Top Story : Telecom – Non-voice revenue the key driver; upside potential to dividends too Overweight
Sector Update:
- Looking forward, we expect voice revenue growth to continue to decline, as voice minutes are increasingly becoming commoditised and tariffs would continue to be under pressure. However, we see strong growth ahead for the non-voice services.
- We expect EBITDA margins to remain stable mainly due to: 1) mid-to-high single digit revenue growth; 2) greater economies of scale; 3) players’ ongoing cost management initiatives; and 4) the shift in players’ focus towards the provision of non-voice services, in particular, the wireless broadband and data valueadded
services, which would help mitigate pricing pressures and higher subscriber/retention costs.
- We are keeping our view that with the exception of Axiata, the telcos will continue to offer generous dividend yields to investors on the back of: 1) stable EBITDA margins; 2) capex spending likely to trend down further; and 3) clean balance sheets. On top of regular dividends, we believe there is a strong chance that the telcos would supplement these further with specials.
- The current Mandatory Standard on Access Pricing is expiring on 30 Jun 2010 and we believe the review may see the gap between mobile and fixed termination rates narrow further.
RHB Equity 360°( Telecom, Insurance, Gamuda, B-Toto, MISC, Hai-O; Technical: Berjaya Corp, Genting Msia) - ...
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