World Cup 2014 … Asian telcos & cable operators … between a Rock & a Hard Place

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Asian telecommunication companies (telcos) have long enjoyed oligopolistic hold in their respective markets in the past 2 decades when Asians found their love with mobile phones, internet broadband & cable TV. From the normalised (adjusted to USD) chart above (encompassing Singapore, Malaysia & Hong Kong telcos & cable operators), since the 2008 financial crisis, they have managed to performed very well indeed given their phenomenally stable earnings & relatively high dividend yields averaging 2.5 – 5% in general.

However, all good things must come to an end, sometimes it is some disruptive technological change or advance that renders certain businesses and processes obsolete. We have seen that with the steam locomotive, polaroid instant snaps, Xerox copiers, pagers, … the list goes on.  The roll-out of 3G-4G networks and fast breakneck fibre broadbands across Asia encouraged the growth of social media, peer-to-peer streaming & other usage of applications that are able to harness the tremendous speed & connectivity into the last mile into Asian consumers’ homes & even when they are on the move.  However, the country / domicile walls that these oligopolistic Asian telcos & cable operators have enacted in the past with their respective government support are crumbling down fast!

The key is that there are serious dearth of unique domestic content & services provided by all these Asian telcos & cable operators. Most contents, apps and media come from the West or recently from China, Korea & Japan that all the Asian operators syndicated, bought or licensed from.  This extends to the current FIFA 2014 World Cup that has enthralled all viewers around the world.  The ridiculous price that Singapore football fans have to endure to watch the World Cup matches  http://www.goal.com/en-sg/news/3880/singapore/2014/03/18/4690244/singapore-costliest-place-to-watch-world-cup is a case study of what has gone wrong in ”paying based on where you happen to live” when it can be free or much cheaper even within other Asian countries.

Asianmacro has been using a VPN service so that he can simply be in the USA, UK, Europe, Latin America or any other country he fancies as identified by his IP address & gateway / DNS to provide security for his online activities.  The fringe benefit to this is I have access to watch all the FIFA 2014 World Cup matches for free in those countries that provide free viewing to residents in them too (where Asianmacro will be simply be there by choosing to be there online)!

I have taken profit on my long position in Asian telcos like Singtel recently.  While I am not going short these stocks as they pay relatively high dividends that many yield hungry investors do chase, the question that we should be asking is whether Asian telcos really have a future besides being “dumb pipe” gateway providers in communications & media, without any real innovative apps or unique domestic content that people want & will pay for!

P.S. And asking Whatsapp or Skype to pay for using its network by Singtel’s CEO is definitely not the way to go! http://www.techgoondu.com/2014/02/26/commentary-singtel-wants-whatsapp-and-skype-to-pay/#.U6wq8PmSySo

FIFA14 World Cup and financial markets

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Football, rugby, cricket, baseball, (*OK American football & Aussie rules football too just to be inclusive) are popular sports with most in the global financial markets. With the impending FIFA14 World Cup upon us in summer, what will happen to the traders & portfolio managers in banks, hedge funds, pension funds, mutual funds & insurance companies? Short of abandoning their posts, their attention will be on the TV in the dealing room playing that match while they root for their teams.  Only the algos running the HFTs machines will continue to do their work unfailingly!

There have been many research done in the recent past to suggest anaemic volumes in stock markets & also of declines when a country loses a game http://www.nltimes.nl/2014/01/29/world-cup-losses-trigger-stock-market-drop/.  Even the venerable ECB had done a study on it before http://espn.go.com/sports/soccer/story/_/id/7573861/stock-market-trading-slows-world-cup-study-says as reported & the actual study can be seen here http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1424.pdf.

However, this FIFA14 World Cup fever does increases the likelihood of the potential path of least resistance .. which is for a higher stock market & in risky assets in general as uninvolved cash on the sidelines, cautious traders & portfolio managers failed to invest & tracked the grinding higher markets. Perhaps, the silent algos in HFTs who do not watch any FIFA14 World Cup matches might get it right & actually be the culprits pushing & buying the markets even higher from here!