Member Info for fleccy

"Höttges voices frustration that “stupid” industry moves by others affects DT’s stock price."

"Don’t lump us in with the rest, pleads Höttges

Following news of Vodafone’s tie-up with 1&1, Deutsche Telekom’s share price fell by about 6%. Höttges thought the negative market reaction was irrational.

“ Why is 1&1, Vodafone, and O2 affecting DT? We’re not affected at all. ”

Höttges.

He added that there will always be “ridiculous” and “stupid” moves in the telco industry — implying that Vodafone’s national roaming deal was one example"

https://www.telcotitans.com/deutsche-telekomwatch/dt-boss-befuddled-by-vodafones-roaming-deal-with-1and1/7031.article

Anyone any views on eventual asset write down's in relation to the PSTN switch off and whether this will present a tax reduction opportunity?

The reason I mention this is because they've said, "We expect to be a significant beneficiary of the UK Government's full expensing scheme from FY24-FY26 and expect to pay no UK cash tax for the next three years", and this would take them up to the PSTN switch off. What I'm unsure of is how much depreciation may have already been factored in.

Another important event, on the horizon, is the hoped for Vodafone UK/Three merger. Under normal circumstances there's no way I could see the CMA authorising this deal, but I'm not entirely sure whether behind the scene's talks have already taken place with the regulators. From Vodafone's point of view, it appears £4.3 billion of Group debt will be transferred into the new combined company, with Three UK adding a further £1.7 billion in debt through refinancing. The new company, MergeCo, will have total debt of £6 Billion and distribute its annual cashflow to its shareholders.

https://investors.vodafone.com/sites/vodafone-ir/files/2023-06/merger-of-vodafone-uk-and-three-uk-13-june-2023-vodafone.pdf

It's likely Vodafone will eventually take full control of the new company, at some point post the three year lock up period. I also suspect/speculate Vodafone will become an Altnet consolidator at some point, probably integrating them into the ex C&WW core network assets as they're acquired. Of course this is all extremely speculative and dependent on the Altnet's falling on hard times, but there's a possibility the UK will eventually have three main Telecom providers, BT, Vodafone and VMO2.

Old news Jax, anything new?

You're highlighting something I've mentioned in some of my previous posts, definitely in reference to BT and possibly on this forum too:

"fleccy

Posted in: BT.A

Posts: 10,393

Price: 122.30

No Opinion

RE: BTPS Briefing 2pm Today29 Jun 2023 22:15

EE alone was valued at around £12 Billion at purchase and it's now the new consumer brand of BT, so it should carry a valuation taking into account the combined entity with a revenue of around £9.7 Billion; Currently much higher revenue than Openreach, coming in around £5.6 Billion.

What I find most annoying, is the media bashing BT over its figures but skirting over the fact that capex will reduce over time, resulting in much higher Net Profit at the end of the FTTP/5G/IP Cloud transformation. Lots of speculation about debt increasing, but no mention of BT's projected cost savings. I take the view that vested interests are eyeing up Telecom assets, and putting as much concerted pressure on the sector as they can. It isn't just BT, the whole sector is taking a beating, look at Vodafone, Telecom Italia, Telefonica and less so Orange, meanwhile private equity are sniffing around for assets while the share prices are pushed down; Vodafone with Vantage Towers (KKR and GIP consortium), Telecom Italia with KKR's bid for their Landline Grid and you can bet Openreach is on someone's shopping list. The share prices of these companies say one thing, the vultures circling says another, in my opinion."

That isn't the only post, where I've brought up the contradiction between private equity investment in Telecom infrastructure and the valuations of publicly traded Telecom companies. My opinion is that retail are being slowly squeezed out of Telecom stocks, with big players quietly mopping up cheap stock in the background.

This is a little bit out there, but a massive amount of money is invested into the US tech giants, they resemble investment vehicles used to mop up and stop competition while growing themselves into behemoths. In the background they're also buying up certain Telecom assets, like Subsea cable and Server assets; Their business models are totally dependent on National Telecom infrastructure, which they have no control over and wouldn't be able to take over, but big entities betting the bank on US tech have a vested interest in ensuring Telecoms support the status quo. There are many possible reasons why Telecom valuations have been under attack for years, we can only guess what they are.

The option isn't there, I looked it up online and tried a few suggested fixes but it still didn't show. It isn't a problem as my phone works fine everywhere I've needed it to anyway.

