5G浪潮：CEEMEA与拉美通讯业

1、By: Christopher Recouso, Herve Drouet and Sunil RajgopalEquitiesTMTAugust 2020 HYPERLINK / E(5)G WavesCEEMEA and LatAm telecoms The ESG deep diveLatAm telecoms better placed than CEEMEA telecoms in 50% of our ESG parameters while CEEMEA telecoms better placed in 21%Energy and compensation-related ES

2、G disclosures as well as gender representation on boards need significant improvement across both LatAm and CEEMEA telecomsAlthough 5G may be a few years away in most EM countries, its ESG connotations are important to considerPlay video with Christopher RecousoDisclosures & Disclaimer: This report

3、must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it.Why read this report?The E(5)G wavesThe telecom services sector employs more than 5m people globally and accounts for about 2-3% of global energy consumption;

4、thus, telecom companies policies on the environment, health, safety, diversity and equality need to be looked at with greater detail, in our view. Indeed, we believe the relevance of environmental, social and governance (ESG) concerns is likely to increase over the next few years as emerging market

5、investors are starting to look at ESG in greater detail when making their investment decisions. If anything, the recent issues regarding Wirecard demonstrate the importance of corporate governance and related metrics. Moreover, with the dawn of 5G, which many industry stakeholders deem will use more

6、 power (at least to begin with) than the previous generations of wireless technology, questions on the steps being taken to reduce carbon footprints and address health issues (raised in some quarters) are increasing. We examine all the relevant ESG topics in this report concerning the 27 telecoms we

7、 cover in CEEMEA and Latin America.ESG waves for CEEMEA and LatAm telecomsAlthough telecom equity values appear to be informed predominantly by their respective market opportunities, regulation, degree of competition and macro-economic outlook, we believe the relevance assigned to ESG elements is li

8、kely to increase. The recent focus on issues relating to gender, ethnicity and corporate governance (such as with Wirecard) accentuates the importance of ESG. We believe better disclosures and corporate efforts to improve the consideration of these issues is likely to aid investors investment decisi

9、ons and potentially help to reduce the probability of negative surprises.Despite the importance of ESG, the subject remains a complex task for standardized assessment. For our analysis, we considered two approaches to compare telecom operators relative ESG standings: 1) a weighted average ranking of

10、 companies based on ESG parameters and 2) a broad-based questionnaire to determine trends and identify operators that are comparatively well placed or more proactively addressing ESG issues. For this exercise, we chose the latter approach as the first seemed problematic to us as it requires standard

11、ized disclosures across the CEEMEA and LatAm telecom universe. We believe the limited or non- uniform disclosures of CEEMEA and LatAm telecoms do not support such an exercise.Within the telecom, media and technology (TMT) space, shares of EM telecoms trade at consistent discounts to their developed

12、market peers despite the formers comparatively better growth prospects. We suspect that EM telecoms comparatively limited ESG disclosers to some extent contribute to this EM-DM valuation disparity.Our analysis shows that LatAm telecoms are better placed than CEEMEA telecoms in 50% of the parameters

13、we examine while CEEMEA telecoms are better placed in 21% of the parameters.Environmental Regarding environmental factors, LatAm telecoms have a better standing compared with their CEEMEA peers.Social From a social perspective, CEEMEA telecoms, especially African telecoms, have become a major enable

14、r for financial inclusion.Governance In terms of governance, LatAm telecoms have greater board independence than their CEEMEA peers. Government as a shareholder is more prevalent in CEEMEA while differential voting rights remain a major concern for LatAm telecoms.ESG Relative leaders and investment

15、viewsOf the relatively better placed telecom operators on our ESG parameters, we highlight our investment views:In Africa, we have Hold ratings on Vodacom Group and Safaricom. Although we view Vodacom as more defensive versus other peers in the region given its dividend support and cash position, we

16、 believe the stock at its current valuation is broadly pricing in much of the prospective growth opportunities; we maintain our Hold rating. Safaricoms unattractive valuation versus peers and the Central Bank of Kenyas decision to waive charges on P2P transactions (until the end of this year) guides

17、 us to be cautious; we maintain our Hold rating. MTN Group too scores relatively well on our ESG parameters, and we maintain our Buy rating as we think, operationally, it stands well positioned and its mobile service revenues should remain defensive. The prospect for asset monetization remains a key

18、 catalyst.In CEEMEA excluding Africa, we have Buy ratings on Magyar Telekom, Saudi Telecom and Mobile Telesystems. Magyar trades at a relatively attractive valuation, in our view. STC has a strong market position with the possibility that it may increase its dividend payout once the Vodafone Egypt d

