■ Reviewing the recent quarter, Indonesia is clearly benefiting from a rational competitive environment
■ Wireless data remains the overall growth driver and is now supported by emerging pricing stability
■ AIS (Buy), Singtel (Buy) and Maxis (Reduce) remain key ideas
Standout revenue quarter for Indonesia:
With the recent September quarter results mostly in, we review the ASEAN telco revenue drivers and highlights. Albeit well flagged in the past, and therefore largely in the price, it is worth highlighting the significant revenue growth improvements seen in the Indonesia telco space with the rational competitive environment. This is partly due to XL's (EXCL IJ, Hold, IDR3,350) exit from the lowest end of the market, driving overall realization rate resilience and rebounds q-o-q. The exception on the wireless data pricing side was Indosat (ISAT IJ, Hold, IDR4,765) given it has taken up the segment that XL left but the volumes have more than compensated at the revenue line.
Wireless data pricing showing signs of hope:
Wireless data revenues continued to be the growth driver for overall ASEAN wireless revenues, as usual at the expense of voice and SMS revenues. We note positively that data realization rates for the various countries and companies are generally showing significantly less pressure, and even upside for some (see table on page 4). It is too early to decipher whether pricing power will swing to the telcos given the increasing appetite for data by subscribers, but at least for now, volume improvements are more fully reflected at the revenue level. Likewise, we remain cautious that the predominantly prepaid subscriber base in ASEAN will continue to reallocate their overall telco spend away from voice and SMS towards wireless data.
The q-o-q decline in Singapore voice revenue per minute (RPM) may partly reflect the shift of revenue allocation in new subscriber plans including the recently introduced SIM-only plans. Meanwhile, the Thai telcos are a mixed bag in terms of realization rate, but voice remains under clear pressure from both the weak economy and the more aggressive moves to migrate to 3G networks with cheaper license fee, which will only accelerate when the 1,800Mhz 4G auction is completed.
We maintain our view that pricing for the recent auction for AIS (ADVANC TB, THB215, Buy, TP THB269) remains reasonable and accretive and as such, it remains one of our key Buy ideas. We believe Singtel (ST SP, SGD3.81, Buy, TP SGD4.55), aside from having a relatively defensive earnings and balance sheet structure, is a good proxy to the fast growing data markets in ASEAN and Australia. Meanwhile, the double whammy of intense competition and cannibalization makes Maxis (MAXIS MK, MYR6.53, Reduce, TP MYR5.40) one of our key Reduce-rated stocks. (Read Report)
Source : HSBC Global Research