Regional
Telecommunications: 你
好 Come Forth, Next
Generation…
 |
| RHB Indonesia Morning Cuppa - 6 June 2016- (Regional Telco) |
This report documents
4G developments across the ASEAN-4 telcos and complements RHB’s coverage
initiation on the world’s largest mobile telecommunications group, CM. 4G has
gained considerable traction across developing markets due to rapid network
expansion and the use of optimal spectrum bands. Falling prices of 4G handsets
are also driving a raft of upgrades to the spectrally-efficient technology. We
expect 4G to be near ubiquitous across the ASEAN-4 by 2018/2019, helped by
data-centric applications and the progressive adoption of the 700MHz band.
¨ 4G is
increasingly mainstream. 494 LTE networks have been launched in 162
countries as at April, with over half of live deployments in developing
markets, according to Global Mobile Suppliers Association (GSA) data. Across
the ASEAN-4, 4G was first commercialised in Singapore (2012), followed by
Malaysia/Thailand (2013) and Indonesia (2014). The rapid 4G footprint expansion
in the Asia-Pacific region has helped drive strong subscriber (sub) conversion
from 3G, with the decline in price-points of handsets further easing barriers
to switching. We expect 4G penetration in the ASEAN-4/China markets to
respectively reach 60-70%/83% by 2018 from 15%/33% currently.
¨ China’s
4G coverage is already above 90%. China Mobile’s (CM) (941 HK, BUY,
TP: HKD106.00) pervasive 4G coverage in China puts it in an enviable position
to drive stronger data uptake and ARPU uplifts going forward, in our view. Its
4G sub penetration surged to 37.8% in 2015 (2014: 11.2%) post aggressive 2014/2015
4G capex. We
project its data traffic to grow by a FY15-18 CAGR of 54.1% while blended ARPU
is set to rise to CNY66.00 in FY18 (FY15: CNY57.70). While average data
consumption in China still lags the ASEAN-4, the gap should narrow quickly,
given the proliferation of over-the-top (OTT) applications and the Chinese
penchant for online services and social media.
¨ Improved data
economics from overstated regulatory risks. Unlike few ASEAN-4 markets where
spectrum is typically auctioned off or awarded via a beauty contest, Chinese
telcos are beneficiaries of near free spectrum allocated by the Ministry of Industry and Information Technology (MIIT).
This eliminates the risk of hefty amortisation charges from prohibitive
spectrum costs, which may dis-incentivise network investments. Regulatory
risks, in our view, are overstated in China, as some polices do offer long-term
mutual benefits.
¨ We add China
telecoms to our ASEAN-4 coverage. Indonesia remains our sole OVERWEIGHT among
the ASEAN-4 telcos. We like the Indo telcos given their superior growth prospects
among ASEAN-4 telcos, steady competition in the market and the sector’s
attractive 4.5x FY16F EV/EBITDA valuations. We are NEUTRAL on Malaysia and
Singapore telcos on concerns over rising competitive risks from potential new
entrants, while our UNDERWEIGHT stance on the Thai telcos is premised on stiff
4G competition, regulatory related risks and prohibitive spectrum payouts. Our
preferred ASEAN-4 telco picks are Telkom Indonesia, Axiata Group, XL Axiata
(XL), Advanced Info Service (AIS) and M1. (Jeffrey Tan, Wong Cheng
Horng, CFA, Ken Chui)
Link to report: 你
好
Come Forth, Next Generation…
Link to Daily report:
Indonesia Morning Cuppa - 060616
Media Highlights:
|
Corporates
Indofood to prepare
IDR1.6trn for new factories
Indofood Sukses
Makmur (INDF IJ; BUY; TP: IDR8,600) will allocate IDR1.6trn to build three to
four new factories this year. The factories include the Cirebon factory with
investment value of IDR400bn with three production lines. Moreover, the
company allocated IDR7.6trn of total capex in 2016 or 15% lower than last
year’s allocation and will be funded through internal cash.
Moreover, the
company will work together with East West Seed Indonesia (Ewindo) to enter
the potatoes seed breeding. The first step of the partnership includes an
initial investment of USD10m. Ewindo calculated that the demand of potato
seeds reached 300 tonnes per year or worth IDR3trn. The partnership between
Ewindo and Indofood targets to increase the production up to 25 tonnes per hectare
or double the current average of 10-15 tonnes per hectare. (Kontan)
Comment: The above new
factories are to anticipate higher demand on consumer food products,
especially noodle and snakcs. We are also positive for its expansion in
potatoes seed breeding since it may help to reduce input costs, by lowering
import components. By having cash of IDR13trn with net-debts to equity ratio
of 0.3x, we see that Indofood enables to fund this capex by internal cash. (Andrey Wijaya)
Acset Indonusa right issue at IDR3,000 per
shares
BTN subsidiary to launch in 2H16
Mega Manunggal to conduct warehouse
expansion
Bakrie and Brothers sets a conservative
target
Government to auction four new toll roads
Indonesia recorded decline of 10.48% in
coal output in Jan-Apr 2016
|
