Member Info for fleccy

Telecom providers are probably among the least impacted by high Inflation. Telecom company bonds are fixed rate, so the debt is unaffected by short term interest rates, but the companies can pass inflationary rises onto consumers. Where interest rates do have an impact, is when debt refinancing is due. As per other recent threads, Vodafone has around 13 Billion Euros of debt maturing over the next 5 years, but would likely be able to pay that in cash if there was no other options available.

BT is more than just Openreach though, there's capex directed at 5G and BT have opportunities to make savings due to things like the PSTN switch off, etc.

BT have said "Our transformation programme has now delivered £2.5bn in annualised savings, well on track to meet our £3bn savings target by FY25".

https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/quarterly-results/fy24/h1/bt-group-h1-fy24-release.pdf

Abject, in my opinion Capex should start reducing significantly post 2026, and BT should see significant operating cost savings too.

Net financial debt excluding lease liabilities was £14.6bn, lease liabilities were £5.05bn giving a total of £19.65bn. I'd argue that Lease Liabilities are an operating cost rather than debt, BT report it as part of Net Debt due to accounting standards. Vodafone do it slightly differently, they report EBITDA after Leases as part of their Cash Flow calculation which still feeds into Net Debt, but subtracted directly from the EBITDA. It's only accounting standards that force companies to count lease liabilities as part of Net Debt. BT's Lease Liabilities will fall as the building closure program progresses.

I need to correct something. I said:

"Between now and 2028 they have €13 Billion in debt maturity, but the €2.76 Billion maturing next month should be well covered by the current working capital, leaving €10.24 Billion to be paid down or refinanced after January."

I missed off €750 million maturing at the end of January, I should have said:

"Between now and 2028 they have €13 Billion in debt maturity, but the €3.51 Billion maturing next month should be well covered by the current working capital, leaving €9.49 Billion to be paid down or refinanced between January and the end of 2028."

Between now and 2028 they have €13 Billion in debt maturity, but the €2.76 Billion maturing next month should be well covered by the current working capital, leaving €10.24 Billion to be paid down or refinanced after January. At the end of this financial year I'm assuming VOD will have around €7 billion in cash, as well expecting at least €4.1 billion in cash and up to €900 million in preference shares for the Vodafone Spain sale. If they go for the Iliad deal it'll add a further €6.5 Billion cash, although I'm not sure what the €2 Billion shareholder loan is about and I believe Iliad will have an option to buy an additional 10 per cent of the venture’s shares every year, giving Iliad a path to take full control of the JV.

The VOD/Three merger will likely require an amount of cash for investment and buying out Three from the JV down the road, which is what I think the plan is. I'd speculate that VOD will let Italy go over time and shift investment into the UK, maybe also picking up distressed Altnets as they become available. I only looked at the debt maturity between now and 2028, but there's more debt maturity due in subsequent years.

https://docs.google.com/spreadsheets/d/e/2PACX-1vSNxkKmgR2PzSL1NH5uvhJAIl6TyUm-PpH2hChEFWELeB8mLB-V562E7qRdDL0lOSa8NyAUBbokBjVp/pubchart?oid=17624073&format=interactive

https://docs.google.com/spreadsheets/d/e/2PACX-1vSNxkKmgR2PzSL1NH5uvhJAIl6TyUm-PpH2hChEFWELeB8mLB-V562E7qRdDL0lOSa8NyAUBbokBjVp/pubchart?oid=1681133451&format=interactive

I wont speculate on the dividend, I'll leave that to others, although there's probably a case for halving it.

Poker BT's costs will see dramatic drops over time, cost savings are something the current market narrative doesn't factor in. Something else, a Labour Government will likely be good for BT and bad for the competition; BT is already Unionised so there isn't much else a Labour Government can do to them, whereas many of their competitors may be pushed toward Unionisation and collective bargaining, post the general election. Labour are also more nationalistic, so more likely to support UK based public companies in preference to companies backed by overseas and private equity finance. Just to clarify I've voted Conservative over the last 40 years, but I don't see a Labour Government as a threat to my investments.

The solution for your frustration is in your statement. Because the dividend yield is good, it makes sense to reinvest the dividends while the share prices are low. The secret to long term success is to reinvest dividends while stocks are cheap and compound returns over time. There's more than one way to achieve growth.

Aus, one thing we do agree on is that there wont be a bid for BT. I doubt the Government would allow private equity to takeover BT, even if it's a UK based fund, since they're still smarting from the ARM fiasco. Should an entity attempt a takeover with the Governments blessing, I doubt they'd get the company for under £3 a share and my guess is more than that. Of course all this is hypothetical since we agree that it wont happen.

