We forecast relatively stable wireline trends, with high-speed broadband demand continuing to rise and regulation generally still favourable, which may be a relief for BT (Outperform, European Focus List stock) and LBTY
(Outperform) after a year so far dominated by regulatory and M&A news flow. Line loss trends at TI (Neutral) and TDC (Outperform) remain in the balance.
Mobile is more in a state of flux – we expect a continuation of the H2 15 trend of convergence between markets, with some of the traditionally worst mobile markets recovering (Denmark, Spain, Italy) and some of the traditionally best
mobile markets worsening (Sweden, Norway, the Netherlands). This trend has scope to lead to surprises in Q1 16 results vs. consensus at the stock level, including a) positive: TDC (Outperform) and Telefonica (Neutral), and b)
Negative: Tele2 (Underperform), Telia (Neutral), Telenor (Underperform) and KPN (Neutral). France could also be impacted by the short-term price cutting seen during Q1.
These mixed mobile trends would confirm that the outlook for European mobile has slipped, with 4G mobile data growth slowing (largely a base effect from rising 4G adoption), pricing discipline slipping in some previously healthy markets and the hopes for mobile market repair from 4-to-3 deals continuing to fade. With one of the legs of the consensus sector bull-case weakened, the point of maximum bullishness for the sector has probably already passed.
For some of our companies, we update forecasts ahead of Q1 results. We downgrade Numericable to Neutral (Outperform) with a new TP of €35 (€43). Other TP changes incldue Bouygues €35 (€34) and Sunrise SFr65 (SFr 57).