(III) Telekom Austria: From Stability To Volatility, Value Is Still Not Unlocked
Valuation of a potential dividend value investment. Stable company with hidden asset, but with part of its business in danger (Belarus exposure)
(Source: https://roic.ai/classic/TKAGY - values in USD, ADR are shown)
Summary
Since its takeover by America Movil in 2016, Telekom Austria operated as a stable, profitable and predictable business.
The strategy of focusing on developing economies of Central and Eastern Europe produced remarkable results.
Due to exposure in Belarus, continuation of past profitability path is at risk.
Active steps have been taken to separate its tower assets as a separate entity, with a potential for their further monetization.
Investment Thesis
The A1 Telekom Austria Group (OTCPK:TKAGY), or Telekom Austria, is one of the largest Austrian and Central East European telecom service and equipment provider. Having most of its business in Austria, since its restructuring in 2016, Telekom Austria has expanded through CEE regions. This expansion deliberately targeted less developed European countries with a hope that they would outpace the growth of the rest of the developed Europe and also require lower relative investments for the expected returns. In the same time, this expansion policy meant that new risks were brought into its business model. One of those has significantly higher probability of being materialized in a form of the forced abandonment of its Belarus operations, which has also been reflected in Telekom Austria's market price. However, Telekom Austria was a technological pioneer in this part of Europe in expanding 5G network and also building its tower infrastructure. The latter being its hidden asset, which might be of more value than one could assume.
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