adobe Systems beats by $0.03, reports revs in-line; guides Q3 EPS below consensus, revs below consensus; guides FY15 EPS below consensus, revs below consensus  

--> Reports Q2 (May) earnings of $0.48 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus Estimate of $0.45; revenues rose 8.8% year/year to $1.16 bln vs the $1.16 bln consensus. Digital Media Annualized Recurring Revenue grew to $2.35 billion exiting the quarter, driven by an increase in Creative ARR of $230 million to $2.02 billion.
- Co issues downside guidance for Q3, sees EPS of $0.45-0.51, excluding non-recurring items, vs. $0.54 Capital IQ Consensus Estimate; sees Q3 revs of $1.175-1.225 bln vs. $1.24 bln Capital IQ Consensus Estimate. Q3 Guidance: Expect Digital Media segment revenue to grow on a sequential basis. Expect Adobe Marketing Cloud revenue to grow approximately 21% on a YoY basis
- Co issues downside guidance for FY15, sees EPS of $2.05, excluding non-recurring items, vs. $2.08 Capital IQ Consensus Estimate; sees FY15 revs of $4.845 bln vs. $4.88 bln Capital IQ Consensus Estimate. FY15 Guidance: Expect Digital Media ARR of ~$2.925 billion by FY15 year-end. Expect Adobe Marketing Cloud annual bookings growth of ~30%. Expect Adobe Marketing Cloud second half FY15 YoY revenue growth of ~24%.