Oscar,
Let's agree first of all, where we should be posting the dialogue, because it is waste to do it twice...Again, the benefit of the readers of this forum I reproduce my answer to you.
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Oscar,
Thanks for your lengthy response, but I believe that you are still missing the point. Until last year, GTSG was a private venture of George Soros, who through his "philanthropic" connections managed to get a few joint ventures going in the emerging part of the world.
What has changed over the past year is the HERMES project, another majority owned effort to lay out fiber through out Europe. Unlike the US where you already have a number of different players doing so (ATT, MCI/WCOM, Sprint, etc.), in Europe you have a series of fragmented nationally centered telephone companies, none of which has a Pan-European presence. With the exception of WCOM which is laying out a pan-European network, GTSG is the only other player who is (and has already) laying out fiber. This is what is making GTSG attractive to investors. On the top of that you get the emerging market part as an icing on the cake. Moreover, with the additional resources that GTSG has now, there is a much better chance of realizing the value of all the JV's that Soros brought in. So the company is sought out as a European play with the added emerging market spice, and not the other way around.
In my view, the higher multiply for GSTG is justified because of the significantly higher growth prospects of the European telecommunications market. When one observes that the US, which is the most sophisticated and mature telecommunications market in the world, is experiencing such growth rates, it does not take much of an imagination to see the prospects for other markets around the world, and particularly in Europe which is well developed and therefore, not as prone to shocks as the emerging markets (read "lower risk").
In addition, GTSG is the closest alternative you have as a pure Pan European telecom play.
Finally, to use your own argument, investors are willing to pay a higher multiple because of "the significant emerging markets angle of this company".
But make no mistake, investors are buying first "a European angle" and then "an emerging markets angle".
Again, this is how I read the situation and this is how I have decided to put my money where my mouth is.
Regards
Tavros |
