The telecommunications sector continues to perform in line with the expectations of Barclays analysts, who confirm a neutral opinion on the sector, which highlights growth in revenues and EBITDA, despite the expected slowdown in revenues from services.
The performance of the 3rd quarter
The slowdown in the growth of revenues from services in Europe continued in the third quarter of the year as expected (+0.8% per year compared to +1.2% in the 2nd quarter and +1.9% in the 3rd quarter of last year). This is due, according to Barclays analysts, to the weakness of consumption and the greater competition experienced in the main markets.
At a geographical level, Portugal (+3.6% y/y) and Austria (+2.8% y/y) led the growth in terms of revenues, Switzerland confirmed a negative trend (-2%) due to the worsening of the competitive environment. Among the five largest countries, growth in France accelerated (+2.2%), while Germany slowed significantly (-1.4%). Italy and Spain slowed down but remained above average (+1.5% and +1.3% respectively). The United Kingdom returned positive (+0.7%).
EBITDA, however, continued to benefit from favorable factors (efficiency and lower energy costs) and remains on a growth trajectory of approximately 1% in Europe.
The positive surprise came from Capex (capital expenditure), just -4% below estimates. The investment bank also continues to expect capital expenditures to decline in 2024 and subsequent years.
Expectations for the 2024/2025 financial year
Estimates for the fiscal year 2024/2025 have not undergone major changes in terms of revenues, EBITDA and cash flows. Barclays analysts expect modest revenue growth in Europe and differentiation across markets for 2025.
Overall, investment in fiber is expected to have a positive impact on revenues in 2025. At the EBITDA level, energy costs are expected to be largely neutral, while digitalisation and lower labor cost growth are expected to have a positive impact on EBITDA growth quantified as +2%/+3%.
Telecom better than the market
Telecommunications stocks, according to Barckays analysts, are outperforming the market: since the beginning of the year, the European telecom sector has outperformed the broader index (+24% the Stoxx 600 Telecom index +9% the Stoxx Europe 600 index ). The sector is trading at a P/E in line with the ten-year average and on an absolute basis revalued compared to a year ago.