19、eal is completed. We like MTS because of its leading market position in the Russian mobile market but also because its dividends look secure given its cash flows and relatively low leverage.In LatAm, we have Buy ratings on Millicom and Telefonica Brasil. In our view, Millicom is trading below its in

20、trinsic value while Telefonica Brasil has the best defensive attributes among the LatAm telecoms to navigate the current COVID-19 crisis.CEEMEA and LatAm telecoms: Relative valuationsTarget EV/Sales EV/EBITDA Company nameTickerRatingCCYCMPPrices2020e2021e2020e2021eLatAmAmerica MovilAMXL MMHoldMXN14.

21、2415.001.7x1.6x5.4x5.0 xEntelENTEL CIHoldCLP5,2604,4001.5x1.4x5.0 x4.8xGrupo TelevisaTLEVICPO MMBuyMXN30.6855.002.2x2.0 x6.2x5.4xLiberty Latin AmericaLILAK USBuyUSD9.6417.502.1x2.0 x5.8x5.3xMegacableMEGACPO MMHoldMXN69.9976.002.9x2.8x6.0 x5.7xMillicomTIGO USBuyUSD29.2758.001.9x2.0 x4.7x4.8xOiOIBR3 B

22、ZBuyBRL1.621.501.8x1.8x5.1x4.9xTelecom ArgentinaTEO USReduceUSD8.018.001.2x0.9x3.4x2.7xTelefonica BrasilVIVT4 BZBuyBRL50.1154.002.3x2.2x5.8x5.3xTIM ParticipacoesTIMP3 BZHoldBRL15.2414.002.6x2.4x5.6x5.1xMedian (LatAm)2.0 x2.0 x5.5x5.1xCEEMEAAirtel AfricaAAF LNBuyGBp0.610.651.6x1.5x3.6x3.3xEtihad Etis

23、alat (Mobily)EEC ABHoldSAR27.2528.002.2x2.0 x5.8x5.3xEtisalatETISALAT UHHoldAED16.7015.702.8x2.8x5.5x5.6xMagyar TelekomMTELEKOM HBBuyHUF383.0420.01.1x1.1x3.4x3.2xMobile TelesystemsMTSS RMBuyRUB339.9390.01.7x1.6x3.9x3.7xMTN GroupMTN SJBuyZAR69.0382.001.4x1.3x3.4x3.2xOoredooORDS QDBuyQAR6.568.001.4x1.

24、3x3.4x3.2xOrange PolskaOPL PWHoldPLN7.626.801.5x1.4x5.0 x5.0 xSafaricomSAFCOM KNHoldKES27.7026.504.4x4.2x8.3x7.7xSaudi Telecom CompanySTC ABBuySAR96.70107.003.0 x2.9x7.8x7.6xTelkom SATKG SJHoldZAR28.1929.500.7x0.6x3.0 x2.3xTurk TelekomTTKOM TIBuyTRY6.978.601.4x1.2x3.0 x2.6xTurkcellTCELL TIHoldTRY14.

25、7814.101.4x1.2x3.4x2.8xVeonVEON USBuyUSD1.551.801.4x1.3x3.3x3.1xVodacom GroupVOD SJHoldZAR135.58117.002.4x2.2x5.9x5.5xZain GroupZAIN KKHoldKWD0.570.602.4x2.3x5.5x5.6xZain KSAZAINKSA ABReduceSAR11.669.402.9x2.8x5.9x6.7xMedian (CEEMEA)1.6x1.5x3.9x3.7xMedian (LatAm & CEEMEA)1.9x1.9x5.4x5.0 xNote: CMP a

26、re the current market prices as of close on 14 August 2020. Source: Refinitiv Datastream, HSBC estimatesESG across CEEMEA and LatAm telecomsE(5)G Waves the 14 parameters analyzedLatAm telecoms better placed than CEEMEA telecoms in 50% of our ESG parameters while CEEMEA telecoms better placed in 21%E

27、nvironmentalSocialGovernanceGHG intensity (kg/Revenue*)Diversity policyBoard diversityEnergy intensity (kWh/Revenue*)Energy/GHG reduction commitmentsPrivacy policyFinancial inclusionDifferential voting rightsAdvisory committeesRelative LeadersBoard independenceCompensation committee independenceLatA

28、mFree-floatCEEMEAGovernment stakeNo discernible difference between CEEMEAand LatAmExecutive compensationCarbon neutral targeted deadlinesNoticeable targets and takeawaysFinancial servicesDifferential voting rightsCompanies with substantial discrepancy between board independence (BI) and free-float (

