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

Image

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

Where to on Social Media … Facebook, Tencent or Rakuten ?

Before AsIanmacro takes his sip of this evening single malt whisky, time to snap a pic & share it on social media … Now wait, so should it be on Facebook, Whatsapp, Viber, WeChat, Instagram, …. the list goes on and it is definitely a chore these days on which to use!

Image

I have always been a techie & have pretty much every other social media app installed across my iOS, Android & Windows devices.  But when it comes to interacting with pretty much anybody in China, it’s Wechat (owned by Tencent – 700 HK)… forget about everything else.

Viber is just so sluggish eversince the recent updates & also the purchase by Rakuten (4755 JP) probably will turn it into another drive-by blasting of spam marketing everytime you use Viber in due course.  Facebook (FB US) even with its purchase of Whatsapp is just so yesterday … good for recording your life-story everywhere else except China & that Whatsapp .. come on, does not even have VOIP calling now & other features available in so many other messaging apps. From above normalised charts of FB US, 4755 JP & 700 HK; you can see FB & 4755 skyrocketed & outperformed 700, probably due to the wider investor base due to the listing in USA & Japan chasing them exuberantly.

This brings me to a ‘gun-to-head’ showdown, where despite the lofty valuations applied to FB US,, 4755 JP & 700 HK; if I need to own just one social media company to ‘pay-to-play’ & get on the boat … it will be 700 HK! From the chart below, look at the decent 25% correction from the recent highs & it has real revenues that continue to grow with monetisation of all the services and paid extras that people foot up in China to use. It’s a no brainer .. except at what levels to jump onto the bandwagon.

Image

For Asianmacro, it will be between 450-462 just shy of current 492 level.  It can easily come with any ‘Sell in May & go away!” portfolio adjustments soon in markets.  Stop loss sell will be < 425 not because I want to get out per se but purely from risk-management, but decent buying levels after will be 380-400 which I will be interested in getting back on again.