Companies: BT.A    CPW    CTM    CW.    RED    TEP    THUS    VOD   

In a ‘thematic’ piece of research from Blue Oar Securities, analyst Blaine Tatum claims that although ‘a number of the UK telcos are trading at levels seen during the tech-bust days of 2002’, this doesn’t mean we will see a bubble-bursting replica. ‘Concerns over business sustainability were a key driver of the tech bust’, but the UK telecoms sector has since seen significant restructuring – ‘balance sheets are robust, with little requirement for rescue capital’.

Among blue-chips, Vodafone’s current share price ‘implies modest growth’, although Carphone Warehouse’s rating represents a significant premium to both BT and Cable & Wireless. Of the latter pair, BT has ‘significant scope to drive shareholder returns by increasing leverage’ and C&W is a buy following a turnaround of its UK business.

Neglected stocks
Examining the small- and mid-caps, Tatum says, ‘Increasing corporate demand for bandwidth, together with infrastructure in telco sweet spots (fibre access, hosting capacity), mean we conclude that the market is ignoring COLT Telecom’s strategic attractions.’ At fallen giant Redstone, investors are ‘yet to acknowledge’ its transformation from commodity telephony to diversified telecoms and IT services.

Business telecoms specialist Thus is another to buy on the basis that ‘investors continue to ignore momentum in the business’ and there is ‘increasing evidence that the group is set for profitability’. Telecom Plus receives a few words of caution, however, due to the risk of ‘a consumer downturn’.