J.P.Morgan sees 2026 as a “year of sector consolidation” for European telecoms, with rising merger and acquisition activity driving potential stock gains despite weak revenue growth.

European telecom revenues fell 0.7% in Q3 2025, but analysts expect bottom-line expansion from cost cuts and lower capital intensity.

17 companies have rallied 30%-200% year-to-date, mainly consolidation plays, while large-cap names like Deutsche Telekom and Telefonica have weighed on overall performance.

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Value stocks trade at just 7-10 times 2027 earnings, leaving room for upside as investors await deals that could improve returns.

Orange: J.P.Morgan rates Orange Overweight with a €19 price target, implying 35% upside. Analysts expect double-digit earnings, equity free cash flow, and dividend growth at the February 2026 capital markets day. Orange’s €17 billion offer for SFR was rejected, but a revised bid is expected. Acquisition of the remaining 50% of MasOrange, closing in Q2 2026, should boost cash flow. Shares trade at 10x P/E despite growth prospects.

Bouygues: Bouygues receives Overweight with a €57 price target, 34% upside. Analysts see undervalued upside from Equans, which drives 70% of 2024-2028 EBITDA growth. Stock trades at 10x P/E with 14% equity free cash flow yield, while potential bolt-on M&A could further scale growth across key markets.

SES: SES returns with Overweight and €10 price target, implying 92% upside. Shares fell 26% from October highs after Intelsat guidance disappointment. Analysts forecast €600 million equity free cash flow for 2027-2028. FCC’s planned 180 MHz C-band auction could deliver a major windfall; J.P.Morgan models only a $750 million probability-weighted payment.

BT Group: BT Group retains Overweight with 286p target, 58% upside. Free cash flow is expected to rise from £1.5 billion to £2 billion in FY2027, starting a path toward £3 billion by FY2030. Mid- and long-term guidance, top-line growth, and double-digit fibre returns underpin a projected re-rating from 4.7x to 6.0x EV/EBITDA, potentially doubling the share price.

Deutsche Telekom: Overweight with €39 target, 41% upside, but removed from Focus List. Shares gained 25% in early 2025 before retreating on FX, US competition, management changes, and German broadband softness. Stock trades at 12x 2026 P/E despite double-digit earnings growth; mid-term spectrum and fibre M&A remain key visibility points.

Telia: Upgraded to Overweight from Neutral, SEK 46 target, 22% upside. 2026 free cash flow expected to grow 13% YoY, with EBITDA growth at 3.1% and capex stable at SEK 13B. Analysts project 9% CAGR in free cash flow through 2028, leverage falling to 1.6x, and dividends growing ~5% CAGR, with Sweden mobile stabilising and Norway wholesale revenues removed.

Proximus: Upgraded to Overweight from Neutral, €10.9 target, 57% upside. After a 20% pullback post-profit warning, organic cash flow is projected to grow from €100 million in 2025 to €400 million by 2030, supporting a 20% yield. February 2026 capital markets day guidance should underpin a 30% long-term equity free cash flow yield. Interim dividend is 9%.

Tele2: Overweight with SEK 182 target, 22% upside. Shares up 50% through September, then down 12%. Analysts expect 5.3% EBITDA CAGR for 2025-2027 and 13% equity free cash flow growth in 2026, enabling higher dividends. Leverage to drop from 2.5x in 2024 to 1.7x by 2027; Baltic TowerCo deal could add ~5% extra dividend yield.

Sinch: Overweight, SEK 45 target, 65% upside. Following five quarters of organic revenue and seven quarters of gross profit growth, management’s early buybacks support growth sustainability. Mid-single digit organic growth and 14% EBITDA margin expected; stock trades at 1.1x EV/sales with 7% equity free cash flow yield.

KPN: Downgraded to Neutral from Overweight, €4.6 target, 15% upside. 2026 revenue and EBITDA growth expected to soften, with flat free cash flow. Service revenue guidance of 2.0%-2.5% YoY slightly below prior CAGR 2023-2027. Combination discounts and higher taxes offset EBITDA gains, limiting cash flow improvement.

Telenor: Downgraded to Neutral from Overweight, NOK 170 target, 15% upside. Shares down ~15% from mid-October highs after Q3 results and mid-November guidance. 2026 free cash flow may fall short of covering dividends due to Asia headwinds, Bangladesh spectrum costs, and Pakistan removal.

Sunrise: Downgraded to Underweight, CHF 37 target, 13% downside. Shares fell 15% since August. Q3 subscription revenues declined 3.1% YoY; new discount brand could dilute returns. Analysts project ongoing revenue softness in 2026, with leverage at ~5x EBITDA increasing potential free cash flow risks.

Telefonica: Neutral, €3.9 target, 4% upside. November capital markets day disappointed investors; shares fell 16%. Fiscal 2025 equity free cash flow guidance cut 18%, mid-term outlook down >20% vs consensus due to higher leases, working capital, and tax.

Vodafone: Underweight, 71p target, 25% downside. Shares up 38% YTD but German service revenue recovery relies on 1&1 wholesale; underlying service revenues still down 3% YoY. Acquisition risks from Telefonica and limited consolidation upside make valuation unattractive at 6% 2026 free cash flow yield.

Swisscom: Underweight, CHF 530 target, 9% downside. Competitive Swiss market with Sunrise and Salt offering 30%-60% cheaper products; second/third brand penetration at 35% of postpaid B2C subscribers pressures growth.

NOS: Underweight, €3.5 target, 6% downside. Portuguese market remains competitive; Digi’s entry in 2024 challenges growth. Consumer revenues declined for two consecutive quarters after 16 quarters of growth, with mixed KPIs.