29、FF)2030TIM2040Orange Polska205081%of Safaricom total customers (35m) use M-PESA service35mactive customers of MTN - Mobile Money (MOMO) serviceBIFFTelefonica Brasil, Airtel Africa and Telkom SABIFFLiberty Latin America, Zain Group, EntelBoard independence (regional ave.)Safaricom MTNTelefonica Brasi

30、l America Movil45mpeople in Brazil dont have access to bank accounts or have not used their accounts in the past six monthsc56%c45%LatAmCEEMEASource: HSBC. Note: *USD (000)ContentsThe E(5)G waves1Governance signals25ESG waves for CEEMEA andBoard independence and diversity25LatAm telecoms1Executive c

31、ompensation, independenceESG Relative leaders andof compensation committee and law-investment views2mandated board advisory committees28ESG across CEEMEA andShareholding structures, votingstructures and minority rights30LatAm telecoms3Results of our ESG assessments34Companies mentioned in this repor

32、t35Executive summary5Valuation and risks36Key takeaways, areas that demandmore work and topics to watch5Disclosure appendix45High level summary of our findings6ESG some stock-specificDisclaimer48observations 7Our approach to assess ESG waves8Metrics for our assessments10ESG and share price performan

33、ce11Links to key HSBC ESG notes12CEEMEA & LatAm ESG waves13Environmental signals14Power play145G and energy consumption155G and health16Standings of CEEMEA and LatAmtelecoms on Environmental metrics16Social signals20Cutting barriers and keepingconnected20Diversity and privacy policies21Mobile money

34、initiatives and progress22Executive summaryESG has been gaining prominence, and the relevance to investors is likely to only increase over the next few yearsWe assess standings of CEEMEA and LatAm telecoms on 14 ESG parameters to discern trendsOn aggregate basis, LatAm telecoms are better placed on

35、half of the ESG parameters in our analysis compared with CEEMEA telecoms; companies that look relatively well placed vs. peers are Millicom in LatAm and Magyar Telecom and Safaricom in CEEMEAKey takeaways, areas that demand more work and topics to watchGuided by our evaluation of the disclosures of

36、27 companies and the availability of the data, we zeroed in on 14 parameters (more details below) to examine three related to the environmental issues, three to social concerns and eight related to governance.E(5)G standings regional takeaways: We have reviewed the relative standings of CEEMEA and L

37、atAm telecoms on multiple ESG topics, especially focusing on environment performance and targets, social inclusion, board independence and gender diversity, executive compensation and minority shareholder rights. We assessed these topics based on 14 parameters. Our analysis shows that LatAm telecoms

38、 better placed than CEEMEA telecoms on 50% of the parameters with CEEMEA telecoms better on 21%. On environmental factors, LatAm telecoms have better standings compared with their CEEMEA peers. From a social perspective, CEEMEA telecoms, especially African telecoms, have become major enablers for fi

39、nancial inclusion. On governance, LatAm telecoms have higher board independence than their CEEMEA peers. Government as a shareholder is more prevalent in CEEMEA while differential voting rights remain a major concern for LatAm telecoms.E(5)G standings company takeaways: In LatAm, Millicom appears re

40、latively better placed on the parameters than the other LatAm telecoms. After Millicom, Brazil-based telecoms Telefonica Brasil and TIM fare reasonably well vs others telecoms. In CEEMEA excluding Africa, Magyar Telekom stands out among our coverage universe. MTS, Orange Polska, Saudi Telecom and VE

41、ON, too, generally place well on various parameters. In Africa, Vodacom, MTN and Safaricom look to have relatively better standings compared with peers.Areas that demand focus and improvement: Energy and compensation-related ESG disclosures as well as gender representation on boards need significant

42、 improvement across both LatAm and CEEMEA telecom, in our view. In LatAm, we would like to see better efforts toward financial inclusion via mobile money services and more equitable voting rights. In CEEMEA, we would like to see stronger governance structures.5G a key ESG subject to ponder: 5G is li

43、kely to consume 3x-5x more electricity than 4G, increasing costs and putting emission reduction targets at risk. Companies are working to reduce costs and emissions through energy-efficient equipment and phasing out older technologies.Operators are expected to increasingly use advanced software and

44、artificial intelligence (AI) to more efficiently manage network loads and power efficiency through various measures. It isworth noting that 5G should significantly increase the overall throughput of the networks, bringing down the electricity consumption on a per bit transported basis.High level sum

