EQUITIES TELECOM OPERATORS FROM TARGET PRICE EPS 18e EPS 19e UNDERPERFORM NEUTRAL TELECOM ITALIA -37% -6% -12% EUR0.55 TARGET PRICE (DOWNSIDE 31%) EUR0.38 Bargain Hunters Beware Downgrading TI to Underperform; TI is likely to remain a value trap 3 SEPTEMBER 2018 at 16:41* TI has fallen ~23% YTD, underperforming the SXKP by 12%, which itself has underperformed the Sam McHugh SXXP by 13%. A quick look at any comp sheet will show you it is trading at around 4.75x (+44) 207 039 9544 EV/EBITDA (Bloomberg) a hefty ~25% discount to peers. So as investors search for “value” one
[email protected] can understand why TI often comes up. However our latest work on The Future of Fibre (published today) has led us to challenge our own long term growth assumptions for TI. In short we have San Dhillon become significantly more bearish, leading to significant cuts to our medium term estimates. We (+44) 207 039 9446 cut our price target from EUR0.60 to EUR0.38 (c30% downside) & downgrade TI to Underperform. Kohulan Paramaguru, CFA (+44) 203 430 8546 Our work identifies Italy and TI as facing the biggest risk to the fixed line outlook in Europe Alexandre Roncier (+44) 203 430 8437Exclusive Our work shows TI’suse wireline business of is over-earning relative to peers. Critically now that Open Fiber has secured project financing and Iliad has launched, we think the downside risks will begin
[email protected] to be crystallised. Firstly we think the market still underestimates the negative impact Open Fiber’s Specialist sales rollout will have on broadband ARPUs, voice telephony revenues and TI’s market share.