Top European Telecom Stocks to Watch: Morgan Stanley’s Latest Rankings

Investing.com -- European telecom stocks have seen varied performance, with some companies showing promising growth potential according to recent Morgan Stanley analysis.

The investment bank has highlighted several standout performers in the sector based on free cash flow visibility, network quality, and strategic acquisitions.

BT Group offers an improving financial outlook, according to analysts. The UK telecom giant is expected to achieve its £3bn free cash flow guidance a year earlier than planned, reaching this milestone in FY29. By March 2026, BT will have built fiber to more than 23 million homes, representing nearly 80% of all UK households. This extensive deployment provides good visibility that capital expenditure will decrease, potentially saving approximately £1bn annually.

The company is also showing signs of stabilization in its consumer broadband and mobile customer base after three years of market share losses. Additionally, its wholesale infrastructure business, Openreach, is experiencing less negative trends, with broadband line losses improving compared to previous quarters.

In other news, BT Group received a reinstated Buy rating from Berenberg, which cited the approaching completion of the company’s fiber network build as a key factor in its positive outlook.

Deutsche Telekom also secured the position in Morgan Stanley’s rankings, earning recognition for its network quality and growth prospects. The company owns what Morgan Stanley considers the "Best Network" across its footprint, particularly in Germany and the US through T-Mobile.

Notably, T-Mobile combines the best US mobile grid with the lowest postpaid ARPU (average revenue per user), positioning it for wireless market share gains and strong growth. Morgan Stanley projects EBITDAaL and EPS growth of 5% and 16% per annum, respectively, from December 2024 to 2027, which represents best-in-class performance in the European and global telecom sector.

The investment bank also estimates that Deutsche Telekom will return approximately 5.5% of its market capitalization annually until 2027, through dividend increases of 15% per year and expanding share repurchase programs.

Recently, Deutsche Telekom’s U.S. subsidiary, T-Mobile, announced a 16% increase in its quarterly dividend. The company also named Chief Operating Officer Srini Gopalan as its next Chief Executive Officer, effective November 1, 2025.

Swisscom rounds out the top three, distinguished by its defensive characteristics and strategic expansion. Morgan Stanley considers it one of the most defensive stocks in their coverage, citing a resilient free cash flow profile and heavy exposure to Switzerland (70% of enterprise value) with a stable macroeconomic environment, low taxes, and interest rates.

Beyond these defensive qualities, Swisscom’s acquisition of Vodafone Italia, which closed in late 2024, is expected to transform the company’s free cash flow profile from flat to growth-oriented due to meaningful synergies from the transaction.

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