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Analyse aandeel Belgacom

Ondanks de toegenomen concurrentie blijft Belgacom het grootste marktaandeel houden bij vastelijntelefonie, mobiele telefonie en breedband internet- en televisiediensten. (rapport Engelstalig)

Allan C. Nichols, CFA 24 oktober, 2014 | 15:15

INVESTMENT THESIS

As Belgium's primary telecom operator, Belgacom faces tough competition as cable providers aggressively encroach on its fixed-line business. Increased wireless competition is also occurring. Fortunately for shareholders, Belgacom recognizes its limitations and avoids buying growth in areas where it has no competitive advantage. Instead, it returns most of its free cash flow to shareholders in the form of dividends and stock buybacks. We like this strategy, and we expect it to continue.

Bundles of services are very important in Belgium. Telenet has long been a fierce competitor in fixed-line telephone and broadband services, and in 2011, Voo also assumed greater competitive sway. Strong competition continued throughout 2012 and 2013. Telenet has marketed free fixed-line phone service for customers purchasing cable television and broadband. Belgacom has responded by marketing free television service for customers who purchase fixed-line telephone and broadband services. Both strategies have been successful at stealing customers from the other: While the cable operators have taken fixed-line subscribers from Belgacom, Belgacom has equally taken television customers from the cable operators.

Historically, Telenet's superior network allowed it to compete strongly. In 2011, Voo emerged as the more aggressive price competitor, but at the cost of profitability. Although Belgacom has lowered pricing somewhat in response, it has been more successful in maintaining margins. However, the firm increased spending for 2013 and 2014 to improve the quality of its network through the implementation of new technologies to increase the speed of its copper lines over the "last mile." The improved network allows Belgacom to compete better in broadband against the cable operators, which have higher broadband speeds. While this strategy initially hurt margins, we think it will help avoid a price war and move competition more into quality of service. Recently, the firm rebranded all of its major offerings under the Proximus brand. The launch included lower prices, more bundles and increased data usage along with greater marketing, which has helped with subscriber growth.


VALUATION

Economic Moat   Fair value   Stewardship Rating   Telecom
Narrow   EUR 22,00   Standard  
Moat Trend   Uncertainty   Sector  
Stable   Medium   

Communication Services


BULLS

  • Despite increased competition, Belgacom continues to maintain the highest market share in fixed-line and wireless telephony and broadband services.

  • Despite cutting its dividend, Belgacom still pays a solid dividend, with the stock boasting a gross yield (before foreign and local tax withholding) of about 5.8%.

  • Belgacom sold its Telindus France unit to Vivendi for EUR 95 million. While this will reduce revenue by EUR 242 million, the unit generated very little EBITDA.



BEARS

  • Cable television firms are strong in Belgium, with more than 72% penetration in many areas. Some of these systems have also been upgraded to offer broadband speeds of up to 200 MB/second, significantly faster than the speeds that Belgacom offers.

  • Belgium has been undergoing a wireless price war that is hurting revenue and margins.

  • Belgacom is 53.5% owned by the Belgian government, whose objectives may not be in alignment with minority shareholders'.

 


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Effecten genoemd in dit artikel

Naam effectPrijsChange (%)Morningstar Rating
Proximus SA26,29 EUR0,88

Over de auteur

Allan C. Nichols, CFA  Allan C. Nichols, CFA, is a senior stock analyst and international investing specialist with Morningstar.

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