LIVE MARKETS-Is now finally the time for telecoms?

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IS NOW FINALLY THE TIME FOR TELECOMS?

Telecoms have been historical laggards and every now and then, hopes of a comeback resurface.

Only in April, the sector was at record lows relative to the broader European market .STOXX. But this time around Swiss bank UBS is sensing a potential narrative shift.

"The sector is evolving into a total return trade, where yield is complemented by valuation catalysts and structural improvements in industry fundamentals," say UBS analysts.

For too long, the sector has been stereotyped as a high-yield and low-growth industry, plagued by capital intensity, pricing pressure and regulatory constraints.

In more detail, UBS's argument is based on four points.

• Yield trade: "With ECB rate cuts ongoing, telecoms' stable, high dividends are becoming increasingly attractive versus bonds"

• CapEx rolling over: "The long, expensive 5G and fibre buildout cycles are peaking"

• M&A: "European regulators have pivoted from aggressive price controls to encouraging consolidation.. deals like Vodafone-Three mark a turning point in market structure"

• Valuation: "European telecoms trade at a discount to US and Asian peers, but multiples haven't fully re-rated despite spread tightening"

So far this year, European telecoms .SXKP have risen by 8.1% while the STOXX 600 .STOXX is up 9%.

(Danilo Masoni)

EARLIER ON LIVE MARKETS:

NEW RECORD HIGHS, WITH A BIT OF RED CLICK HERE

BEFORE THE BELL: EUROPE NEAR PEAKS, DEFENCE IN DEMAND CLICK HERE

ARMS STOCKS SOAR AHEAD OF UKRAINE PEACE TALKS CLICK HERE