EM CEEMEA CREDIT: Turk Telekom: Concession renewal
Aug-28 08:52
(TURKTI: -/BB/BB-)
- We view the payment structure for the renewed concession as significant, as well as the capex plans. We expect the company could raise debt to help pay for the expenditure and expect credit ratios to be impacted. Impact on credit ratings is probably unlikely at this stage with ratings agencies likely to take a wait and see approach.
- Turk Telekom agreed to renew its concession agreement for providing telecom services with the Communication Technologies Authority, which was due to expire in Feb 26. As a part of the agreement Turk Telekom will pay $500mn per annum in 2026 and 2027 and $200mn per year during 2028-34 and $100mn in 2035. Turk telekom has also agreed to invest a $17bn until 2050. The investment will be be around fixed line and “innovative technology”.
- The investment required and the payment required is more of a surprise than the renewal of the concession agreement, given the shareholder structure. We expect that the majority of the investment will be associated to delivering high speed broadband, given the trends.
- Capex intensity has been in the low 20% range in H1 25 but for FY25 management guidance is for 28-29%. Historically capex has been around $600-800mn per annum and FCF has been just shy of $1bn pa. The new spending plans are significant, which will not only delay resumption of dividends but also deteriorate credit ratios, which according to management have room. We expect management could raise debt to help fund the payments as well as the capex.
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FOREX: FX OPTION EXPIRY
Jul-29 08:38
Of note:
EURUSD 1.65bn at 1.1650 (a bit far).
USDJPY 1.24bn at 149.00 (wed).
USDCAD 1.7bn at 1.3770/1.3775 (wed).
AUDUSD 1.01bn at 0.6550 (wed).
EURUSD 1.81bn at 1.1600 (thu).
AUDUSD 1.38bn at 0.6600 (thu).
- EURUSD: 1.1500 (629mln), 1.1550 (680mln), 1.1600 (862mln), 1.1650 (1.65bn).
- USDJPY: 148.00 (430mln), 148.50 (317mln), 148.75 (277mln), 149.00 (322mln).
- USDCAD: 1.3715 (365mln), 1.3770 (540mln).
- AUDUSD: 0.6600 (966mln).
SPAIN DATA: Domestic Demand Fuels Another Strong GDP Print
Jul-29 08:32
Spain continues to cement itself as the post-covid Eurozone growth engine, with Q2 flash GDP growing 0.7% Q/Q (vs 0.6% cons and prior). Sequential growth has been above 0.6% for the last eight quarters.
- Domestic demand was solid in Q1, contributing 0.9pp. External demand was a modest drag to the tune of 0.1pp.
- Household consumption rose 0.8% Q/Q, after slowing a little to 0.5% in Q1. This is consistent with the solid growth in retail sales and improvement in consumer confidence seen through Q2. Meanwhile, Spain’s record low unemployment rate will also be providing a tailwind to consumption.
- Gross fixed capital formation rose 1.6% Q/Q (vs 1.9% prior), while Government consumption was -0.1% Q/Q (vs -0.5% prior). Exports rose 1.1% Q/Q (vs 1.7% prior) while imports grew 1.7% Q/Q (vs 1.5% prior).
- On the production side, industry grew 0.8% Q/Q, while services saw more impressive 1.2% Q/Q growth. The services PMI was in expansionary territory through Q2.
- Hours worked rose 0.3% Q/Q, while real productivity per hour was 0.5% Q/Q. We wrote last week that Increased employment rates, and by extension hours worked, has been a key driver of Spain's economic outperformance post-covid. Importantly, this has also come alongside improving real productivity metrics.
MNI: UK JUN M4 MONEY SUPPLY +0.3% M/M, +3.3% Y/Y
Jul-29 08:30
- MNI: UK JUN M4 MONEY SUPPLY +0.3% M/M, +3.3% Y/Y
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