Industry Focus

ASEAN Telecom Sector

Refer to important disclosures at the end of this report

DBS Group Research . Equity 2 Jan 2019

Revisiting EVA for future direction STI : 3,053.43 KLCI: 1692.07

JCI : 6194.50 SET : 1563.88
• Economic Valued Added (EVA) has been more potent
than earnings in predicting the share price; our EVA- Analysts
Sachin MITTAL+65 66823699
based predictions in 2014 have largely materialised
sachinmittal@dbs.com
• Our top picks are companies where capex has
TOH Woo Kim+60 32604 3917
peaked,and sharp EVA improvements are not priced in
wookim@alliancedbs.com
• Netlink NBN, Singtel and Axiata Group are our top
picks in the region Thailand Research Team

EVA is more potent than earnings in predicting share price

changes over five years.Earnings growth in the short term is STOCKS
often achievedby deploying more capital with diminishing 12-mth
returns. However, this does not improve EVA due to higher Price Mkt Cap Target Price Performance (%)
S$ US$m S$ 3 mth 12 mth Rating
capital charge and might lead to a drop inearnings in the
NetLink NBN Trust 0.76 2,168 0.87 (2.6) (8.4) BUY
medium term due to rising deprecation. Barring the impact of Singtel 2.94 35,147 3.59 (9.3) (18.1) BUY
tail-end events, our EVA-based predictions in 2014 have largely Axiata Group 3.97 8,670 5.05 (12.9) (26.2) BUY
materialised. We prefer companies whose (i) capex has peaked,
and (ii) big EVA improvements are not priced in. Source: DBS Bank, Bloomberg Finance L.P.
Closing price as of 28 Dec 2018
Rising revenue and declining capex are idealbut we see either
one missing across the countries. Singapore is likely to witness
Regional FY19F Dividend Yield
~5% contraction in mobile revenue in 2019, driven by rising
adoption of SIM-only plans, although capex has peaked FY19F Dividend Yield
already. TPG’s potentially weak launch in 2Q19F might lead to 7%
7%
revenue stabilisation in Singapore from 2020 onwards, leading 6% 6%

to street upgrades perhaps. In Indonesia, 7-8% top-line 4% 4% 4% 4%

4%
growthlooks promising in 2019,but capex is likely to rise with 3%
4%
3%
4G rollout outside Java. Malaysia is set to see flattish growth in 3%

the mobile sector due to a milder competitive environment,

while broadband is likely to see pricing edging downwards.
Thailand mobile sector might see 2-3% revenue growth in
2019 with ARPU being pressured by unlimited data plans.

12 months of FY19F for Singtel and Net Link NBN (Mar YE)
Netlink NBN, Singtel and Axiata are our top picks in the region.
Source: Bloomberg Finance L.P., DBS Bank
Netlink NBN is trading below its book value despite generating
positive EVA with 7% regulatory return on its assets vs 6%
WACC. Netlink offers 6.6% yield with 4% distribution CAGR
over FY19F-21F. Singtel’s capex is on a downward trend led by
lower capex in Australia and the share price implies only 2%
EVA CAGR over next-10 years. Singtel offers 10% earnings
CAGR over FY19F-21F and fixed annual dividend of 17.5Scts
(~6% yield). Axiata’s capex is also on a downward trend,led by
lower capex at Celcom and its share price implies only slightly
positive EVA from 2020 onwards. Axiata offers over 30%
earnings CAGR over FY18F-20F led by Celcom and XL Axiata–
and offers 4% yield. Potential catalysts are monetisation of
stakes in edotco and Idea-Vodafone.

