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1、26 January 2018TelecommunicationsAPAC TelecomsTelecommunications TelecommunicationsIndustry UpdateAsia Australasia JapanIndustryAPAC TelecomsDate 26 January 2018Deutsche BankMarkets ResearchWhat investors are thinkingWhat investors are thinking We have been meeting Asian based investors from mid Dec
2、ember throughJanuary. Our enthusiasm has been difficult to transfer to skeptical investors. Every company we rate Buy features a counter-story, which creates a strong barrier to investing. Currently it seems like the negative stories are generally priced in, while the potential for a more positive s
3、tory to emerge is discounted. For this reason, the sector is heavily under-owned, and interest especially light. Its usually onlythis difficult to broke telcos when they have been forming a strong base. We do note a thawing of resistance in January, as the sectors relative value has become more obvi
4、ous. But investors appear reluctant to buy anything without a provable catalyst, and preferably with a nearby date for the catalyst to be realized. Shouldnewsflow improve a buying squeeze should follow.While marketing, our charts from the 2018 Outlook showing how sector relative value was at extreme
5、 levels generated attention, while our argument that sector revenue should pick up was fairly well received, with our argument being: 1) IT budgets should expand now that animal spirits are getting unleashed after being tight since the GFC; 2) Consumer spend on the sector should pick up as global gr
6、owth drives employment opportunities for young Asians - who like to spend on telecoms - as occurred in the last growth cycle; 3) IoT, smart cities, etc can drive anew leg of growth; and 4) 4G and fibre capex cycling down through 2019 - driving a strong FCF cycle. Investors were most interested in ou
7、r views on China, Japan and India. Key feedback by market follows.Peter Milliken, CFAResearch Analyst+852-2203 6190Srinivas Rao, CFAResearch Analyst+65-6423 4114James WangResearch Analyst+852-2203 6145Raymond Kosasih, CFAPT Deutsche Verdhana Sekuritas IndonesiaResearch Analyst+62-21-2964 4525Deutsch
8、e Bank AG/Hong KongThis research has been prepared in association with PT Deutsche Verdhana Sekuritas Indonesia. The opinions contained in this report are those of PT Deutsche Verdhana Sekuritas Indonesia. Deutsche Bank does and seeks to do business with companies covered in its research reports. Th
9、us, investors should beaware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 08
10、3/04/2017.Distributed on: 26/01/2018 07:15:08 GMT7T2se3r0Ot6kwoPa26 January 2018TelecommunicationsAPAC TelecomsChina One word keeps popping up: “frustration“. Investors are disappointed in Chinesetelecoms inability to perform, and their relatively weak messages and profit growth. In this market, val
11、ue is widely acknowledged, but not seen as a good enough reason to hold, a catalyst is needed, so even though CT and CM are screening well there is a reluctance to act. Operators at Access China were askedpointedly about their lack of profit growth in recent years, and whether this would change. The
12、 message seems to be getting through, with answers suggesting a more commercial focus than previously. However, even supporters wonder if they will do enough. Our point that large China funds were 38% underweight the sectordid interest investors, some of who finally seem to be looking for reasons to
13、 add to, or initiate, a position. Many questions were asked about why China Telecom was a big overweight in our model portfolio given the China Mobile broadband push, as CT is seen as stuck in the middle of CUs revival and CMs dominance - with the fact it has been outgrowing both substantially in mo
14、bile seen as more a curiousity than trend.Japan Our downgrade of the sector to three SELLs was met largely with resigned agreement, but around one-third of investors suggest we are too negative. Those on the remain camp had a consistent pushback that Rakuten lacks spectrum share, deep pockets and a
15、roaming deal. We pointed out why more spectrum and a roaming deal were extremely likely, and how Rakuten was incentivized tosucceed, as mobile success is an existential issue, given telcos efforts to build eco-systems that will encroach on its core business. With the stocks dropping to around our TP
16、s, they are reaching levels with dividend yield support both we, and investors, think.India Investors are very sceptical on our BUY call on Idea Cellular. Our thesis of market consolidation driving long-term pricing power, and Jios entry driving market growth does get some investor attention, but the few who are sympathetic appear unwilling to act decisively out of fear the price war will be prolonged, deep, and disproportionately hurt Idea. The recent increase in daily data limits by Jio (
