Sunday, February 20, 2011

Telecommunications in Malaysia - a sector not to be missed

When I thought of how much monthly expenses are spent on communication, I thought I should not miss out this sector.

I spend around RM430 a month paying these companies. Some may pay much lower, some may even pay much higher, nevertheless it is already a necessity. We use their services from voice to data (3G or High Speed Broadband), whereas for video content, we use Astro's services.

Few thoughts about this sector:

  1. voice has matured, with more spending on mobile rather than fixed. Fixed line usage will continue to deteriorate;
  2. data is growing, but who will be the winner ultimately. Current seems to be TM. Will they continue to grow their market share?;
  3. mobile has the Big 3 i.e. Maxis, Celcom (under Axiata) and Digi. The others such as UMobile, YTL, Redtone are just passers-by;
  4. this is a high capex game. Remember telcos are technology adopters not so much of a technology innovative companies. AT&T used to have Bell Labs which churned out tonnes of new technologies during the earlier days. Now this is not so - I remember Bell Labs became Lucent and now it is Alcatel-Lucent. Look at where Alcatel-Lucent is right now - almost animosity. Telcos are more of adopters today. Look at how AT&T, Verizon, even Maxis and the Singapore telcos are so reliant on Apple, Blackberry and recently Google to help them to push their 3G packages;
  5. since it is a high capex game, why the smaller players bother mind-boggles me;
  6. anyway I believe they are looking at the post investment effect which is the amount of free cashflow received is very rewarding;
  7. all the big boys (Axiata, Maxis, Digi and TM) are fighting over the data market share. Smaller players are also putting their effort in not allowing this to be just the big boys game;
  8. Will any player be able to break Astro's dominance? Is yes, when and who can possibly be the player?
The industry is gamed for exciting times (has always been since mobile became something big).
Here are some of the market cap size of companies in this space:

As you can see, the telco sector consists of around 9% of the total market cap - very significant. Now who will be the winner? - as my blog is trying to identify the better play. I will have more of the industry and individual company analysis of this sector.
See ya!

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