ed: CK / sa: JC, CW, CS

Industry Focus
ASEAN Telecom Sector
The concept of Economic Value Added
Economic Value Added (EVA) is a measure of whether a
company is earning better than its cost of capital. A positive
EVA indicates that a firm has added value on top of the
opportunity cost of capital.
EVA = Net Operating after Tax (NOPAT) – Capital charge
Or EVA = (ROIC – WACC) x Invested Capital
Where Invested Capital = Book Value of Equity plus Net Debt
ROIC = (EBIT – Tax)/(Book Value of Equity + Net Debt)
WACC is the weighted average cost of capital. ROIC is the
Return on Invested Capital.
A positive EVA indicates that ROIC is higher than its WACC
and the firm is creating value.
EVA can be enhanced by investing more capital into the
business as long as ROIC exceeds WACC. Even if ROIC is
declining but is still higher than WACC, the firm will see
higher EVA. A negative EVA indicates that ROIC is below its
cost of capital and there is value destruction by the firm.
As ROIC x Invested Capital = Net operating profit after tax
(NOPAT)
While WACC x Invested Capital = Opportunity cost of capital
So EVA = NOPAT – Opportunity cost of capital
EVA has been more potent than earnings in explaining market
value changes
In the paper titled “EVA® AND MARKET VALUE” by Stephen
F. O’Byrne, Stern Stewart & Co, the authors found a
significant relationship between changes in EVA and market
value. More specifically, they observed that 5-year changes in
EVA explain 55% of 5-year changes in market value, whereas
5-year earnings changes explain only 24%. As per their
research, 10-year changes in EVA accounted for 74% of
variation in market value, as compared to the 64% explained
by 10-year changes in earnings.
There is a formula to value a firm based on
EVA
The difference between the market value and book value of a
firm is called Market Value Added or MVA.
MVA = Market Value - Book Value of Equity
The link between MVA and EVA is as follows:
MVA = Present Value of Annual EVAs
This relationship is reproduced from G. Bennett Stewart III,
The Quest for Value (HarperCollins, 1991).
If ROIC <WACC, a firm should trade lower than book value
ideally. If a firm consistently generates ROIC equal to its cost
of capital, then its EVA is zero, suggesting that MVA is also
zero. This implies that the market cap of the firm should be
the same as its book value. Similarly, if a company keeps
generating high EVA, its market value is likely to be higher
than its book value. And if a company consistently generates
negative EVA (with no hopes of turnaround in the future), its
market cap is likely to be lower than its book value.
Furthermore, a study by McKinsey found that companies with
higher EVAs managed to sustain their outperformance over
the medium term relative to those in the lower end, through
the infusion of more capital into their businesses. As these
companies were already generating higher ROICs, the infusion
of more capital helped them grow their EVAs even further.
Hence, analysing historical performance of EVAs could provide
us with a reasonable expectation of the company’s future EVA
performance.
2014 vs now – were our predictions correct?
In our report “Economic profit as the guiding light” released
in January 2014, we used a two-stage growth model to
understand the market expectations of growth in EVA. If the
market cap implied >10% EVA CAGR over the next 10 years,
then the stock is considered expensive. If the market cap
implies less than 4-5% EVA CAGR, then the stock is
considered attractive. Ignoring the structural changes in the
markets, such as the threat of the entry of a new operator in
Singapore and the high spectrum prices in Thailand weighing
on the ROIC of operators, we believe that EVA was a good
indicator of future performance and a suitable metric for
identifying overvalued opportunities in the region.
Page 2
Industry Focus
ASEAN Telecom Sector
Counters with high MVA/EVA valuations have dissappointed the market
Sources: DBS Bank, Reuters, Companies
Benchmark indices – Reuters Thailand wireless telecom index, Reuters Indonesia telecom services index, Reuters Malaysia telecom services index (all
indices are on total return basis)
We revisit this exercise in 2018, to understand market
expectations of growth in EVA for regional counters and have a
re-look at the market valuations of counters under our
coverage. We use a two-stage growth model to understand the
market expectations of growth in EVA.
For the first stage, we assume that companies can grow their
EVA at a constant rate over the next 10 years. After 10 years,
we assume terminal EVA growth rates of 0% in Singapore,
1.5% in Malaysia and 2% in both Thailand and Indonesia.
Based on the existing market cap of companies, we figure out
the implied EVA CAGR over the next 10 years using the
relationship between MVA and EVA.We then compare the
implied EVA CAGR with historical growth rates to see if
expectations are too high or low from a historical perspective.
We also use the MVA/EVAas a metric to assess the sensibility of
the current market valuations of counters under our coverage.
We use 2018 as the base year for this computation for
Singapore, Thailand and Malaysia, as market conditions in 2018
were largely reflective of the likely market conditions in the
future. However, for Indonesia, we use 2019 as the base year,
as operators were negatively impacted in 1H18 due to the pre-
paid SIM registration period and we think that 2019 would be
better reflective of future market conditions.
Key risks to our view
Tail-end events could distort predictions based on EVA.
Predictions based on EVA ignore potential structural changes in
the marketplace, regulatory issues and other tail-end events,
which could result in severe disparities between predictions
based on EVA and actual performance. For instance, the
potential entry of a new player in Singapore and the resultant
price competition led to severe declines in the profitability and
EVAs of Singapore operators, thus distorting previous
predictions based on EVA. High spectrum prices weighed on the
ROIC of Thai operators, thereby distorting predictions made
based on EVA. Tail-end events could impact the long-term ROIC
generation ability of operators, thereby distorting predictions
made based on EVA.
Page 3
Industry Focus
ASEAN Telecom Sector

