Getting Terrific Reception in Telecom

The tumult in the telecommunications business over the past three years has been enough to turn any fund manager's hair gray. But that hasn't happened to Sophie Debehogne. Then again, she's just 30 years old. Debehogne has also had good reason to relax lately: Her $125 million Fortis Equity Telecom World fund gained 25.46% in the fourth quarter, making it the best performer among the 500 offshore funds tracked by BusinessWeek.

Not that Brussels-based Debehogne is doing a lot of bragging. Like most of the funds that topped the offshore charts for the fourth quarter, her telecom fund had a double-digit negative return for all of 2002. Indeed, hers has been a topsy-turvy world since she took over the Fortis fund in 1999. The fund gained a breathtaking 82.4% that year, only to lose 33% and 25% in 2000 and 2001. "For years, it was up, up, up," she says. "Then there was the big drop and no way to try for absolute performance." However, Debehogne is heartened by telecom's fourth-quarter comeback and is upbeat for 2003.

That's not just a matter of youthful exuberance. Debehogne thinks new management at big European telecom companies such as France Telecom, Deutsche Telekom, and Holland's KPN has begun to solve the companies' debt problems. She's holding on to her positions in all of them and increasing it in France Telecom, which she sees leading a campaign to reduce costs and capital expenditures this year. She anticipates even more value in other, less troubled European telcos, like Telecom Italia, which "are quite safe because they don't have very high levels of debt, they have high free cash flow and a high dividend yield."

But the real growth, she believes, will come in the European mobile sector. "I think mobile will attract more and more traffic from fixed networks," she says. She is especially taken with Vodafone Group PLC, her fund's largest holding. The British wireless giant carries little debt, she notes, has a big lead in global market share, and is moderately valued. Debehogne expects Vodafone--already up 5% this year--to benefit from new handset technology and data services innovations, such as the recently launched "Vodafone live!" platform, which lets users download and send color pictures and sound files.

Although young, Debehogne is no telecom industry greenhorn. The Belgium native was hired at Fortis right out of Solvay Business School and cut her teeth as a telecom analyst. Debehogne, who also manages a consumer discretionary fund for Fortis, now spends a lot of her time on the road checking out companies. Even in her job interview, says her boss, William de Vijlder, "I was struck by her incisive nature; she asked a lot of questions." It's a skill that's served her well in the turbulent telecom sector. Heck, a few more quarters like the last one, and Debehogne could be poised for early retirement.

By Brian Hindo in New York

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