Communications

Report by New Street Research

Physical and commercial constraints mean Starlink is unlikely to be more than a niche operator across Developed Asia for the foreseeable future. Low proportion of profit from Broadband also limits any likely impact on the relevant telcos P&L. Rather than seeing the Developed Asian telcos as likely to suffer from a “second wave” of Starlink-related selling, New Street thinks they are more likely to benefit from internal switching within global telcos as investors figure out how much better placed they are than telcos in the US or Europe. Ultimately telcos work when dividends are rising and New Street sees dividend growth across the board for this group, coupled with ongoing share buybacks. Top picks: Singtel, KT and SoftBank Corp.

Communications

Report by New Street Research

New Street expects many markets to consolidate further to just two operators, and in smaller, poorer countries, possibly a single network. Consolidation underpins much of the sector's improvement - most notably through reduced capex, as seen in Brazil, where industry capex dropped from $7bn to $4bn. Countries where further consolidation is likely include Colombia, Peru, Chile, Malaysia and many in sub-Saharan Africa. Key beneficiaries include Millicom, Airtel Africa, MTN, VEON and Entel. EM Telcos remain substantially undervalued on double digit equity FCF yields. Top regional picks include Singtel and KT (Asia), IHS Towers and Vodacom (Africa), and Liberty Latin America and TIM Brasil (LatAm).

Communications

Report by New Street Research

Something is changing in the Korean Telco landscape - buybacks from SK Telecom and KT Corp, increased stock ownership by employees and management, an increased focus on profitability / returns, and more progressive dividend policies all point to a better environment for shareholders going forward. At the same time, post the spin out of SK Square, SKT, which has not historically been a rapid growth company, is now guiding to 50% revenue growth over the next 5 years! Taken together Korean Telcos which have historically traded at a substantial discount to the rest of the EM telecom sector look set to re-rate materially.