It isn't available on my phone, it's an android 11 Redmi Note Pro and the option isn't available. On phones with the option, the service must be available via a gateway service to access the mobile provider network, so that any billable calls, like international, can be charged. I looked it up online and tried deregistering and registering my phone, but the option still didn't become available. It isn't a problem since I have good mobile reception anyway, although I was interested to try it for a play. I use WhatsApp for video calling with friends and family, so I do use wifi calling of sorts.

"Fleccy - Nope, it’s not an app, it’s part of the OS."

I assume it uses the mobile service providers network though? So you need an EE Sim to use the service?

"Fleccy, maybe this is Hotteges tactic to keep the share price down so that he can take advantage of the weak share price and fill his boots"

If Simplywallst are correct and 73% of BT's shares are held by the top 25 shareholders, then he doesn't have much chance of building a larger holding without approaching big players. The third largest shareholder is showing as BT Group Shareview, so at least 5.43% of the stock is probably held by retail income investors, like me.

https://www.bt.com/about/investors/individual-shareholders/e-shareholders

"VOD still does not make it into my retirement fund though. I struggle to see the strategy for earnings growth with the plan to back it up."

They hold interests in various emerging market Telecom companies, that will likely see growth in the medium to long term; Who knows even Vodafone Idea might come good for them in the end, although I'm not holding my breath on that one. They're number 2 in Germany, so have opportunities to grow market share at the expense of DT, and they have opportunities to sell down other assets to bring down debt and fund investments elsewhere. None of those are a sure thing, but that's the chance you take when you invest in a company.

"It’s automatically turned on for iPhone users on EE.

When in range of a Wi-Fi connection with internet access, all caps, texts and data flow through bb connection rather than mobile network"

Yep that's what I mean, I use Android so wasn't aware they already had apps to facilitate Wifi connectivity giving mobile network functionality. I'm now on EE myself, recently moved off Plusnet, but my reception is excellent here so haven't needed to look into alternative access methods.

"Deutsche Telekom Chief Executive Timotheus Höttges issued something of a warning to incoming BT CEO Allison Kirkby, asking for improvement at the UK operator “over the next twelve months, because we have been waiting already for quite some time”.

In recent weeks, Deutsche Telekom, a 12.06% shareholder in BT, has reportedly been weighing up a takeover bid or, if earlier rumours are to be believed, an exit from its BT position.

Speaking on Deutsche Telekom’s quarterly earnings call yesterday, Höttges indicated that all options remain on the table, but that positive movement must be made to convince the German incumbent of BT’s value."

https://www.telcotitans.com/btwatch/h%C3%B6ttges-gives-bt-a-year-but-all-ideas-on-the-table/7028.article

I don't really understand what the article is getting at, if DT sell their stake in BT their pension fund will miss out on dividends and possible price recovery down the road. The market will hold BT's price down if it believes the two biggest shareholder's have "Paper Hands". Imagine if Drahi or DT had to sell and the market knew it, they'd force the price down and offer to pick up the stock at knock down prices, probably offering a little over the On-Exchange price. Once the big financial players hold all the stock the narrative will suddenly change and BT will be publicised as the best thing since sliced bread. There's absolutely nothing the new CEO can do to raise BT's share price, Jansen's plan is a good one and it's being well executed, it's the market that's holding the price down for their own reasons. Höttges needs to ask the unseen entities that control stock prices from behind the scenes, as they're the ones who'll decide when BT's price will recover. It could be the market already considers Drahi and or DT as having Paper Hands.

I think BT is worth well north of £3, possibly £4. It isn't just the reduction in capex once FTTP and 5G rollout's completed, they'll also be seeing ongoing cost savings due to the transformation up to and beyond 2030.

We don't use the landline in our house, there isn't even a phone plugged in, and I'd hope BT have a plan to offer customers some sort of landline alternative once PSTN switch off happens. I'd like to see some sort of hybrid WiFi/mobile phone solutions, possibly using apps on mobiles utilising broadband connectivity when in range of the router, and cell access when out and about; There may be opportunities for companies to develop plug in home based bespoke telephones with rechargeable batteries and sim/Wifi functionality, using the mobile network as backup when the broadband connection is down. I would think there are opportunities for new products and enhanced services on the back of the PSTN switch off, hopefully BT making EE their consumer facing brand is indicative of the solutions they'll offer.

"Financial outlook

• We expect to be a significant beneficiary of the UK Government's full expensing scheme from FY24-FY26 and expect to pay no UK cash tax for the next three years. With demand for FTTP well ahead of our expectations, we will reinvest this benefit into further accelerating our FTTP connections and absorbing inflation whilst remaining committed to our target of building to 25m premises by the end of 2026, bringing our annual capex outlook to £5.0-5.1bn for FY24-FY26 inclusive. We expect take-up to accelerate beyond 30% whilst maintaining our build cost envelope of £250-£350 per premises.

