UBS Equity Preference List European Communication Services 2026 08 19

19 August 2026, 09:03 UTC Chief Investment Office GWM Investment Research

European Communication Services Equity preferences

Communication services can be divided into telecommunication and media, and with both we have a clear focus on quality and attractive dividend yields. Telecoms Achille Monnet are defensive due to their resilience in recessions. But structural drivers have UBS Switzerland AG different effects depending on regulation and competition in their respective markets. For instance, fiber can be seen as a tailwind for Deutsche Telekom but Please see important disclaimers and not as supportive for Telefonica. As such, stock-picking is crucial disclosures at the end of this document. Sector view: Fair valuations and free cash flow should begin to improve as capital expenditures slow. European telecom markets remain highly competitive, but this could change under a new competition commissioner. From a valuation perspective, the communications services sector trades at a 25% premium on dividend yield to its 15-year average, offering a 3.5% forward dividend yield for 2026. However, much of the sector’s performance is driven by Deutsche Telekom, which, in addition to its 3.7% dividend yield for 2026, also offers a EUR 2bn buyback. As a result, we do not view the valuation as excessive. We expect the sector to benefit as fiber capex declines with the completion of rollouts in more geographies (Spain, Italy, Norway, and the UK), which should support healthy free cash flow growth and, in turn, underpin dividend yield growth. Given the index’s concentration in higher-quality markets—namely the US and Germany through Deutsche Telekom—consensus expectations are for healthy EPS growth of 14% in 2026.

Our Top Picks: Deutsche Telekom, Telenor, Universal Music Group

Latest Changes: We have increased the portfolio weight of Scout24 SE by 2.0 percentage points (pps) and Spotify Technology S.A. by 1.0 pps. Conversely, we have reduced the portfolio weight of Telenor Group by 1.0 pps and Sunrise Communications AG by 2.0 pps.

Benchmark: MSCI Europe Communication Services

Most Preferred Company Changes* Currency Weight

Deutsche Telekom EUR 32.0% Elisa Oyj EUR 3.5% Inwit EUR 4.0% Scout24 SE Weighting EUR 9.8% SMG Swiss Marketplace Group Holding AG CHF 10.0% Spotify Technology S.A. Weighting USD 22.3% Sunrise Communications AG Weighting CHF 4.0% Telenor Group Weighting NOK 6.0% Universal Music Group EUR 8.5%

Source: UBS, Consider potential trading restrictions, all figures are rounded *Changes since the last publication

Chief Investment Office GWM, 19 August 2026 Page 1 of 15

European Communication Services

The telecommunications market moves slowly. Attractive regions—characterized by light regulation, limited competitive intensity, healthy economies, and favorable demographics—tend to stay attractive, while improvement for challenging markets remains difficult. For this reason, we focus on high-quality regions such as the US, Germany, and the Nordics, where incumbent market shares are relatively stable and competitive positioning is clearer.

In the US, T-Mobile (of which Deutsche owns more than 51%) maintains the best 5G wireless network, along with the lowest pricing and smallest market share. This combination should permit strong, profitable, above-market growth for multiple years. Moreover, competitors carry substantial debt, and the regulatory environment remains relatively relaxed, so we expect continued rational competition.

Germany is a broadly stable market and offers an attractive fiber transition setup, with Deutsche overseeing close to 70% of project build-outs. While Germany telco competition has increased, we do not expect this to derail Germany’s market quality or growth profile.

The Nordics have long been among Europe’s most rational telecom markets, supported by a favorable regulatory environment and a collective “more-for- more” pricing strategy. Several Nordic countries, such as Finland, have only three main operators (versus four in most European markets), allowing operators to achieve sufficient scale to invest in network infrastructure and preserve rational pricing. In contrast, unattractive markets often harbor a sub-scale…