By Matthew Jarzemsky
When it comes to crowded trades, the defensive flight to U.S. telecom and utilities shares is leading the pack.
Telecommunication shares have posted the sharpest advance among the Standard & Poor’s 500-stock index’s 10 sectors in the past three months, followed by utilities. The two sectors have also risen to the No. 1 and No. 3 spots,
respectively, in a Bank of America Merrill Lynch ranking of sectors’ price momentum relative to the broader market. The bank labeled them as “near overbought” this week, which indicates investors will have to look harder for bargains in those sectors.
“They are becoming a little bit more stretched, as far as momentum goes,” said Stephen Suttmeier, technical analyst at Bank of America Merrill Lynch. “More investors are aware that these groups are outperforming. You’ve got to be
selective [picking stocks] when you get to these levels.”
Telecom and utilities stocks’ reputations as safe havens have made the sectors particularly attractive as investors have sought to avoid getting whacked by Europe’s debt crisis. The S&P 500′s telecom sector — which includes AT&T and Verizon — hit a fresh four-year high today, while the utility sector is nearly at its own four-year high.
Such companies’ profits and margins typically hold up when economic growth slows. Their share prices are fairly stable, and they tend to get a large portion of their revenues from the U.S.
The telecom sector has jumped to the top spot on BofA’s relative price model from seventh place on April 11. The utilities climbed to third place from ninth in the same time frame. The model uses technical factors to rank sectors’ price momentum relative to the broader market.
The “near overbought” status doesn’t necessarily mean the sectors will stop rising. Sectors sometimes remain near the top of the relative price model for months, and the high dividend yields of the two groups will likely attract investors unimpressed by sub-2% yields on U.S. government debt, Mr. Suttmeier said.
While the relative-price model ranks companies’ momentum against each another, chart watchers are also watching the sectors’ performance on an absolute basis.
Telecoms have “just been on a tear,” said Rick Bensignor, chief market strategist at Merlin Securities. “Right now, it is at a place that, in the past, it has kind of paused, both in the actual price chart of relative performance as well as some of the models we’ve used for exhaustion of trend.
“I don’t know right here, right now, that I’d go plowing into telco.”
T-Mobile’s Cell-Tower Sale Is Said to Attract Bidders - Bloomberg
T-Mobile USA Inc. received a second round of bids for its cellular towers, attracting offers from companies such as American Tower Corp. (AMT) and Crown Castle International Corp. (CCI), a person with knowledge of the deal said.
The unit of Deutsche Telekom AG (DTE), which owns about 7,000 antenna towers in the U.S., has also received bids from private- equity firms, said the person, who asked not to be named because the discussions aren’t public. Selling the assets could raise about $2 billion, according to Kevin Smithen, an analyst with Macquarie Capital in New York.
Deutsche Telekom set out to sell T-Mobile USA’s towers after a failed takeover of the carrier by AT&T Inc. last year. The deal would help the company raise money for wireless spectrum and network enhancements, while allowing T-Mobile to rent back antenna space on the towers. The new owner could then use the assets to provide service to other carriers as well.
“I expect they will announce a winner in July and probably close the deal by September,” Smithen said.
Deutsche Telekom appointed the New York boutique bank TAP Advisors LLC to search for a tower buyer and raise cash, Bloomberg reported in March.
Cara Walker, a T-Mobile spokeswoman, and Philipp Kornstaedt, a Deutsche Telekom spokesman, declined to comment. American Tower and Crown Castle, two of the largest U.S. cellular-tower operators, didn’t respond to requests for comment.
AT&T Deal
AT&T (T)’s $39 billion bid for T-Mobile collapsed in December because of regulatory opposition. Even as it aims to offload the towers, T-Mobile’s German parent is stepping up investments in the division. Deutsche Telekom plans to boost U.S. network spending by $1.4 billion over two years in a race to upgrade equipment and bring faster connections to smartphones.
T-Mobile, based in Bellevue, Washington, is the only large U.S. carrier that doesn’t offer Apple Inc. (AAPL)’s iPhone. That’s put it at a disadvantage to its three larger rivals, Verizon Wireless, AT&T and Sprint Nextel Corp. (S)
T-Mobile lost 1.65 million contract customers last year, a slump that’s prompting it to make cutbacks. The company said last month that it plans to trim 900 jobs. It’s also eliminating 1,900 jobs by closing seven call centers.
