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The sale of the Telegraph Media Group (TMG) gets a boost from its 2022 Trading Statement, including steadily rising profits, and visibility for 2023 subscriptions
TMG has built out its digital reader revenues, rapidly closing on one million subscriptions—setting the business on a more sustainable path
The sale of TMG and The Spectator will reach its highest valuation if appetite to own these assets sharpens and widens the range of buyers that will bid
When the sale was announced, Douglas McCabe, CEO and director of publishing and tech at Enders Analysis, told the Standard that the economics for City AM as a free print publication were “challenging”, and so a buyer would need a plan to elevate its online offering.
“Commuters — particularly commuters into the City — have remained stubbornly low post-pandemic, and the impressive corporate advertising that City AM carved out for itself in the late 2000s and early 2010s has also declined,” he said. “The unit costs of printing and distribution exploded in 2021 and 2022, and have not returned to pre-Ukraine levels.
“Any buyer would need a belief and vision for the brand as an online use-case."
Vodafone's headline revenue growth of +3.7% is actually a small decline once Rest of World exchange depreciation is accounted for. Europe, however, delivered an improving revenue trend to +0.4%, as signalled at Vodafone's FY results announcement.
The mix and operating trends are less positive, with growth driven by low-margin B2B, and subscriber losses accelerating in German fixed. Investors will be weighing up whether these results are green shoots of a recovery or another false dawn.
Although the company may reach its guided EBITDA on assumed exchange rates, it looks set to fall short in euro terms, which has implications for FCF and dividend cover.
Karen Egan, senior telecoms analyst at Enders Analysis, said the telecoms industry is "a very tough place" right now.
"Virgin Media O2 are particularly likely to be cutting jobs as they're still going through the integration process, but it's tough for all these companies right now," she said.
"Revenues aren't really growing, but costs certainly are... because they're having to upgrade to 5G and to fibre and all of that requires investment. Those costs can't be avoided."
“When you look at the sector, the profitability is struggling in [the] face of escalating costs and revenues that aren’t growing,” said Karen Egan, an analyst at Enders Analysis, adding that operators were required to pour millions of money into building networks while sustaining and upgrading them into fibre and 5G. “Who is not cutting costs in telecoms?”
Douglas McCabe at Enders said: “This momentum will help leverage its valuation, though multiple bidders will always be the critical ingredient.”
Analysts at Enders added that potential buyers included UK and non-UK media groups, private equity investors, wealthy UK individuals interested in acquiring a “trophy” asset close to the Conservative party, or non-UK individuals.
“It’s obviously bad because it throws into doubt the reliability of the organisation and the governance,” says François Godard, an analyst at Enders Analysis.
“It has the immediate effect of forcing the company to scrutinise everything. You stop all your dealings, you stop all new contracts, you look at existing contracts and you have to run checks on all supply agreements.”
Godard adds: “Even if in a few months’ time we see that it was limited to one person and a few suppliers, in the meantime the whole business has been disrupted.”
