Resilient against inflation
Marginal impact of inflation on Telcos. China and India have
similar purchasing power on per capita basis as Indonesia and
Thailand respectively but much lower mobile penetration rate.
This suggests strong unmet demand for mobile services and
affirms that subscriber growth would continue to be strong in
China and India. Even margins should be quite safe as a
majority of costs are network related costs, which do not vary
with inflation. We have factored the impact of higher inflation
on Telcos in Thailand and Indonesia by lowering our FY08
earnings estimates by 5-10% already. We see minor impact of
inflation in Singapore and Malaysia, where purchasing power is
much higher than telecom tariffs.
Strong growth potential and high competition are the key
attributes of developing markets. China is an exception as
competition remains limited even after industry restructuring.
We like China Mobile and Bharti for their competitive pricing
and superior network coverage. We think that PT Telkom’s
pricing is not competitive and likely to erode with rising
competition in Indonesia. In our view, weakness in China
Mobile on talks about asymmetric regulations and recent selloff
in Bharti on broad market weakness in India present
excellent buying opportunities.
Lack of growth potential and limited competition characterize
mature markets. Singapore is an exception here as competition
has intensified recently with the introduction of mobile number
portability (MNP) in June 08. We like ADVANC in Thailand for
its growth from upcountry regions where residents are
benefiting from higher prices for agricultural products.
Our top picks offer a mix of growth, value and yield. For growth
buyers, we recommend China Mobile (CM) and Bharti for their
double-digit growth potential in the long term and attractive
valuations. For value buyers, we recommend PT Telkom for its
cheap valuations and single-digit growth prospects with decent
yield. For more risk averse, we recommend ADVANC in Thailand
for its single-digit growth prospects cushioned with attractive
yield.

Table of Contents
Impact of high inflation on various countries 3
Fundamental difference among developing markets 4
Competitive positioning across various countries 5
China Mobile’s pricing and network 6
Bharti’s pricing and network 7
PT Telkom’s pricing and network 8
Elasticity and tariff cuts in Indonesia 9
Fundamental difference among mature markets 10
Sector Valuations 12
China Telecom Sector 14
China Mobile 18
China Telecom 20
India Telecom Sector 24
Bharti AirTel 28
Reliance Com 30
Indonesia Telecom Sector 34
PT Telekom 38
Indosat 40
Malaysia Telecom Sector 44
Digi.com 48
Telekom Malaysia 50
Singapore Telecom Sector 54
Thailand Telecom Sector 58
Advanced Info Service 62
Research Team Directory 65
Disclaimer 66
Asian Equities Sales & Research Contacts 68