Germany’s OHB SE is a space economy success story. Investors have benefited handsomely, too. The upcoming SpaceX IPO has propelled OHB stock into orbit.
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Trading platforms usually command premium valuations – until they don't. When sentiment turns, they can trade at value prices. That's when it pays to pay attention – and act.
My report delved into European Union (EU) regulation in the telecoms sector. Speak of a subject guaranteed to put readers to sleep!
Still, it was a timely piece. As I pointed out at the time, the EU was finally pushing for long-overdue consolidation among its more than 100 telecoms companies.
While the EU prides itself on having created a single European market, it has completely failed to do so in telecoms. With over 100 operators, the EU telecoms market is 20 times (!) more fragmented than its US counterpart. This is largely the legacy of nationalistic and protectionist policies from individual EU countries – including poison pills to protect former national monopolies.
This level of fragmentation led to a lack of economies of scale, which in turn caused two costly knock-on effects: the sector didn't invest at sufficient scale, threatening the EU's digital competitiveness, and it didn't offer consumers the best possible deal – a growing issue in a more inflationary environment.
My interested was piqued in February 2023, when the European Commission (EC) launched a "zero taboos" review of the telecoms sector, specifically to reconsider rules around cross-market consolidation.
As EU Commissioner Thierry Breton put it at a global telecoms conference: "It is time that we have a serious discussion about the possible existing obstacles to cross-border consolidation", given that they are "holding back our collective potential compared to other continents".
In a conversation with a Financial Times journalist, Breton also confirmed that his focus was firmly on consolidation, despite many well-known hurdles.
In the report, I recommended taking a closer look at A1 Telekom Austria (ISIN AT0000720008, VI:TKA). At the time, this was a relatively little known stock that had recently been dropped from Austria's ATX index. It was jointly controlled by the Austrian government and Carlos Slim, the Mexican billionaire behind América Móvil (ISIN US02390A1016, NYSE:AMX), which has close to 400m customers.
A1 Telekom Austria was a special situation, thanks to a planned spin-off of its mobile phone tower subsidiary. Including the spin-off and dividends, the conservative stock has gained over 50% since then. Not yet the 100-200% re-rating I was hoping for, but not a bad result for a very conservative investment.
A1 Telekom Austria.
Others have since woken up to the potential of the European telecoms sector. After quietly outperforming broader European markets over the past 18 months, there is more money to be made in this sector – or so it says in two recent reports by Goldman Sachs and UBS (get in touch if you'd like a copy of these reports).
The big guys are chiming in
On 18 September 2025, a research note from UBS reported:
"European Telecoms M&A update: EU slow to implement Draghi proposals
One year after the Draghi report there are still no deals announced. Since the publication of Mario Draghi's report (link) on EU competitiveness in September 2024, which called out the need for consolidation within European Telecoms, investors have been waiting to see whether the EC's change in tone would result in concrete policy changes and deal announcements. ....
The EC has acknowledgedthe need for improving scale and returns in the industry, which have been an impediment to investment, and consolidation could solve all three issues and thus potentially be a win-win outcome for the regulators and industry alike with consumers potentially benefitting from better and safer networks. ....
Recent reports from Financial Times and WSJ have suggested that the EU Competition Commissioner, Teresa Ribera, is under increasing pressure to accelerate the EC's ongoing review of its merger guidelines and implement Draghi's recommendations."
The EU dragging its feet on implementing policy?
Quelle surprise!
That said, stuff does happen eventually, even in the EU.
On the same date, Goldman Sachs published a report summarising the findings gathered from hosting C-suite executives of most European telecoms companies at a conference in London. The resulting 41-page document dug into the specifics of the industry and pointed at the best opportunities.
"We heard bullish updates on improved pricing power supporting structurally higher revenue growth and incrementally positive comments on cost efficiencies to further boost the organic returns outlook for the sector. This supports our bullish Digital Infrastructure thesis that deregulation is driving ramping growth and returns for the best-positioned stocks – this is not reflected in consensus estimates or share prices, in our view. Management teams remain confident in the scope for in-market mobile consolidation to further boost growth, returns and share prices."
One of the factors that will soon work in the sector's favour are the falling capex requirements for rolling out fibre networks across Europe. Over the past few years, this has been a once-in-a-generation infrastructure effort. In 2025, the sector is still expected to deploy 18% of its revenue as capex. In 2026, this figure is set to fall to 12-15%, and continue to decline.
Source: UBS, 3 September 2025.
Source: UBS, 3 September 2025.
At the same time, switching off legacy copper networks and reducing headcount will bring significant cost savings.
Add in rising prices – as companies move to catch up with recent inflation – and you're looking at a sector positioned for high single-digit and low double-digit earnings growth over the coming years.
Stocks in the sector remain cheap when you compare their dividend yields to bond yields. One of the catalysts that could help re-rate these valuations is consolidation, and the takeover bids that will inevitably come with it.
For once, paying a premium to acquire competitors will actually be worth it. Past takeovers in the sector have shown that merger partners can deliver significant synergies, as the following chart illustrates.
Source: UBS, 3 September 2025.
What are some of the likely stocks to benefit?
UBS highlighted several possible deal situations: "In France, SFR is reportedly in talks about a break-up of its business (link). Reports indicate that Telefonica could acquire either Zegona in Spain or 1&1 in Germany (link). Telenor has also been linked with Tre in Sweden and Denmark (link). TIM stated it expects Italy to see either infrastructure consolidation or a merger of Iliad Italia with either TIM or WindTre (link)."
Goldman Sachs, meanwhile, published a table with its view on individual stocks. In terms of upside, two slightly more speculative stocks topped their list: German mid-caps 1&1 (ISIN DE0005545503, DE:1U1), and United Internet (ISIN DE0005089031, DE:UTDI).
Source: Goldman Sachs, 18 September 2025.
Do your own research
Why do these two Germans mid-caps have so much more potential than other stocks in the sector?
And which stocks should you pick?
I haven't looked at these questions in detail myself.
My work is very much focused on being ahead of the crowd. When I published my report on this sector and the EC's upcoming activities, almost no one was onto the sector. At that time, the risk/reward ratio looked very attractive in what was a widely neglected, undervalued sector – with multiple catalysts on the horizon.
More ideas and research end up on my desk than I can possibly deal with.
The Weekly Dispatches are my outlet for topics I can't always fully explore myself – but that others might want to dig into further. My free articles serve several purposes, but one of them is to help readers generate ideas that are worth a deeper look.
Two years ago, the European telecoms sector was a low-hanging fruit. Since then, it has performed well, especially considering the relatively low operational risk the sector carries.
There are undoubtedly more opportunities ahead – but the difference now is that others (including Goldman Sachs and UBS) – have already latched onto them.
Out now: rebound play
Sky-high debt.
Losses larger than annual revenue.
A "premium" product so unwanted, you couldn't even give it away for free.
The company featured in the latest Undervalued Shares report has seen some WILD swings.
Just two years earlier, people were falling over themselves to become customers. A dramatic rise – followed by an even more dramatic fall.
Now is the time to take a closer look, though.
The stock could be gearing up for a quick 20-30% gain, with 3-4x potential over the next two years.
A short-term trading opportunity AND a longer-term recovery play!
