Growing end of the week for the European telecommunications sector. The Stoxx sector index gains 1,2% thanks to the rally of two former purebred horses that have been in the pits for some time: the English BT, up 6% on the London Stock Exchange after an initial stretch of up to 9%. and our Tim up in the early afternoon by about 2% from the initial +3%.
At the origin of the rally there is above all the scoop from the Financial Times which on Friday morning revealed a negotiation, which has just begun, by the former incumbent of British telecommunications with the Australian Macquarie for the sale of a stake in Openreach, the company of the English network valued at around 20 billion pounds, more or less double the current capitalization on the London Stock Exchange.
In the event of a positive outcome of the negotiations, BT could recover the capital necessary to finance the investment plan necessary to develop the extension of the optical fiber network which today serves 2,6 million users but which, according to the programme, should benefit from 3 million connections per year.
It is not the first time that a fund has contacted BT to enter the most promising holding of the group. But this time many elements conspire to support the reasons for an agreement. Starting with the disappointment inflicted on the shareholders of one of the most common blue chip companies on the City list last May 7 when BT withdrew its proposed dividend for this year and froze that for next year (1,5 billion), with the promise to return to paying a dividend in 2022, but for a halved amount. A forced lent which is partly explained by the investment plan mentioned above but also by the need to face the fierce competition not only from Vodafone but also from the group that will be born from the integration between Virgin Media and 02.
The parable of British Telecom is repeated, almost photocopied, on the front of Telecom Italy. Also in the Italian case there is the presence of a financial interlocutor, i.e. Kkr, more active than ever on the European front (it has just entered the German Prosiebensat alongside Mediaset). Also here the financial item is intertwined with the need to develop the fiber optic network, a circumstance that led CEO Luigi Gubitosi to negotiate with the US fund the sale of a minority stake in the fixed network (40%, with expected receipts of around 1,8 billion) and the passive secondary network (copper and fiber infrastructure from cabinet to houses, valued at 7,5 billion).
The company is confident of getting an offer by the summer. All this should facilitate negotiations with Open Fiber shareholders for the single network. Even because in the post-coronavirus world the common imperative is to spread the risk and to avoid excessive exposures, resorting to alliances with solid financial partners, as Mediobanca Securities advises in a recent report: “The crisis dictated by Covid-19 has launched us into a new digital context, which should represent the new normal not before by 2025, that's why we wouldn't be surprised to see this trend accelerate further”. “That's why I died – continues the analysis – we are confident that the agreement between Tim and Kkr for the sale of a stake in the secondary network will be finalised”. Even if there is no shortage of difficulties, as Elliott underlined, who threatened Tim's exit if the operation continues to delay.