Even so, T-Mobile benefited from a breakup agreement with AT&T following the merger’s collapse. The company received $3 billion in cash; wireless frequencies in cities such as Los Angeles, Dallas, Houston, Washington and San Francisco; and lower fees for calls into AT&T’s network.
To contact the reporters on this story: Scott Moritz in New York at smoritz6@bloomberg.net; Serena Saitto in New York at ssaitto@bloomberg.net; Cornelius Rahn in Frankfurt at crahn2@bloomberg.net
To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net
Saudi Telecom: suspension lifted but mystery remains - Financial Times
Some investors in the Saudi stock market breathed sigh of relief on Wednesday after the Capital Markets Authority lifted a suspension of trading on Saudi Integrated Telecom Company, known in Arabic as AlMutakamela.
The telecoms operator has been at the center of Riyadh market gossip for the past few months as bankers tried to piece together exactly why trading in its shares was halted on April 1, less than a year after its initial public offering.
Those who bought the shares in good faith were not able to sell for the entire suspension period. On Wednesday, they finally got some action. Turnover in AlMutakamela shares was the biggest on the market at 565m riyals ($150m), according to the bourse website.
A statement from the CMA on Tuesday gave some clues as to what went down at AlMutakamela:
The company submitted an examination report prepared by its external auditor which confirms the collection of the balance due from related parties amounted to approximately 261,87 million Saudi Riyals and the collection of founding shareholders’ share of 650 million Saudi Riyals. Moreover the company provided a letter from the bank confirms the deposit of approximately 911.87 million Saudi Riyals in the company’s bank account. The company has therefore rectified the qualifications of its external auditor on the company’s financial statement for the year ended 31/12/2011G, which related to that the founding shareholders, had not paid their share in the company’s capital and the withdrawal of funds for the benefit of the company’s founding shareholders. Since the reasons for suspending the trading of the company’s shares by CMA no longer exist, the CMA Board has issued a resolution to lift the suspension on the trading of the company’s shares starting from Wednesday, 20-6-2012.
While the statement sticks to typically impenetrable jargon, it alludes to one important thing: the company sold shares to the public without the founding shareholders having contributed to its capital.
Riyadh’s bankers are rightly asking how this was allowed to happen. Criticism has fallen on the capital markets authority, the ministry of trade and industry, the financial advisers, the telecoms licensing authority, the creditors. You name it – everyone, it seems, has found a different entity to blame.
Exactly what went wrong at AlMutakamela will probably remain hard to decipher. Investors have been left in the dark, unsure of what happened or of how to interpret its explanation. The suspension of AlMutakamela’s shares should be unsettling for foreign institutional investors preparing to enter the market.
The CMA published this statement on April 1:
The auditor’s report included some reservations where the company asked to liquidate the two guarantees proposed to the Communication and Information Technology Commission in cash and in kind to what the company would own from the license and frequency band to provide fixed communication services in the Kingdom of Saudi Arabia. The company would pay the license fee and the financial outcome that would be written in the books as a company asset offset by the payment of the founding shareholders’ share of 650 million Saudi Riyals in the company’s capital. The remaining balance of 364.638.952 Saudi Riyals from the two guarantees should be written as funding from the founding shareholders.
The auditor’s report included some reservations where the company asked to liquidate the two guarantees proposed to the Communication and Information Technology Commission in cash and in kind to what the company would own from the license and frequency band to provide fixed communication services in the Kingdom of Saudi Arabia. The company would pay the license fee and the financial outcome that would be written in the books as a company asset offset by the payment of the founding shareholders’ share of 650 million Saudi Riyals in the company’s capital. The remaining balance of 364.638.952 Saudi Riyals from the two guarantees should be written as funding from the founding shareholders.
Although it is just a small company, AlMutakamela and its saga have drawn the wrong kind of attention to the Arab world’s largest stock market. In what remains one of the most tightly regulated markets in the region, questions still remain over how much the regulators are willing to tell.
Related reading:
Saudi banks benefit from buoyant bourse, FT
Saudis set to open up access to bourse, FT
Saudi Tadawul poised to exercise more global appeal, FT
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