Exane BNP Paribas has raised its target for French cable operator Numericable and upped its recommendation on the company’s stock from neutral to outperform.
In a note entitled ‘All’s well that merges well’, the bank’s analysts set a target of €50 for Numericable stock, up from €34.
According to Exane BNP Paribas, the fusion of Numericable and SFR is “fundamentally attractive”. It predicts that the combined entity will deliver annual average operational free cash-flow of up to 16% between now and 2020. Synergies between Numericable and SFR, notably from high-speed fixed-line internet, are estimated at €7 billion, up from €4 billion previously.
Exane BNP Paribas says that Numericable is best-placed amongst French operators to benefit from consolidation of the sector. How well it performs could depend on which of its competitors succeeds in merging with Bouygues Telecom, which failed to secure a rival deal with Vivendi for SFR.
According to Exane BNP Paribas, the best case for Numericable would be if Free buys Bouygues Telecom, while the latter’s acquisition by Orange would be less favourable. If Bouygues remains independent, the resultant downward competitive pressure on fixed-line pricing could prove harmful, however.
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