General optimism for the telecommunications sector noted by WSJ Online.
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January 5, 1999
Europe's Big Telecom Stocks Surge;
Mobile Firms See Double-Digit Gains
By BILL MCINTOSH
Dow Jones Newswires
LONDON -- Prices of telecommunications stocks across Europe soared as investors rekindled their love affair with 1998's hottest market sector.
The Dow Jones Stoxx Telecom index jumped 30.90 points, or 7.5%, to 443.43, as institutional investors piled into large-capitalization telecommunication issues like Deutsche Telekom AG and France Telecom SA, which are now denominated and traded in euros.
Many portfolio managers who sat out the second half of December as technicians upgraded computer systems for the euro were rushing back in, traders said. Also, the key themes that boosted telecom shares last year -- exploding data-traffic volumes related to the spread of the Internet and solid growth prospects even if economies weaken -- remain intact.
'Wall of Money' to Come
A trading director with an Anglo-French brokerage firm said he saw evidence of global investment funds rearranging their portfolios to increase exposure to euro-zone stocks. "There's still a wall of money to come into European markets," he said.
That helped the telecom issues move sharply higher.
Deutsche Telekom, Europe's biggest telecom operator and one of the Continent's biggest companies in terms of market capitalization, gained 16%, or 4.37 euros, to 32.43 euros ($38.35). Its main rival, Mannesmann AG, rose 11%, or 10.82 euros, to 109.50 euros.
The story was much the same in France, Italy and Spain. France Telecom rose 8.3% to 73.30 euros, up 5.61 euros, while Telecom Italia SpA ended at 7.8500 euros, up 0.5680 euro, and Telefonic de Espana SA added 7.6%, or 2.90 euros, to 40.82 euros.
Mobile-Phone Firms Soar
European mobile-phone operators rang up double-digit percentage gains amid a plethora of fourth-quarter customer-growth reports released in Italy and Britain. The reports showed that mobile phones, bolstered by innovative prepayment packages, are making dramatic inroads into consumer markets.
Vodafone PLC, Britain's biggest mobile operator, reported that domestic and overseas customers grew by 1.8 million in the fourth quarter, raising its customer base to 9.13 million. During December, the company added more than 500,000 new United Kingdom customers, many of them attracted by relatively inexpensive prepaid packages that offered handsets and network connections for 69.95 pounds ($116.08).
"In general there is an anticipation that this growth will continue," said John Jensen, a telecom analyst at Salomon Smith Barney. "Investors are basing their willingness to pay a certain price on a belief that growth will continue at a high pace."
Vodafone Hits Record
Those assumptions pushed Vodafone's stock price up 73 pence, or 7.5%, to a record close of 10.49 ($17.41). Orange PLC, the third-largest of Britain's four mobile operators, gained 14%, or 96 pence, to 794.5 pence on its report of adding 512,000 customers in the quarter, giving it 2.16 million users.
Over the weekend, Telecom Italia Mobile reported that it added five million subscribers last year, up from 3.7 million in 1997, putting its total of subscribers at over 14 million. Its shares rose to 6.77 euros, up 0.4692 euro.
A stellar performance from Omnitel, Italy's No.2 mobile operator, which passed the six-million customer mark Dec. 23, helped controlling shareholder Olivetti SpA rise to 3.26 euros, a gain of 0.2904 euro.
"Increasing subscriber usage will help boost share prices as 1999 goes along," said Mr. Jensen of Salomon Smith Barney. "I still think there are more positive surprises to come out of this industry."
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