Sector update:
Regional Telecommunications (Neutral),
Pokémon GO Data Conundrum
Regional Telecommunications (Neutral),
Pokémon GO Data Conundrum
Pokémon
GO (PKG) could be a blessing in disguise, potentially driving
stronger mobile data uptake for telcos although the pressure on data yields
across the ASEAN-4 markets would still dilute the overall positive impact on
mobile revenue in the near term, in our view. We believe Indo telcos stand to
gain most, with average data consumption possibly doubling from the gaming app.
Preferred regional picks: Telkom Indonesia, AIS, XL Axiata and Time dotCom.
Still OVERWEIGHT on Indo telcos, NEUTRAL on Malaysia/Singapore telcos and
UNDERWEIGHT on Thai telcos.
¨
Coming
to a small screen near you. PKG has taken the mobile gaming industry by
storm since its official launch in the US, Australia and New Zealand on 6 Jul.
A key concern raised by industry proponents of the augmented reality game,
which utilises the location-based setting and camera of a smartphone, is the
extent of data consumed by the gaming app. Anecdotal evidence points to higher
data traffic, as more users download and access PKG on the go but random trials
conducted among gamers have yielded inconclusive results. We think PKG
would have near-term implications on mobile data (potential ARPU uplifts), as
avid gamers could breach their monthly data caps (data overage) due to the
habit-forming feature of the game. That said, the actual impact on mobile
networks could be much less or insignificant. Our channel checks in Indonesia,
one of the first in the ASEAN-4 markets to have fairly widespread access to PKG
via unofficial platforms suggest that:
i. The
gaming app is immensely popular among youths already accustomed to Niantic’s
previous AR app, Ingress, which shares similar maps; and
ii. Mobile
operators’ have seen traffic spikes on their networks in recent weeks (possibly
also distorted by extended Lebaran promotions). Meanwhile, the reception
to PKG appears relatively more muted in Malaysia, Singapore and Thailand
– which can mean the novelty value is thin (we may be wrong).
¨
IND telcos best play on the PKG theme, followed by TH. Among the
ASEAN-4, we think Indo and to a lesser extent, Thai telcos offer the best
“opportunities” to ride on the PKG theme. Data from third party consumer
analytics group, 3P Communications, indicates that the average mobile data
consumption of PKG is 5-10MB for up to an hour of play, ie a fraction of
a high-definition (HD) video stream which remains the key driver of mobile data
consumption. A linear extrapolation (assuming two hours of a PKG
session) would imply a monthly data usage of up to 900MB. Given that the
average mobile data usage per subscriber/month of 810MB,1.9GB, 3.2GB, 2.2GB for
ID, MY, SG, and TH respectively, PKG would account for 74%, 31%, 19%,
and 27% of the respective monthly data consumption. The data propensity is most
pronounced in the Indonesian market (a predominantly prepaid market), which
suggests that mobile gamers are more likely to purchase additional data to
satisfy their gaming needs. The Indonesian market also ranks highest in terms
of 2016F mobile gaming receipts in the ASEAN-4, followed by Thailand, Malaysia
and Singapore, with mobile gaming revenue accounting for 33% of mobile ARPU.
While the Singapore market has the largest mobile gaming spend as a percentage
of ARPU, already-high mobile data usage/bundles (>3GB/mth) suggest limited
scope for incremental monetisation opportunities, in our view.
¨
Telkom Indonesia, AIS, XL Axiata and Time dotCom are top regional
picks. We remove M1 from top BUYs following the recent downgrade. The
Indo telco sector remains our only OVERWEIGHT among the ASEAN-4 markets,
predicated on superior industry mobile revenue growth prospects,
steady/rational competition and attractive sector EV/EBITDA valuations. Among
the Big-3 Indo telcos, our preferred exposure remains Telkom Indonesia, as it
is well-positioned to capture stronger data growth and a beneficiary of the tax
amnesty.
Best regards,
Jeffrey Tan
Regional Head of
Telecoms
RHB Research Malaysia
