Trend overview
Q1 reporting was mixed with many telcos reliant on a H2 growth acceleration to meet FY guidance. Q2 is likely to show a worsening of domestic yony revenue growth but investors should not be overly concerned. The Q2 slowdown: i) is mainly due to lower handset sales, in particular iPhone 6. Service revenues (= ex handsets) are set for a mild +0.7pp qonq
improvement to -0.6% yony. The trend is therefore still one of underlying improvement ii) Group organic revenue growth is still +ve at Q2E +2.0%. For a sector that historically has faced strong deflationary headwinds, organic growth is a good result even if driven by nondomestic operations. We update our POs for Liberty Global and Telefonica SA.
Most/least favoured into the quarter
+ves into Q2 we flag are: TeliaSonera on a better Sweden EBITDA and Eurasia result building a path to flat group organic EBITDA guidance; Proximus guidance upgrade; Mobistar EBITDA beat and Orange EBITDA recovery.
–ves into Q2 we flag are: Tele2 EBITDA expectations remain too high; Tel Italia and Telefonica face a BRL headwind; Vodafone boosted by cable consolidation but mobile trends in Germany to remain weak.