Telecommunication Sector - Turns away from price wars; Maintain OW
KBVS Update
Friday, 13 September 2024
Telco Sector- Turns away from price wars; Maintain OW
We remain optimistic about the telecommunications industry, fueled by wider internet access, upgraded network infrastructure, and strong data usage trends. MNOs are focusing on enhancing ARPU and maintaining stable data yields rather than engaging in price competition. The launch of Telkomsel Lite has not ignited a price war, signaling a shift towards sustainable business growth and profitability.
Our analysis showed that quarterly mobile data price cuts significantly declined since the IOH merger. Before IOH merger, aggressive price cuts by the big-3 MNOs averaged IDR553/GB qoq. After the merger, the rate of price cuts significantly fell to IDR52/GB qoq.
We maintain an Overweight rating for the telecommunications sector, with TLKM and ISAT as top picks. Both companies have realized significant cost savings and operational efficiencies through TLKM's integration of IndiHome B2C into Telkomsel and ISAT HiFi's acquisition of MNC Play. EXCL also offers a compelling opportunity, as its proposed merger with FREN is projected to enhance cost synergies and accelerate industry consolidation.
Regards,
Steven Gunawan - KBVS Research