EVA CAGR over next 10-year as implied by the market value

Share WACC 2018F Avg. Book Market Value EVA (2018F) Implied EVA CAGR
price ROIC Value 2018 over next 10-years

StarHub 1.76 7.0% 25% 317 3,126 181 1.9%

Singtel 2.90 6.7% 9% 29,503 47,779 989 2.2%
Net Link NBN 0.76 6.0% 7% 3,102 2,974 35 nm
Advanced Info 171 8.2% 23% 54,885 502,902 22,234 4.7%
Total Access Com 43.00 9.0% 4% 30,853 100,158 1,741 16.0%
Digital Telecommunications 14.50 7.2% 6% 117,009 136,955 (2,322) nm
Infrastructure Fund
Indosat 1,695 9.4% nm 13,475,628 9,607,194 (3,774,158) nm
PT Telkom 3,720 9.2% 23% 114,917,817 350,085,873 18,247,709 0.8%
XL Axiata 2,010 9.4% 4% 21,557,162 19,960,835 (1,829,755) nm
Link Net 4,810 10.2% 28% 4,832,323 15,365,379 722,296 4.1%
Digi.Com 4.32 7.0% 62% 519 33,474 1,415 4.2%
Maxis Bhd 5.27 6.8% 16% 7,159 40,944 1,309 5.4%
Telekom Malaysia 2.25 8.2% 2% 7,447 8,681 (872) nm
Time Dotcom 8.00 7.6% 10% 2,368 4,670 46 15.7%

Axiata Group 3.99 7.1% 5% 30,828 36,065 (805) nm

PT Sarana Menara 620 9.6% 21% 7,659,407 31,445,414 1,603,138 2.4%
Nusantara
Tower Bersama 3,490 9.4% 10% 3,215,652 15,779,694 169,362 23.3%
Infrastructure

Source: Companies, DBS Bank

Page 4
Industry Focus
ASEAN Telecom Sector

Singapore - EVA vs share price

Singtel’s EVA improved in 2014 largely from growth in associate
contributions offsetting declines in Singapore and Australia and
mild increases in capex. EVA took a hit from 2016, largely
owing to higher capital expenditure on Optus’s accelerating
network rollout and spectrum payments in Singapore. Declines
in associate contributions from 2017 onwards amplified the dip
in EVA, which is reflected in the downward movement of
Singtel’s share price from January 2018.
StarHub’s share price has been on a downward spiral, reflecting
the continued fall in StarHub’s EVA. StarHub suffered
continuous declines in EVA owing to higher capex infusions into
its 4G network rollout and spectrum payments. Operating
profits also took a dip, especially after 2016, with continued
subscriber losses in the Pay-TV segment and exacerbating
competitive conditions in the mobile market amid the
anticipated entry of the fourth operator.

EVA history and Outlook - Singapore

EVA history and Outlook ‐ Singapore
S$m
 3,000

 2,500
2,391  2,373 
2,200  2,177 
 2,000
1,690 
 1,500 1,498 
1,206 
 1,000 989 
360  349  329  298 
 500 208  181  177  187 

 ‐
2013 2014 2015 2016 2017 2018F 2019F 2020F

5.0 (S$) Share price movement

4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Jan‐14 Jul‐14 Jan‐15 Jul‐15 Jan‐16 Jul‐16 Jan‐17 Jul‐17 Jan‐18 Jul‐18

