Vodafone offers a little 'hope' after Dutch M&A ruling - Berenberg
By Oliver Haill
Date: Wednesday 28 Nov 2018
(Sharecast News) - Confirmation by European Commission antitrust authorities of the merger between the third and fourth biggest Dutch telecoms players "is the best piece of news that this unloved sector has had in at least the last two years", said Berenberg on Wednesday.
But Vodafone is only Berenberg's speculative "hope trade" on the news, analysts stressed.
The EC approved the deal between T-Mobile and Tele2 without any remedies, which was the first time such a decision was made since 2007.
"This latest development could spark (or at least create speculation around) M&A," Berenberg's Usman Ghazi wrote. "Our interactions with investors over the last 24 hours suggest that renewed hope for remedy-light consolidation (of overcrowded four-player European mobile markets) could support inflows into an underweight European telecoms sector in the coming weeks and months."
Investors looking from the Vodafone "hope trade" should note that the readacross from the latest Dutch deal to the FTSE 100 group's major markets such as the UK, Italy and Spain "is tenuous for now", Ghazi said, because the Dutch approval is fairly specific to that market, especially with the competitive foreclosure risk that was facing Tele2 as a result of its small market share of just 5%.
Berenberg has a 'buy' rating and a price target of 243p on Vodafone.
Instead, the analyst sees Sweden as "more interesting than the UK, Italy and Spain for a positive readacross" where already struggling mobile-only operator Hutchison Whampoa has a 13% mobile subscriber share and [if] "its performance deteriorate further, a case for remedy-light consolidation could be made over the mid-term".
"We believe there is scope for heightened speculation, especially if Hutch misses out on the low-band 5G auction due to take place this December."
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