SINGAPORE (May 19): DBS Vickers prefers Asean fixed-line markets Indonesia and Thailand over mobile markets Singapore, Malaysia which are facing fierce competition from new players via mobile virtual network operators (MVNO) and spectrum reshuffles.
The shakeup in mobile markets has triggered irrational competition among existing players, resulting in downward pressure on mobile tariff. On the other hand, fixed-line markets are generally enjoying steady growth, supported by bandwidth upgrade.
“We favour HKT Trust & HKT, HKBN and Telekom Malaysia which provide stable dividend yields,” says DBS.
In the next 6-9 months, DBS says investors will focus much on the spectrum re-allocation development. This will dictate the medium-term outlook of individual mobile operators due to changes in the competitive landscape and new spectrum utilisation fee.
The developments in some markets are subject to government policies. For longer-term development, operators have yet to derive a detailed plan on 5G development as they do not have a matured monetisation model at the moment.
“We like the Indonesia market with healthy competition in mobile segment,” says DBS, “we expect steady earnings growth of 6-7% in FY17, supported by ARPU uplift and rising mobile penetration.”
DBS adds that the country’s regulator has also given telcos its assurance on the allocation of expiring spectrum to existing players, signalling a lower risk of new entrant introduction. The fixed-line market outlook is also promising with rejuvenation via optical fibre.
“Indosat is our top pick in this market, back by strengthened brand positioning after its network modernisation programme as well as its operational efficiency improvement.”
Shares of Indosat are trading at IDR 7,400 (77.2 Singapore cents)