Strategic and Financial Analysis & Valuation of TDC A/S

Nadja Remahl

Student thesis: Master thesis


In December 2010, the former Danish state monopoly TDC A/S was reborn in the stock market. This dissertation is concerned with uncovering the theoretical value of TDC as of September 30th 2011 with the purpose of assessing the level of the market price. A comprehensive strategic analysis and financial analysis lay the ground for carefully forecasted pro forma statements. On a macroeconomic level, many factors were found to represent either a risk element or opportunity element. Of the risk elements, the national Telecom regulation and economic growth are the most prominent. Of the opportunity elements, especially the continuous changes in life style and technological development were found to be significant. On the meso level, there were likewise identified several factors. The economic growth in the Telecom sector is diminishing, and combined with high fixed costs, unpredictability of shifts in technology platforms and regulation, the competition has intensified. TDC’s is in a dominating position in all domestic markets in terms of market shares. Hence, the first priority is basically to keep this position, which, however, is far from easy facing the intensified competition. There are two main points concerning TDC’s historical performance, namely 1) that revenue growth has been negative, which mainly can be ascribed to the conditions of the industry, and 2) that both profit margin and the turnover rate on invested capital has improved significantly, as a result of seemingly successful reorganizing and cost‐cutting. The value has then been calculated using two different direct present value models, namely Discounted Cash Flow to Equity and Residual Income model. The discount rate, i.e. the owners required return, used was 8,275%. With a most likely pro forma statement as input, the theoretical price of TDC was calculated to be 48,30 DKK per share, which is roughly 6% above the price of the valuation date. Two alternative scenarios along with a sensitivity analysis revealed high sensitivity especially on certain input factors. The most prominent were the cost and intangible and tangible assets forecast and the required return on equity. The final conclusion of this dissertation is that the TDC stock is fairly priced if not slightly underpriced.

EducationsMSc in Accounting, Strategy and Control, (Graduate Programme) Final Thesis
Publication date2011
Number of pages118