UBS strategists, among them Polo Tang and Ondrejsek Cabejsek, say European telecommunications stocks may be set for a meaningful re-pricing so long as investors are discriminating about timing and selection. While the broader European equity market rose 17% in 2025, UBS notes that telecom shares underperformed, delivering a 12% return over the same period.
The analysts attribute potential upside to what they describe as "capex tailwinds" - the idea that once the most intensive phase of fibre network deployment finishes, pressure on leverage and cash flow should ease. That backdrop, UBS argues, creates room for stock-specific catalysts to drive reratings.
UBS most-preferred names
From their coverage universe, UBS highlights four stocks as the most preferred in European telecoms. The firm presents distinct rationales for each pick, rooted in execution, corporate structure, or balance-sheet dynamics.
Orange
Orange is described as having emerged from a period of investor concern about French competitive dynamics. UBS cites improved execution and the prospect of a sizable inorganic catalyst as reasons for renewed investor interest. The bank believes the French incumbent's organic performance is not fully appreciated by the market, pointing specifically to management's ability to guide for double-digit "all-in" Free Cash Flow (FCF) growth through 2028.
Crucially, UBS highlights the reconsolidation of Orange's Spanish business as the primary mechanical driver behind a potential re-rating to 20EUR? Note: original text used 9 per share| The analysts say that the Spanish unit, currently held as a 50:50 joint venture, could be fully integrated. UBS expects that full integration combined with delivered synergies would surprise the market and be the key catalyst for reaching their target share valuation.
Deutsche Telekom
Deutsche Telekom's shares, after falling more than 20% from their 2025 peak, are presented by UBS as offering an "attractive entry point." The analysts point to a historical pattern of a seasonal rally in January and February, with the stock averaging around a 15% gain over the past four years in those months.
UBS characterises the recent pullback as a "perfect storm" driven by several factors: a weaker U.S. dollar reducing the impact of DT's sizeable U.S. earnings, competition concerns at T-Mobile U.S., and slower core earnings growth in Germany resulting from wage increases. Despite these headwinds, UBS sees momentum starting to turn. They note that foreign-exchange pressures are easing and that German mobile pricing is showing early signs of rationalisation. They also say any indication that SoftBank has finished selling its stake in T-Mobile U.S. would remove a major technical overhang for DT shares.
Swisscom
Swisscom is framed as a high-quality defensive option, offering a 4.4% dividend yield at a time when investors are sensitive to income. UBS highlights two pillars of support: a recovery in domestic Swiss pricing and the potential for Sunrise to wholesale from Swisscom's network.
UBS also points to Italy as a potential source of upside. The merger between Fastweb and Vodafone Italia is described as running ahead of schedule, with legal integration effective as of January 1. UBS notes that the synergies originally guided at 600 million euros could materialise earlier than expected, representing a meaningful incremental contributor to value.
Tele2
Tele2 is identified as the company currently offering the strongest core income after leases and the best free cash flow growth profile in the coverage set. UBS links this improvement to a strategic reset prompted by a new reference shareholder, which has pushed the company to rationalise capital allocation aggressively.
The bank records specific guidance for capex intensity, which Tele2 has set to fall from 14% in 2024 to between 10% and 12% in the current year. In Sweden, UBS observes that the competitive environment is normalising as lower-value challenger segments lose momentum. Taken together, these dynamics underpin UBS's expectation that service revenue growth will accelerate to 3% in 2026 for Tele2.
UBS's analysis underscores a common theme: once the most intensive phase of network capital deployment is past, telecom operators with clear execution pathways, corporate-catalyst opportunities, or improved pricing dynamics could see disproportionate upside. The bank's list of most-preferred names reflects a mix of those qualities across incumbents and more operationally levered players.