Why some telecom operators are withdrawing from the stock market

The time to say goodbye to the stock market is approaching for Free. The simplified public takeover bid (OPA) launched by its founder Xavier Niel (personal shareholder of the World) on the Iliad group, the operator’s parent company, ends Friday, September 24. Barring any surprise, he will come out with more than 90% of the shares and voting rights of the entity, allowing him to quickly initiate the squeeze-out procedure for listing in Paris.

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Free follows in the footsteps of the Altice group of Patrick Drahi, owner of SFR, which left the Amsterdam Stock Exchange in January. But also the Spanish MasMovil and the British TalkTalk, which came out shortly before being bought out by investment funds respectively: KKR, Providence and Cinven for the first, Tosca for the second. Coincidence or underlying trend? One thing is certain: the share prices of most European operators have been declining over the past five years and French players are no exception to the rule, while the CAC40 has recorded an increase of almost 50%. over the same period.

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In private, most of the operators’ executives claim that the thermometer is broken. That their poor performance on the stock market would be decorrelated from the financial realities of their companies. “The creation of value in our sector in the coming years will be greater than what the markets anticipate”, assures one. “Whether we win or lose subscribers, our actions stagnate”another sighs.

A form of emancipation

However, many specialists in the sector dispute this. Revenue growth for telecom operators has been sluggish for years. Deploying fiber optics and 5G, the new mobile phone standard, requires significant investment, but competition prevents them from raising prices to cushion them. Result: margins remain low.

This equation does not meet the requirements of the markets, which scrutinize each quarter the evolution of the number of subscribers and the average price they spend, and therefore significantly better value American operators, who can charge prices well above European standards. , where competition is more intense. It is on the strength of this observation that Deutsche Telekom has decided to invest in its American subsidiary T-Mobile, against an increase in its own capital by Japanese SoftBank. The latter now owns 4.5% of German.

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Those who set sail also present the operation as a form of emancipation. “Once out, you don’t ask yourself every morning what effect this or that choice will have on the course”, justifies an Altice framework. Iliad’s managing director, Thomas Reynaud, also sees it “A way of giving time to time”. It would be an opportunity to invest, to hire, to develop abroad. It also allows, more prosaically, to avoid the transparency constraints of listed companies. Or to avoid lengthy meetings to present the financial results to investors.

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