Thematic Investing in Tech and Media, CM Research

Cyrus Mewawalla

Thematic Investing in Tech and Media

Thematic TMT investing

CM Research

CM Research is an independent research house based in London, England. We provide global thematic research in the Technology, Media and Telecoms (TMT) sectors. 

Our focus is on disruptive technologies: how will they unfold; which industries will be impacted; and who will be the ultimate winners and losers. 

Our aim is to help investors predict share prices and corporate executives stay one step ahead of the technology trends that are shaping their industry. 

We research technology investment themes in detail and then feed the results into a scorecard system to quantify the impact of several conflicting themes on individual stocks. 

Recent themes covered include internet TV, the Internet of Things, Big Data, Mobile payments, crowdfunding, artificial intelligence, the cloud, software defined networking and Generation Hashtag.

We cover the top 500 global TMT stocks by market capitalisation and several technology start-ups and pre-IPO companies too. 

In 2015, CM Research analysts outperformed the Bloomberg Benchmark Analyst Index - which measures how good analysts are at predicting stock prices - by 7.1%.

Thematic (Sector/Industry)

<ul><li>TV broadcasters still control 93% of subscriptions and advertising revenues that pass through the TV set. The remaining 7% of revenues relates to video streaming services like Netflix.</li><li>But Internet TV will move faster and be more disruptive than analysts predict.</li><li>The inflection point will be the arrival of a “pure” internet TV in which all TV viewing is accessed by a single operating system, probably remote controlled by a smartphone or tablet.</li><li>Film and TV studios will see content prices bid up as technology companies – like Apple, Netflix and Alibaba – compete to acquire content rights.</li><li>TV broadcasters will report profit warnings as they lose control of payTV subscription revenues and TV advertising revenues.</li></ul>

TV broadcasters still control 93% of subscriptions and advertising revenues that pass through the TV set. The remaining 7% of revenues relates to video streaming services like Netflix.But Internet TV will move faster and be more disruptive than analysts predict.The inflection point will be the arrival of a “pure” internet TV in which all TV viewing is accessed by a single operating system, probably remote controlled by a smartphone or tablet.Film and TV studios will see content prices bid up as technology companies – like Apple, Netflix and Alibaba – compete to acquire content rights.TV broadcasters will report profit warnings as they lose control of payTV subscription revenues and TV advertising revenues.

During this decade, the digital data universe is expected to grow 75-fold from 1.2 zettabytes to 90 zettabytes. (1 zettabyte = 1 trillion gigabytes).Ask any CEO how he expects to sell more products and cut more costs and he will tell you that Big Data features prominently in his strategy. Big Data refers to the technology processes by which companies can profit from the large amounts of data to which they have access.But investors who want to ride the Big Data wave are finding that it is not that easy to identify where to invest.In this report, we delve deep down into the Big Data supply chain and look at where the investment opportunities really lie.&nbsp;

During this decade, the digital data universe is expected to grow 75-fold from 1.2 zettabytes to 90 zettabytes. (1 zettabyte = 1 trillion gigabytes).Ask any CEO how he expects to sell more products and cut more costs and he will tell you that Big Data features prominently in his strategy. Big Data refers to the technology processes by which companies can profit from the large amounts of data to which they have access.But investors who want to ride the Big Data wave are finding that it is not that easy to identify where to invest.In this report, we delve deep down into the Big Data supply chain and look at where the investment opportunities really lie.&nbsp;

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Zegona has unlocked €1.8bn via fiber monetization, enabling a €1.6bn capital return and transforming its balance sheet with 69% share count reduction and lower leverage.</li>
<li>Trading at ~6.7x EBITDAaL, Zegona offers embedded upside through strategic rerating or a control premium from Telefónica or MasOrange, both reportedly exploring bids.</li>
<li>Post-Buyback, per-share economics improve dramatically, with lower debt, rising EBITDA, and potential for further upside via fiber JVs or a formal takeover process.</li>
</ul>


Zegona has unlocked €1.8bn via fiber monetization, enabling a €1.6bn capital return and transforming its balance sheet with 69% share count reduction and lower leverage.
Trading at ~6.7x EBITDAaL, Zegona offers embedded upside through strategic rerating or a control premium from Telefónica or MasOrange, both reportedly exploring bids.
Post-Buyback, per-share economics improve dramatically, with lower debt, rising EBITDA, and potential for further upside via fiber JVs or a formal takeover process.


