Telecoms are generally assumed to offer investors cash-flow stability and good dividends, which stand out as havens when markets are expensive or becoming more volatile. These shareholder priorities can, over the short term at least, oppose the ongoing need to invest in the future of the business. It is often assumed that this is limited to keeping up with technological progress and meeting consumer demand for more connectivity, but we have frequently observed that the regulatory outlook is a fundamental driver of the returns that can be made for the entire industry. In Europe, prior periods of intense investment have been followed by disappointing revenue and profitability as regulators at the national and EU levels have prioritised consumer protection over developing fast networks. Regulators have a further core requirement from the industry: that it delivers competitive networks, enabling European companies to compete globally. Understanding the alignment of interests and expectations is key.
As the perceived benefits of telecoms companies’ shares stem directly from sustaining returns on capital that is already mostly deployed, and taking advantage of economies of scale, it is of vital importance that we understand whether the regulatory and consequent competitive backdrop supports these expectations. With the next stage of technological progress already rapidly approaching, we are focused on making sure our investments are aligned with the needs of the key stakeholders’ and that they have strategies to ensure long-term dividend reliability. Significant resource has focused on discovering what role the move towards 5G mobile networks is likely to play in coming years, and integrating that into our understanding of how well (and how expensively) our potential investments are meeting these requirements.