COLT announced plans this week to cut €175 million of low margin voice wholesale business and take a €30 million restructuring charge in an attempt to address declining margins and halt operating cash burn, issues which I highlighted in a previous post. The stock took a hit and is down about 10% on the month. Press reports, like this FT article and this Guardian article, speculate that majority shareholder Fidelity is losing patience and the business is effectively for sale. Robert Powell at Telecom Ramblings is also speculating on potential buyers.
The graph below shows my rough estimates of the revenue and EBITDA margin (excluding restructuring charges) for 2014 and 2015 based upon COLT’s guidance (2015 is purely based upon my guestimates). The execution risk in the restructuring based upon the firm’s recent history doesn’t match up against any potential M&A upside in my opinion. This one is best to watch from the side-line. It should be interesting.
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This blog represents my personal views and is not reflective of the views or opinions held by any company or employer I work for currently or have worked for in the past. The views expressed herein are based solely upon publicly available data. No views expressed herein should be taken as an endorsement to take any particular course of action in the markets. The basis of this blog is that different views should be expressed and readers make up their own minds on the what they believe and act accordingly.
deconstructingrisk 