Zegona Communications: From Turnaround to Capital Return Vehicle with M&A Optionality

<ul>
<li>Telefónica evaluating 1&amp;1 takeover; tight float (UI 80.8%, Rentrop 4.5%). Our synergy DCF supports €26–€30/sh takeout (sweet spot €28–€29). Downside €19–€20; October 21, €21.80.</li>
<li>Probability-Weighted fair value: €23.83/sh (45% at €28.5, 55% at €20.0). Phase-II timeline 9–12 months; PW IRR +12.6% (9m) to +9.3% (12m), ex-fees/hedging.</li>
<li>Hedge long 1U1 with EU telco basket or DAX; O2 Deutschland short impractical (TEF owns ~96.85%). Key risks: heavy remedies, execution slippage, deal pivot to cooperation-only.</li>
</ul>


Telefónica evaluating 1&amp;1 takeover; tight float (UI 80.8%, Rentrop 4.5%). Our synergy DCF supports €26–€30/sh takeout (sweet spot €28–€29). Downside €19–€20; October 21, €21.80.
Probability-Weighted fair value: €23.83/sh (45% at €28.5, 55% at €20.0). Phase-II timeline 9–12 months; PW IRR +12.6% (9m) to +9.3% (12m), ex-fees/hedging.
Hedge long 1U1 with EU telco basket or DAX; O2 Deutschland short impractical (TEF owns ~96.85%). Key risks: heavy remedies, execution slippage, deal pivot to cooperation-only.


1&1: Telefónica Circling Germany’s #4 Mobile—tight Float, Heavy Remedies, Real Synergies

<ul>
<li>Telefónica plans a largely voluntary ERE (6–7k exits) post-4 Nov plan, targeting FY25 provisioning alongside Hispam exits. This creates a reset year and positions FY26 for cleaner margins and FCF.</li>
<li>Benchmarking prior ERE, we forecast €0.5–0.6bn run-rate savings; ~€260m EBITDA uplift in 2026. Applying 5.2× EV/NTM EBITDA to adjusted base yields €6.40/share TP, before associates, minorities, lease-policy adjustments.</li>
<li>Catalysts: 4 Nov strategy, ERE launch mid-Nov, Hispam closings. Key risks: uptake, regulation (Chile/Argentina), backfill erosion. Recommendation: BUY (12–18m); accumulate on weakness into plan headlines and execution milestones.</li>
</ul>


Telefónica plans a largely voluntary ERE (6–7k exits) post-4 Nov plan, targeting FY25 provisioning alongside Hispam exits. This creates a reset year and positions FY26 for cleaner margins and FCF.
Benchmarking prior ERE, we forecast €0.5–0.6bn run-rate savings; ~€260m EBITDA uplift in 2026. Applying 5.2× EV/NTM EBITDA to adjusted base yields €6.40/share TP, before associates, minorities, lease-policy adjustments.
Catalysts: 4 Nov strategy, ERE launch mid-Nov, Hispam closings. Key risks: uptake, regulation (Chile/Argentina), backfill erosion. Recommendation: BUY (12–18m); accumulate on weakness into plan headlines and execution milestones.


Spain

Telefonica S.A. provides telecommunications services mainly to countries in Europe and Latin America.  The Company offers fixed-line and mobile telephone, Internet, and data transmission services to residential and corporate customers.

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Telefonica SA (TEF SM)

Internet TV as an Investment Theme

TV broadcasters still control 93% of subscriptions and advertising revenues that pass through the TV set. The remaining 7% of revenues relates to...

CM Research

Big Data as an Investment Theme

During this decade, the digital data universe is expected to grow 75-fold from 1.2 zettabytes to 90 zettabytes. (1 zettabyte = 1 trillion...

CM Research

Zegona Communications: From Turnaround to Capital Return Vehicle with M&A Optionality

Zegona has transitioned from turnaround to capital return, unlocking €1.8bn, reducing leverage, and remaining a live M&A target—offering 20–50%...

Jesus Rodriguez Aguilar

1&1: Telefónica Circling Germany’s #4 Mobile—tight Float, Heavy Remedies, Real Synergies

Telefónica may bid for 1&1. Tight float, scarce borrow. Synergy-backed takeout €26–€30/sh (sweet spot €28–€29). PFV €23.83; Phase-II 9–12m implies...

Jesus Rodriguez Aguilar

TEF: Front-Load Pain, Bank FY26 Gains

Telefónica front-loads FY25 (Hispam exits, 6–7k voluntary ERE) to reset earnings. FY26 margin/FCF uplift likely; Chile optionality. BUY, €6.40 TP;...

Jesus Rodriguez Aguilar

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