In this briefing:
1. Emerging Asean Telcos 2019: Indonesia Looks Best Placed. Malaysia Improving.
Looking at the telco space for Emerging Asean markets in 2019, we see a number of key themes.
- Revenue trends are likely to worsen in Thailand and the Philippines, but improve in Indonesia and possibly Malaysia.
- Margin trends usually follow revenue but Indonesia will have the added benefit of reduced subscriber churn following the SIM registration completion in 2018.
- Political risk is elevated with elections in Thailand (although renewed talk of delays) and Indonesia.
Overall, Indonesia looks to be the most interesting market with rising revenue growth as the market stabilizes. Telekom Indonesia (TLKM IJ) is our top pick, followed by Xl Axiata (EXCL IJ). Elsewhere, Malaysia looks to be improving but valuations remain high. The outlook has worsened in Thailand with DTAC (DTAC TB) getting hold of spectrum and now litigation risk coming to the fore with old cases with TOT/CAT. The Philippine duopoly faces the rude shock from the China Telecom Consortium’s entry in late 2019.
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