45、mary of our findingsAt the aggregate level, LatAm telcos show relatively better progress compared with their CEEMEA peers. Out of the 14 parameters we assessed for ESG, LatAm telcos are better placed than CEEMEA telcos in 50% of the parameters while CEEMEA providers placed better in 21%.EnvironmentO

46、n average, LatAm telecoms have lower GHG intensity and energy intensity compared with CEEMEA telecoms.On renewable energy, companies with European influence have better disclosures and stronger emission reduction targets.SocialMost LatAm and CEEMEA companies have diversity policies; however, privacy

47、 policies are more prominent in LatAm than in CEEMEA.Telecom operators in CEEMEA, especially in Africa, have been successful in providing financial services while we see LatAm telecoms laxity in offering mobile financial services as a lost opportunityGovernanceOn an average, LatAm telecoms have more

48、 board independence compared with CEEMEA telecoms; however, board diversity is poor in both LatAm and CEEMEA.We note that the major CEEMEA countries have stricter advisory committees compared with LatAm countries. However, LatAm companies have a higher percentage of independence for their compensati

49、on committees.Differential voting rights is a major issue in LatAm compared with CEEMEA, while government stakes are a major issue in CEEMEA compared with LatAm.Overall we think ESG disclosures need to improve across the board, especially for energy and compensation disclosures. We note that subsidi

50、aries with European influence typically have better disclosures than other telecoms in these regions. LatAm telecoms place better on half of the ESG parameters and disclosures compared with CEEMEA telecoms.CEEMEA and LatAm Telecoms: Observations across our ESG parametersESG parametersBetter placed C

51、omment EnvironmentalGHG intensity (kg/USD000)LatAmOn average, LatAm telecoms have lower GHG intensity than CEEMEA telecomsEnergy intensity (kWh/USD000)LatAmOn average, LatAm telecoms have lower energy intensity than CEEMEA telecoms Energy/GHG reduction commitmentsNoneIn both LatAm and CEEMEA, subsid

52、iaries of developed markets have aggressive targets SocialFinancial inclusionCEEMEACEEMEA telecoms look relatively well-placed in financial inclusion compared with LatAm telecoms Diversity policyNoneAlmost all companies have a diversity policyPrivacy policyLatAmAlmost all LatAm telecoms have a priva

53、cy policy while many CEEMA telecoms do notGovernanceBoard diversityNoneDiversity is poor for both CEEMEA and LatAm telecomsBoard independenceLatAmOn average, LatAm telecoms have higher board independence than CEEMEA telecoms Executive compensationNoneCompensation weightages need better disclosuresCo

54、mpensation committee independenceLatAmOn average, LatAm telecoms have higher compensation committee independence than CEEMEA telecoms Advisory committeesCEEMEACEEMEA countries have more mandated committees than LatAm countriesDifferential voting rightsCEEMEALatAm telecoms has more prominent issues w

55、ith differential voting than CEEMEA telecoms Free-floatLatAmOn average, LatAm telecoms have more free-float than CEEMEA telecomsGovernment stakeLatAmNo LatAm telecom has government as a significant shareholder and, therefore, do notneed to deal with complexity associated with government shareholding

56、Source: Company data, HSBC estimatesESG some stock-specific observations Based on our review of each companys standing on various ESG metrics, we highlight how each stocks places on each of these parameters (see the table below for the 10 largest operators in the regions by market cap and page 34 fo

57、r all 27 companies).LatAm and CEEMEA Telecoms: Our ESG assessments for top 10 operators by market cap (sorted by market cap, USD)Saudi Telecom Company America MovilEtisalat Telefonica Brasil Vodacom Group SafaricomMTSZain Group TIMMTN Group Environment Social Governance GIEIETFIDPPPBDBIECCCIDVRFFGSN

58、ote: Full star relatively better placed vs peers; half star kn line with peers; empty star needs improvementGI GHG intensity; EI Energy Intensity; ET Energy Targets; FI Financial Inclusion; DP Diversity Policy; PP Privacy Policy; BD- Board Diversity; BI Board Independence; EC Executive Compensation;

59、 CCI- Compensation Committee Independence; DVR Differential voting rights; FF Free Float; GS Government stakeSource: HSBC estimatesLatAmAmong the LatAm telecoms in our coverage universe, we note that Millicoms standing appears markedly better on all the social and governance parameters; we believe M

60、illicom has the best ESG governance structure and disclosure among our LatAm telecom names. Among the other LatAm names, Brazilian telecoms Telefonica Brasil and TIM place moderately better than others. Telefonica Brasil and TIM have the most aggressive carbon reduction targets among the LatAm telec