The pre-requisites for rapid growth in wireless broadband (3G licences,
reasonably-priced datacards and dongles, and rising laptop
penetration) are now firmly in place. We forecast that by 2015, there
will be 164.7 mn wireless broadband connections in Asia ex-Japan, and
that wireless broadband revenue will amount to 8.0% of total cellular
service revenue by 2015, versus only 0.7% in FY08.
■ We have ranked the countries under our coverage according to the
revenue opportunity from wireless broadband. While there are some
cost implications from wireless broadband take-up, we believe the
revenue impact is more material, and should drive up returns by
generating another cash flow stream over a largely sunk cost base.
■ We believe that the Philippines, Indonesia, Malaysia and Thailand are,
in descending order, the best-placed developing markets for wireless
broadband growth. Of the developed markets, Australia scores best by
far, given high laptop penetration, low fixed-line coverage, extremely
challenging geography and high prices for Telstra’s ADSL service.
■ For large-cap exposure to this theme, we would therefore choose
PLDT, Indosat, Axiata, SingTel and AIS. Telekom Malaysia is, in our
view, the clearest large-cap loser, given that it has no cellular
exposure, a weak ADSL product (due to face intense competition from
wireless broadband) and a high cost base.