Phone Companies, Once Spurned, Become Investor Haven (Update3)
By Cecile Daurat
London, Sept. 21 (Bloomberg) -- Bob Parker got an investment idea when a business trip he was supposed to make to the United Arab Emirates was canceled earlier this week because his company decided it didn't want employees flying to the Middle East.
``I spent the whole day on the phone to clients in the Middle East,'' said Parker, deputy chairman of Credit Suisse Asset Management in London. ``Who won on that decision? Telecom operators won and British Airways lost.''
In addition to working the phones, Parker has been buying European phone company shares, including France Telecom SA. He is one of many investors around the world who say they expect people to make more phone calls as they cut down on travel in the wake of the terrorist attacks in New York and Washington last week.
The world's 10 biggest phone companies, including Vodafone Group Plc, NTT DoCoMo Inc., AT&T Corp., have grown in market value by $37 billion since Sept. 11, the day of the attacks. In contrast, the world's airlines have lost a third of their value, or about $31 billion. British Airways Plc has dropped 42 percent.
``There's so much uncertainty in the rest of the economy that people are parking money in telecom stocks,'' said Marshall Whiting, an analyst at Theodoor Gilissen. ``It's not specifically that they're strong. It's more a safe haven.''
Shifting Value
Telecommunications stocks have also performed better than comparable indexes. Shares of British Telecommunications Plc have risen 9.9 percent since Sept. 11, while the FT-SE 100 index slumped 12 percent. NTT DoCoMo's stock gained 15 percent, while the Tokyo Price Index fell 5.7 percent. Shares in San Antonio- based SBC Communications Inc. have also gained 1.9 percent, while the Standard & Poor's 500 Index has slumped 12 percent.
They may continue to outperform as companies cut back on travel and employees do more work over the phone, investors said.
Investors sold more than $500 billion worth of stock in the world's 10 biggest phone companies in the past year. In Europe alone phone companies shed about 1 trillion euros ($920 billion) in value as concern mounted about how operators would recoup $100 billion spent on licenses on faster wireless services.
Now, investments in mobile services worldwide may pay off if last week's attacks against the World Trade Center and the Pentagon boost sales of cellular phones because more people want to be in touch with family and friends, investors said.
The dead and missing in New York, where AT&T Wireless, Nextel Communications Inc. and other cellular businesses have distributed thousands of phones to relief workers, totals 6,333.
Still in Debt
Phone companies ``are still generating cash,'' said Neil Massie, who helps oversee about 330 million pounds ($483 million) in phone shares, including Telefonica SA and France Telecom SA, at LeggMason Investors in London. ``They are quite strong companies, as opposed to companies more exposed to economic movements.''
In Japan, the situation is much the same. Telecommunications stocks have performed better than the Nikkei 225 stock average. Shares of NTT DoCoMo, the largest mobile-phone company, have risen 15 percent since Sept. 11, while the Nikkei stock average declined 7 percent.
KDDI Corp., Japan's second-largest phone company, has risen 12 percent while Japan Telecom Co.'s shares have surged 41 percent. NTT Corp., the largest phone company in the world by sales, has gained 8 percent.
``Investors are looking for safe havens for their money, and companies that expect an increase in revenue are targeted,'' said Naohiko Sasaki, who helps manage 360 billion yen ($3 billion) at Kokusai Asset Management Co.
In Korea, SK Telecom Co. has gained about 6 percent since Sept. 11 while Korea's benchmark KOSPI index has fallen about 13 percent. Singapore Telecommunications Ltd., Southeast Asia's biggest phone company, has fallen about 5 percent, less than the Singapore Straits Times index, which dropped 21 percent.
U.S. Stocks
In the U.S., the president of AT&T's Network Services, Frank Ianna, this week said the company may benefit from the attacks on the World Trade Center, which caused demand for some services to surge. Sept. 11 was AT&T's busiest day. Its network handled 431 million calls, 31 percent more than the previous record.
European investors said they are aware that phone companies there still owe a total of about $330 billion. Their plans to sell assets or new shares to pay that debt off likely will remain incomplete until share prices rise more than they have.
Earlier this month, Royal KPN NV, the biggest Dutch phone company, said proceeds from asset sales will be less than anticipated, raising concern about how it can pay off debt. Two days later, France Telecom, Europe's second-biggest phone company, said it scaled back plans to trim its 64.9 billion euros in debt for the same reason.
Short Term
The rise in some phone companies' shares may be short term, because ``there are still significant problems,'' Theodoor Gilissen's Whiting said.
The top three phone companies in Europe by market value -- Vodafone, Deutsche Telekom AG and Telefonica -- still have lost more than a third of their value this year.
Still, LeggMason's Massie argued that large phone companies, such as British Telecom, are better equipped to weather a further slowdown in the global economies than their smaller rivals and other industries such as travel.
``The damage has been extreme in some cases,'' said Credit Suisse's Parker, referring to the airline industry. When he finally did fly this week, on a trip from Munich to London, the plane was two-thirds empty. |
