Asian telco stocks perform 'worst'

Nicole McCormick
08 Jan 2010


Share prices of Asian telecoms companies (excluding Japan) took a battering in 2009, with investment bank Credit Suisse deeming the sector’s share price performance last year as the “worst” of all the industries it tracks.


In 2009, several Asian mobile markets, including Hong Kong, India, the Philippines and Vietnam, were ravaged by severe price competition. At the same time, the US financial crisis hurt operator revenues due to slower demand for mobile services.


Mobile revenue growth has meanwhile slowed in several countries due to increasing market saturation.


“The 'low beta' nature of telecom services contributed to telcos’ status as the worst performing sector during FY09,” states a new report from Credit Suisse. “EPS downgrades on structural issues (new competition) in the two largest markets - China and India - were the other key drivers [contributing the sector’s poor performance].”


The bank says that even in the emerging markets, revenue growth is becoming difficult to find in the telecom sector.


“Looking into FY10, cellular service revenue is once again set to grow somewhat slower than nominal GDP,” the bank states. “We expect the highest cellular revenue growth in Indonesia, followed by China and then the Philippines.”


In Indonesia, Credit Suisse is forecasting cellular revenues will increase by almost 10% in 2010 vs. 2009, on the back of continued price stability.


It also foresees cellular revenue growth in China of 8.8% in 2010, with revenues in the Philippines expected to jump 7.4% in the period.


Conversely, Credit Suisse expects Indian cellular revenues to increase by only 2.4% this year.

“Our Indian team is forecasting only 5.1% revenue growth from Bharti (only 0.9% in cellular), and 3.4% growth from Idea for FY3/11,” adds the bank. “While Reliance’s revenue growth looks better, this is due to its tower business; cellular revenue is expected to decline 0.7%.”


Nicole McCormick

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