Author Topic: TI-A Telecom Italia  (Read 28238 times)

LightWhale

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Re: TI-A Telecom Italia
« Reply #50 on: May 11, 2018, 08:05:42 AM »
No schooling intended, you know more than me


ajc

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Re: TI-A Telecom Italia
« Reply #51 on: May 11, 2018, 09:20:22 AM »

No schooling intended, you know more than me


Agree to disagree. I prefer it when someone rips my thinking apart. Does more to focus my mind. Also, finding overlooked weaknesses is a rule #1 corollary. Maintains principal long-term. Credit where it's due.

Any long ideas you like right now?



Packer16

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Re: TI-A Telecom Italia
« Reply #52 on: May 11, 2018, 06:02:05 PM »
We will see how successful Iliad will be.  So far they have had delayed roll-outs & losses.  They also are entering an already competitive market & will not be able to leverage fixed-line infrastructure like they have been able to do in France.  Even today in France, guys like Brookfield can lay fiber & make decent returns which tells you how much profit is still available in France.  It will be interesting to see if Iliad can get a positive NPV given their network disadvantages and lower price points & fickle Italian consumers.  These consumers may be a positive initially when gaining customers but it also effects Iliad's retention like all the other players.  Another question is how long will they be able endure losses which impinges on their clearly more profitable French business and whether they can reach the scale to make it as a good as the business they have in France. 

They have had 4 competitors in the past but I believe they had deeper pockets than Iliad.  Also, Iliad is projecting (as a goal) EBITDA breakeven at 10% penetration which implies they need greater than 10% to make positive NPV.

Packer

LightWhale

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Re: TI-A Telecom Italia
« Reply #53 on: May 12, 2018, 03:15:07 AM »
Any long ideas you like right now?
I do like TITR, and bought some in February. I supposed x4 EBITDA would give enough room for negative surprises. 

Packer, would you mind sharing the principles of how you model Iliad's penetration - with all its uncertainties - on TI's value?

We will see how successful Iliad will be
From our perspective, isn't Iliad's entrance more significant than its future success? It's not a zero sum game. If Iliad fails to become NPV positive, will that necessarily be good for TI, or cause a price war? One company's failure can develop into everyone's failure. I'm wary of commoditised industry dynamics, where NPV can be negative after years of sunk costs, but only incremental costs count.
« Last Edit: May 12, 2018, 03:21:37 AM by LightWhale »

Packer16

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Re: TI-A Telecom Italia
« Reply #54 on: May 12, 2018, 10:28:14 AM »
As to Iliad's impact on TIs value, I think there are too many dynamics to come up with a reasonable estimate.  IMO your estimate is probably what the market consensus is & is why TI is trading where it is.  I just think this consensus could very well be mistaken give the number of possibilities here.  One in particular is the spin-off of the network.  TI shareholder's would probably hold a majority of such an entity & as in the Elliot presentation shows it would have a significant value.  The question about a network spin-out would be if the network company given their favored position, can charge favorable rates.  IMO as long as the Italian state has a stake, the pricing will be favorable.   

The biggest issue I see with Iliad is the large market share breakeven they have to achieve (10% to get to EBITDA breakeven), meanwhile in France they can lay cable & get 40%+ EBITDA margins.  The rural subsidies in France provide Iliad another advantage they will not see in Italy.  The incumbents in Italy (TI, VOD & VIP) have invested more & can compete on marginal cost vs. Iliad will have to compete on total cost until they get more infrastructure & with better opportunities in France, Italy is going to be a black hole for awhile.  Also the incumbent's have deeper pockets and better ability to bundle that Iliad.  Now this investment makes sense if you have a lower cost offering but given how much leased infrastructure (from other competitors), I cannot see how this can be the case.  How long will Iliad keep bleeding?  As to a price war, I would be more concerned about the incumbents as they have the resources to fight one & Italian rates are cheaper than France contrary to Iliad's contention which is dependent upon penetration rates in each country which they fail to mention in their presentation.  I would agree with your view if investment opportunities in France were limited and this may happen some day in the future but is not the case today.

Packer

LightWhale

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Re: TI-A Telecom Italia
« Reply #55 on: May 13, 2018, 04:09:48 AM »
Thanks Packer, it’s informing to read.

Iliad probably does not expect profits before 2022 or becoming NPV positive before 2025. They’re preparing for a marathon & I don’t see them quitting so fast. Considering your description of the margins and opps in France, why in your opinion they are prioritising Italy? Perhaps they foresee 1) substantial synergies between the two markets & keeping the Italian operations very lean, or 2) a growth of the general pie when G5 is here.

But going beyond mobile, at the current saving share price the range of possibility does seem to be skewed to the positive.

It should be interesting to watch the coming quarter unravel. Iliad’s pricing strategy will show itself. And the backstage discussions between Elliott and Genish will move to the front. So far, they have disagreed on TIM’s break-up, other than the Sparkle bit.

« Last Edit: May 13, 2018, 04:16:29 AM by LightWhale »

ValueIdeaLog

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Re: TI-A Telecom Italia
« Reply #56 on: May 14, 2018, 06:50:08 AM »
Did anyone happen to save Elliott's last presentation? They've taken the website down and I can't find the PDF anywhere.

Packer16

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Re: TI-A Telecom Italia
« Reply #57 on: May 14, 2018, 06:56:45 AM »
Here it is.

ValueIdeaLog

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Re: TI-A Telecom Italia
« Reply #58 on: May 14, 2018, 07:43:58 AM »
Thank you sir!

LightWhale

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Re: TI-A Telecom Italia
« Reply #59 on: May 16, 2018, 05:45:31 AM »
Quick updates:
- Iliad will launch by June 21th, and Sisal approved it will sell Iliad's SIM
- TIM responded with a  10 monthly offer for the first 6 months