EU Considers Granting Telecoms' Greatest Hopes and Dreams
Comment of the Day

February 13 2023

Commentary by Eoin Treacy

EU Considers Granting Telecoms' Greatest Hopes and Dreams

This article from Bloomberg may be of interest to subscribers. Here is a section: 

Top European Union officials raised the possibility last year of making major streaming operators like Netflix Inc. and YouTube help pay for 5G and fiber infrastructure. Telcos had been pushing for such a move for over a decade.

The EU’s executive arm is expected to publish a request for feedback on the idea this month, the first step toward a formal proposal. When a draft of this consultation was circulated around Brussels recently, telcos read it with glee — and tech companies with horror. The consensus was that the EU is no longer asking whether it will do something but rather, how.

Last week brought another cause for celebration, at least for the bankers who work with the likes of Deutsche Telekom AG and Vodafone Group Plc. Commissioner Thierry Breton said the EU should more closely consider cross-border mergers, which could create “a true single market for telecoms” in Europe. Telcos, again, have been lobbying for consolidation for a long time.

Eoin Treacy's view

Regulatory changes mean a lot to investment prospects in any sector, but when it comes to who pays for expensive network upgrades, it can have a material impact on the bottom line. Telecom stocks have been off the radar for 20 years because growth did not look likely to ever return. Repricing for the potential for slimmed down costs is a welcome development.
Deutsche Telekom crossed the €20 area for the first since early 2000s in January and continues to holds the move.
BT Group is firming from the lower side of a developing base formation.
Orange is also steady at the lower side of its range.

Many European telecoms have been forced to cut dividends over the last couple of years. That has detracted from the perception that their cashflows are reliable. Greater visibility on costs should the potential for dividends to increase once more.

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