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Thu 9 Oct 2008 01:55 AM

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Morgan Stanley cuts targets on EMEA telcos

Mobinil, Qatar Telecom highest downside; Telecom Egypt, MTN remain top picks.

Morgan Stanley cut its price targets on several Europe, the Middle East and Africa telecom companies on the current macroeconomic uncertainty, but said it remained positive on the stocks.

The investment bank said the implied average downside for Egyptian Company for Mobile Services (Mobinil) and Qatar Telecom remained the highest.

It cut Qatar Telecom's price target to 204 riyals from 251 riyals, and Mobinil's to 129 Egyptian pounds from 148 Egyptian pounds.

However, Morgan Stanley said it was positive on EMEA telecom companies as they continue to be operationally sound, have strong balance sheets, and their valuations are inexpensive.

"And, we feel the drivers for upside to our forecasts - lower cost of ownership, rising disposable income and the basic human need (and want) to communicate - remain intact," analyst Sean Gardiner said in a note to clients.

Gardiner cut the price targets on Telecom Egypt to 20 Egyptian pounds from 21 Egyptian pounds, on National Mobile Telecommunications Co (Wataniya) to 2.2 dinars from 2.4 dinars and on Mobile Telecommunications to 1.3 dinars from 1.5 dinars.

Russian telecom company VimpelCom , Telecom Egypt and Sub-Saharan Africa's biggest mobile phone operator MTN remained his top picks, the analyst said.

MTN's expensive valuation was justified "by superior execution and exposure to high-growth markets in Sub-Sahara Africa," Gardiner said.

Gardiner said VimpelCom's growth should be driven by its acquisition of fixed line carrier Golden Telecom, and a rebalancing of tariffs would help drive a better second half of 2008 for Telecom Egypt.

The investment bank also cut the price target on VimpelCom to $32 from $40, while MTN Group's price target was slashed to 140 South African Rand from 155 South African Rand. (Reuters)

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