Aus, the board don't have to do what a large shareholder says. Because of takeover rules a bidder would have to accumulate over 30% of the stock and then probably make a cash offer to remaining shareholders. Deutsche Telekom is in at over £4 per share and Altice must be averaging somewhere in the £1.50 to £1.80 range, so they'd likely push for a high price. If enough shareholders don't accept the offer, over 90%, then the bidder will have to start buying stock on the open market and the price will rise as the stock becomes scarce. The best chance of a bid succeeding is for the bidder to offer a fair price at the start, otherwise the market will force a fair price. Because BT is financially sound they don't need to accept a low ball offer, in fact they have a duty to all shareholders to achieve a fair price.

There's that much ramping in here, it's like a boiler room sales slogan generator fed by short video's on X. As far as I can tell the X video's are just edited clips from previously recorded video statements, so nothing new. I'll stand corrected if someone can point out anything new in the video's.

Aus, why is £2.50 to £3 overpaying. Nearly a third of the debt is actually lease liabilities, not financial debt, and the pension deficit is well under control. Openreach is an amazing business with a large standalone valuation of 20 to £25 Billion and EE is probably worth the same, when you consider it now includes the previous fixed line BT consumer facing business. If you deduct the financial debt of around £14 Billion, you get a possible valuation between 26 and £36 Billion. BT is easily worth £2.60 and £3.60 a share just for the Openreach and EE parts of the business, throw in the rest and there's a case for saying it's worth over £4.

Jax, so you're saying it's a fantastic opportunity to continue buying at historically low prices then?

Mandy you need to let your obsession with me go, it isn't healthy.

Don't forget:

VG €750m 0.5% XS1499604905 EUR 750,000,000 100,000 0.5 Annual 30/01/2024

I was bored so I thought I'd do a chart showing Debt/Bond Maturity, since Debt often comes up in discussions on here. I expect things will change with disposals and mergers, so it'll be interesting to see how things change over time. VOD have the cash to pay the €3.51 Billion due next month, should they choose to cover it using the €7.031 Billion they currently have in Cash and cash equivalents, but the overall Cash and equivalents figure shouldn't change much in the FY figures, since they'll likely top it back up when they add the €3.378 Billion Working Capital back into the figures; Basically the Working Capital deducted in the H1 results will likely go toward covering January's debt maturity, if they don't refinance, so the FY24 Cash and Cash Equivalents should still be around €7 Billion and Net Debt should reduce back to around €33 Billion, if I'm understanding the figures correctly; I'd be grateful if someone could correct me if I'm misunderstanding this, any accountants on here?

By Year:

https://docs.google.com/spreadsheets/d/e/2PACX-1vSNxkKmgR2PzSL1NH5uvhJAIl6TyUm-PpH2hChEFWELeB8mLB-V562E7qRdDL0lOSa8NyAUBbokBjVp/pubchart?oid=1681133451&format=interactive

I sorted on Maturity but the spreadsheet wouldn't sort correctly and I have no idea why. I've done some rearranging.

For anyone who's interested here's a chart showing the outstanding Bond maturity date's against value, with the value's converted to Euro's using current exchange rates where necessary:

https://docs.google.com/spreadsheets/d/e/2PACX-1vSNxkKmgR2PzSL1NH5uvhJAIl6TyUm-PpH2hChEFWELeB8mLB-V562E7qRdDL0lOSa8NyAUBbokBjVp/pubchart?oid=17624073&format=interactive

https://investors.vodafone.com/debt-investors/bonds-outstanding-eu-and-us

If I've made any mistakes, or missed something, let me know and I'll correct.

Mesh I've previously looked at the adjusted EBITDAal Margin and I agree Italy looks better than the UK, but Italy has seen a steeper decline on the Organic growth figures. Going just off the figures it's hard to know what Vodafone's turnaround plan is, but I believe them when they say things will improve. Hopefully they'll announce something on Italy soon, and the UK Three merger will get approved toward the end of next year. All the articles use debt to bash the Telecom companies, but Telecom companies have always maintained quite high debt levels by choice, so I'm not sure that's a valid concern. If the dividend does remain affordable and Vodafone don't cut while they're executing their turnaround plan, then it's winner winner Chicken dinner, otherwise I'm happy for Vodafone to drop the dividend if it pushes the share price up.