Pair Trade: Long Deutsche Telekom - Short Belgacom Thursday, November 08th 2012Companies Description Investment Case Deutsche Telekom (DTE GY)’s Q3 2012 revenues were in line with expectations. EBITDA was a bit above company-provided consensus. Q3 numbers seem broadly consistent with 2012/2013 consensus expectations. Investors focus should be on the Capital Markets day that the company will hold on 6 /7th December. Deutsche Telekom intends to merge its US subsidiary (TMO USA) with MetroPCS Communications. The two companies have got differentMarket Price Data network standards (GSM/CDMA), which will probably make theDeutsche Telekom (DTE GY) integration more challenging. However, the deal could bring significantLast Price (€) 8.520 synergies.YTD Change -3.98% Additionally, the reverse merger into MetroPCS would provide DeutscheMkt Cap (€ bn) 36.783 Telekom with a publicly traded asset in the US. In the long-term, theBelgacom (BELG BB) German company could decide to exit the US market.Last Price (€) 22.420YTD Change -7.67% Belgacom (BELG BB)’s Q3 2012 results were solid. It’s got a net debt farMkt Cap (€ bn) 7.565 below the sector average, a robust cash flow and an attractive dividend policy.Source: Bloomberg However, Telenet’s success on King & Kong mobile plans (and ProximusAnalysts Recommendations: cutting its mobile tariffs in September) could increase the competition on mobile data pricing. Belgacom may have to decrease further its tariffs, for both Consumer and Enterprise divisions. A price war scenario on the Belgian mobile market could be a worry. The long Deutsche Telekom (DTE GY) vs. short Belgacom (BELG BB) ratio has a current value of 0.378. We’ll define as our target 0.3941. 0.374 willSource: Bloomberg be our stop-loss level.Market Multiples P/E EPS DY Net Debt/ 2013 2011/13 2013 EBITDA Technical Comment Est. CAGR Est. Est. Est. 2012DTE GY 13.42 -1.9% 7.55% 2.16BELG BB 10.76 -5.8% 9.50% 0.93Source: BloombergNext Report Date & Events Dec. 6th,DTE GY Capital Markets Day 2012 Feb. 28th, FY 2012 Results 2013 March 1st,BELG BB FY 2012 Results 2013Source: Companies web sitewww.fincor.ptwww.facebook.com/FincorAnnouncement: Fincor—Sociedade Corretora, S.A. provides services of reception, execution, and transmission of orders. The contents men-tioned in this document do not constitute (nor should they be interpreted as to form) any kind of counselling, or investment recommendation, or arecord of our trading prices, or an offer or solicitation to trade in any financial instrument. Fincor—Sociedade Corretora, S.A. Will not accept anyresponsibility resulting from any use referring to said content or about any resulting effect that could have occurred.