Thursday, October 27, 2005

Let's get naked!

Struggling today with two sets of results, Telenor and France Telecom, two dramatically different stories, as demonstrated by their respective share price performance today. Just a couple of interesting observations. Telenor CEO Baksaas said this morning that VoIP's impact is becoming more pronounced, and Michel Combe just remarked on the FT conference call was that the IP transition is moving more quickly than the company had anticipated, particularly in the business market. One other interesting tidbit is that Telenor now has 21k naked DSL customers on its wholesale lines (that's 21.6%), 56k naked DSL subs in its retail residential base (that's 14.4%). Add them together and you get 15.9% of Telenor's own residential DSL customers without a PSTN subscription. There are also 209k unbundled lines (28% of all DSL plant in the country). More later, if I survive.

UPDATE: The France Telecom call was a bit of a bloodbath. I have an UNDERPERFORM rating on the company, but there were a lot of analysts on the wrong side of a BUY rating on the stock on the day when the company cut its full year revenue outlook and the share price took a 6% dive - and they aren't happy. One analyst from a BIG firm pulled no punches in pressing management on how it could have gone to the capital markets in late September to fund the Amena deal when its publicly-stated guidance was about to go out the window. Irritation levels were high, but management kept digging - one quizzical statement was that, while the company was publicly stating 3 - 5% pro forma revenue growth as guidance, internal forecasts were closer to the 3% end of the spectrum - as if this is some sort of justification which people will simply accept. When it comes down to the actual numbers, we're talking a few hundred million euro in Q4, which is a lot of money to me, but relatively trivial for a company with EUR48bn in turnover. From where I sit, the 6% decline in the share price was down to communication and perceived credibility. The worrisome question is whether the company has poor internal reporting systems, or whether visibility in its markets is so poor that they genuinely didn't see it coming. Neither is a good message to be sending out in a sector which performs as dreadfully as EuroTelco has this year.

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