• FY24 Outlook: adjusted revenue and adjusted EBITDA growth on a pro forma basis driven by CPI-linked pricing and the impact of cost transformation; despite expected headwinds from cost-of-living pressure, and cost inflation, including higher energy costs. Normalised free cash flow for FY24 is expected to be between £1.0bn and £1.2bn as the tax benefit from full expensing will be offset by higher capex. Cash capex in FY24 may be up to £200m higher than reported capex of £5.0 to £5.1bn due to the repayment of government grants resulting from higher than expected fibre take-up on the BDUK programmes.

• Beyond FY24, we continue to expect consistent and predictable adjusted revenue and adjusted EBITDA growth driven by CPI-linked pricing and by cost transformation. We remain confident in expanding normalised free cash flow by at least £1.5bn, when compared with FY22, by the end of the decade. This comes from lower capex and lower opex as we move past peak capex and towards an all-fibre, all-IP network. FY24 outlook"

"The BT Conundrum

One analyst asked Höttges what Telekom’s 12% share in UK incumbent BT might look like in 12 months, given the rough ride the operator has had in the past 12 months. He described it as “tricky”.

“Are we happy with where the company stands? No. Is it – are there a lot of, let’s say, green lights in the business? Yes. If you see what this company has ticked over the last quarters, it’s quite impressive, with [Openreach’s] Equinox 1 and Equinox 2 was, let’s say, the developments on the fibre build-out,” he said. “Even the interest rates [are] helping them on their pension side.”

The latter comment reflects on the fact that some analysts have quipped that BT is a pension business with a side operation as a telco.

Höttges said despite some investor concerns disappearing, the share price hasn’t reacted so there is still a way to go with the business. “I think this company is very well positioned for convergence, and it’s – I’m a strong believer that this company is going to be successful on the midterm on a long-term perspective,” he said.

“Now today, it is not showing it, so therefore, we have to find the right ways of approaching it… we have to see now with the new CEO and all these kind of things, how this is evolving… t’s clearly something which – where I want to see an improvement over the next 12 months because we are waiting already for quite some time,” he added."

https://www.mobileeurope.co.uk/deutsche-telekom-holds-line-on-huawei-signals-more-european-mergers/

"New day, new opportunity and new discussion (s) about the next Company - Sector to invest after QBT success."

Don't count your polli before they've hatched.

You're

Jax, your like the Edinburgh Jukebox in Good Omens 2; You keep playing the same tune over and over and over and over.............. again. Even you must be getting bored of singing from the same hymn sheet, most on here have probably now blanked you out due to your constant repetition.

"Mcap 11.1 + net debt 18.9 = Enterprise value of 31bill."

Actually as of the 31st March 2023, BT's Net Financial debt was £13.497 Billion with £5.359 Billion Lease Liabilities.

"Net financial debt is net debt excluding lease liabilities. It allows for the comparison to net debt measures reported before the introduction of IFRS 16 on 1 April 2019, and reflects a view that lease liabilities are operational debt in substance, rather than financing transactions.

Net debt and net financial debt are considered to be alternative performance measures as they are not defined in IFRS. A reconciliation from loans and other borrowings, lease liabilities, cash and cash equivalents, and current asset investments, the most directly comparable IFRS measures to net debt and net financial debt, is set out below."

Basically Lease Liabilities are the rent BT pay on the buildings they lease back from Telereal Trillium, and BT will be reducing the number of Exchanges dramatically over the next 10 years. BT own the Freehold on the Exchanges and will therefore get a cut of any profits, with Telereal Trillium, when the properties come up for redevelopment post Exchange closure.

The media talk about BT's "Net Debt", but no mention of how that debt is made up and how the lease liabilities will reduce over time. BT may or may not decide to maintain the level of debt, by borrowing more as lease liabilities reduce, but the debt narrative gets too much prominence when it isn't black and white.

$29,000 seems to be the new normal with any breakouts above $30,000 quashed in relatively short order. Clearly an entity, or entities, are selling at $30,000 and above; On the 8th August it was knocked back shortly after breaking $30,000 and the same thing happened today when it was over $30,000 for less than 5 minutes. I have no idea what the current liquidity is, or the amount of buys and sells driving the price, but $30,000 is a big resistance point.