1、每日微信群内分享7+最新重磅报告；
4、行研报告均为公开版，权利归原作者
所有，起点财经仅分发做内部学习
EQUITIES ● TMT
24 January 2019To navigate the 2019 waters …
With global economic growth starting to lose steam (according to the World Bank, global growth is
projected to moderate from a downwardly-revised 3 percent in 2018 to 2.9 percent in 2019 and 2.8
percent in 2020-21), the increases in Fed rates, coupled with the government shutdown (see our
note US Government Shutdown, 17 January 2019), in our view, are likely to dampen consumer
sentiment and spending – primarily on discretionary items. Although telecom services (chiefly mobile
and fixed broadband services), which have become an essential part of consumers’ lives, are
unlikely to be materially impacted by the downbeat external environment, it may nevertheless
dampen new housing starts. This may in turn impede broadband subscription growth rates – a key
growth driver for cable companies given the declines in pay-TV and telephony subscriptions. For
mobile operators, although the recent newsflow around Apple (see our note Apple: China bites even
more, 8 January 2019) and Samsung – pointing to reduced demand and the lengthening of handset
replacement cycles – hints at the potential for improvement in margins due to reduced spending on
smartphone-related promotions, we think handset-related promotions may see acceleration in the
latter half of 2019 as operators introduce 5G-enabled services and phones.
US Telecoms stock price performances since the beginning of 2018 through 2019 to date
Note: Priced as of 22 January 2019. Source: Refinitiv Datastream
Cherry-pick sturdy carriers
Verizon, AT&T, TMUS and Comcast are our preferred stocks for
2019; DISH is our least preferred stock
We cut our TP for DISH to USD24 from USD38 as we turn more
cautious on spectrum monetization prospects; downgrade to Reduce
Asset-mix, business momentum, RoICs, leverage and shareholder
remuneration potential drive our stock picks; on a relative risk-reward
basis, we prefer Verizon, AT&T, TMUS and Comcast (all rated Buy)EQUITIES ● TMT
24 January 2019
… choose sturdy carriers
Verizon
We continue to like Verizon due to its relatively better RoIC, strong position in mobile (once
again illustrated by the strong net additions and lower churn in Q4 2018), lower debt/leverage
position (c2.0x 2019e net debt/EBITDA), lower exposure to pay-TV (9% of revenues) and
cost-cutting initiatives.
In September 2018, Verizon announced a voluntary separation program for select US-based
management employees. About 10,400 eligible employees are expected to leave under this
program by end-June 2019 with nearly half already exiting in December 2018. If we were to
assume an average of cUSD100k/employee/annum cost, this implies cost savings of cUSD1bn
per annum. This separation program forms part of the planned USD10bn of cost-cutting through
2021, which coupled with the more rational and subdued competition in mobile, in our view,
continues to be supportive of the stock. Additionally, the planned rollout of 5G services
(nationwide rollout in 2019) should aid the company in potentially garnering a greater share of the
broadband market (at the cost of smaller cable players), which should benefit revenue growth.
We rate Verizon as Buy with a DCF-based fair value target price of USD62 (no change). Our TP
implies upside of c9%, and we see a dividend yield of 4.3% for 2019e.
AT&T
AT&T had a difficult 2018, dragged down by weaker-than-expected growth in mobile, pressure
on its pay-TV business and the overhang related to the TWX deal. For 2019, we continue to
expect declines for the pay-TV business; however, we expect to see a resolution of the TWX
situation (the decision by a panel of judges regarding the Department of Justice’s appeal on
AT&T/TimeWarner merger is expected before 1H 2019, see below). We also expect the
company’s momentum in mobile to improve, helped by the launch of 5G services (2H 2019).
Note: US District Judge Richard Leon (who reviewed the DOJ’s request to block the AT&T/Time
Warner merger) ruled on 12 June 2018 to grant AT&T the right to proceed with its acquisition of
Time Warner (de-listed); however, the DoJ filed an appeal against the ruling, and on 6 December
2018, a panel of three Judges heard DoJ appeal.
Verizon: The sturdiest
ship to sail
AT&T: Coming out of rough
waters
US: Mobile service revenue trends
Note: As reported – not adjusted for one-offs or restatements. Source: Company data
EQUITIES ● TMT
24 January 2019Despite the short-term headwinds, we think AT&T, with its strong position in mobile, fixed-
broadband, pay TV and content assets, remains strategically well placed. Moreover, at current
levels, the stock is trading at a significant discount to most of its peers (5.8x 2019e EV/EBITDA
vs. 6.4x 2019e EV/EBITDA for telecom and 8.0x 2019e EV/EBITDA for media, peers), and its
dividend yield (6.7% 2019e) is one of the highest among the stocks in our coverage – providing
strong support for the stock. Although the company’s leverage has increased following the TWX
transaction, we do not think there is any risk to the dividend.
We rate AT&T as Buy with a DCF-based fair value target price of USD38 (unchanged), which
implies upside of c24%.
T-Mobile
T-Mobile (TMUS) continues to deliver positive operational momentum with its subscriber
addition numbers for Q4 2018 once-again exceeding consensus expectations (see page 7).
Approval of the TMUS/Sprint combination remains a key potential catalyst for the stock.
The DoJ and the FCC continue to review the transaction. We believe that the deal has a reasonable
probability of approval (see our report The course for the remainder of 2018, 22 August 2018).
Pairing up with Sprint would allow TMUS to gain meaningful scale, which could help drive better
profitability, and eventually put TMUS on a better footing to face, or participate in, any potential
changes in the competitive landscape. Nonetheless, we consider that, irrespective of the outcome
for the deal, TMUS is well positioned to continue to gain market share (through footprint expansion).
We rate TMUS as Buy with a DCF-based target price USD76 (unchanged), which implies
upside of c14%.
US: Fixed-line revenue trends (excluding satellite pay TV)
Note: As reported – not adjusted for restatements. Source: Company data
T-Mobile: Continuing its
northward course。。。。。。。。。