1. Pair Trade: Long Deutsche Telekom - Short Belgacom
Thursday, November 08th 2012
Companies Description Investment Case
Deutsche Telekom (DTE GY)’s Q3 2012 revenues were in line with
expectations. EBITDA was a bit above company-provided consensus. Q3
numbers seem broadly consistent with 2012/2013 consensus
expectations. Investors focus should be on the Capital Markets day that
the company will hold on 6 /7th December.
Deutsche Telekom intends to merge its US subsidiary (TMO USA) with
MetroPCS Communications. The two companies have got different
Market Price Data network standards (GSM/CDMA), which will probably make the
Deutsche Telekom (DTE GY) integration more challenging. However, the deal could bring significant
Last Price (€) 8.520 synergies.
YTD Change -3.98% Additionally, the reverse merger into MetroPCS would provide Deutsche
Mkt Cap (€ bn) 36.783 Telekom with a publicly traded asset in the US. In the long-term, the
Belgacom (BELG BB) German company could decide to exit the US market.
Last Price (€) 22.420
YTD Change -7.67% Belgacom (BELG BB)’s Q3 2012 results were solid. It’s got a net debt far
Mkt Cap (€ bn) 7.565 below the sector average, a robust cash flow and an attractive dividend
policy.
Source: Bloomberg
However, Telenet’s success on King & Kong mobile plans (and Proximus
Analysts Recommendations: cutting its mobile tariffs in September) could increase the competition
on mobile data pricing. Belgacom may have to decrease further its
tariffs, for both Consumer and Enterprise divisions. A price war scenario
on the Belgian mobile market could be a worry.
The long Deutsche Telekom (DTE GY) vs. short Belgacom (BELG BB) ratio
has a current value of 0.378. We’ll define as our target 0.3941. 0.374 will
Source: Bloomberg
be our stop-loss level.
Market Multiples
P/E EPS DY Net Debt/
2013 2011/13 2013 EBITDA
Technical Comment
Est. CAGR Est. Est. Est. 2012
DTE GY 13.42 -1.9% 7.55% 2.16
BELG BB 10.76 -5.8% 9.50% 0.93
Source: Bloomberg
Next Report Date & Events
Dec. 6th,
DTE GY Capital Markets Day 2012
Feb. 28th,
FY 2012 Results 2013
March 1st,
BELG BB FY 2012 Results 2013
Source: Companies' web site
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