Singtel Starhub

Source: Companies, Reuters, DBS Bank

Page 5
Industry Focus
ASEAN Telecom Sector
Singapore - Next 10-year EVA CAGR implied by the current market cap
Share WACC FY18F Avg. Book
price ROIC Value 2018
StarHub 1.77 7.0% 25% 317
Singtel* 2.90 6.7% 9% 29,503
Net Link* 0.76 6.0% 7% 3,102
NBN
*FY19F due to March YE
Source: Companies, DBS Bank
EVA prospects and key risks
Netlink NBN is trading below its book value despite a positive
EVA. Positive EVA is based on ROIC of 7% (regulatory WACC)
vs our WACC of 6.0%. Reported earnings are lower than the
distributions due to accounting depreciation being much
higher than the regulatory depreciation. Netlink will benefit
from 100% migration to fibre over the next two-years. As of
30 Sep 2018, NLT’s network had passed 1.36m residential
homes out of 1.50m estimated residential homes in
Singapore, implying 90% rate. There were 1.24m residential
end-user connections, representing c.91% of homes-passed.
Key risk for Netlink’s share price will be sharp rise in interest
rates. NLT could trade at S$0.68 or 7.5% yield if Singapore’s
10-year bond yield in the last quarter of 2019 rises to 3.4% vs
our expectations of 2.9% (2.45% currently) and yield-spread
stays at 4.1% vs our expectations of 3.0% (4.1% currently).
Our bear-case valuation implies ~5% downside risk
Singtel is likely to see EVA grow in the future vs declining EVA
in the past due to three key factors. (i) Improvement in
associates contribution led by Telkomsel in FY20 (Mar YE) and
Bharti entering positive earnings territory in FY21. (ii)
Potentially lower annual capex than S$2.2bn in FY19 as
Australia capex is trending downwards. (iii) Potentially
spinningoff the digital businesses in FY21 which are seeing
narrower losses but still loss-making.
We see two key risks to Singtel’s share price. (i) Potential
sharp increase in losses from Bharti in FY20 could more than
offset the growth from Telkomsel in FY20. (ii) Digital
businesses may see further widening of losses instead of being
narrowed down. Our bear-case valuation for Singtel is S$2.65,
implying only 3% downside potential including the dividend
yield.
Market EVA (2018F) Implied EVA Past 5-year
Value CAGR over next EVA CAGR
10-years
3,066 181 1.0% -13%
47,025 989 2.2% -15%
2,974 35 nm nm
StarHub likely to see EVA growth due to massive cost-cutting
despite revenue under pressure. StarHub is likely to see
S$30m in annual cost savings from FY19 onwards due to staff
reduction and another S$30m in savings from FY20 onwards
due to the shutdown of co-axial cable network. TPG has
invested very little so far and may not gain subscribers in
2Q19 launch leading to stabilisation of revenue for StarHub.
Key risk will be TPG having a significant impact.Our bear-case
valuation is S$1.75 if TPG causes severe disruption.
StarHub could see a 6% drop in FY19 EBITDA under
thisscenario vs 2.5% under our base case.
Our investment thesis
Netlink faces negligible earnings risk and offers over 6.6%
yield with FY19-21 distribution CAGR of 4%. NLT’s yield is
similar to industrial S-REITS despite its much longer asset life
as Netlink incurs annual capex to replenish its depreciated
asset base. Plus Netlink has ample room to raise its debt at
~3% and invest in regulated return of 7%.
Singtel offers assured annual DPS of 17.5 Scts (6.0% yield)
with FY19-21F EPS CAGR of 7%. Associates’ profit
contribution has been a critical factor for Singtel’s share price
historically. A potential rebound in associate contributions in
FY20F led by Telkomsel, AIS and Globe despite a weak Bharti,
could prompt the market to re-rate the counter. Singtel is
attractive, trading at a 12-month forward PE of 15x, -2SD of
its historical average of 17x and offers 7% EPS CAGR over
FY19F-21F and 6.0% yield.
Stronger-than-expected earnings rebound in FY20F. The
street’s FY19F earnings are edging up and we expect to see
more upward revisions going forward. StarHub’s valuation is
attractive, trading close to -2SD of its historical EV/EBITDA and
PE average, and offers sustainable yield exceeding ~5.7%
Page 6
Industry Focus
ASEAN Telecom Sector

Indonesia EVA vs share price

PT Telkom’s EVA has been rising with growing operating profits
in the mobile segment. High double-digit growth in EVA over
2015-16, is clearly reflected in the steady growth of the share
price over 2016, while the decline in the share price over late
2017 and over 2018 is explained by the dip in EVA over 2018,
which was a result of tight competitive conditions in Indonesia.
Link Net’s share price, on the other hand, exhibits a weak
correlation with EVA, largely due to corporate governance
issues and Link Net’s slow rollout approach that allows the entry
of new competitors.

EVA history and Outlook - Indonesia

High-double digit y-o-y Decline in EVA due to

growth in EVA over 2016 subscriber losses in 1H18
sent the price higher sent the share price lower

Source: Companies, DBS Bank

Page 7
Industry Focus
ASEAN Telecom Sector

Steady improvement in Indosat’s EVA was rewarded by the
market as seen from the improvement in Indosat’s share price
over late 2015-mid 2017. However, with EVA tapering off
towards mid-2017, the counter experienced sharp declines in
the share price from mid-2017, which continued through 2018,
reflecting the steep tumble in Indosat’s EVA owing to heavy
subscriber losses and tight competition in 1H18 due to the
prepaid SIM registration era in Indonesia.
The sharp fall in XL Axiata’s EVA, over 2014-2016, driven by
declines in operating profit owing to subscriber losses and
higher capital infusions on network expansions during XL’s
transformation phase, explains the dip in share price over late
2014-2015. The improvement in EVA over 2017 is also reflected
in XL’s share price over 2017.

EVA history and Outlook - Indonesia

Rp b EVA history and Outlook ‐ Indonesia

0 Source: Companies, Reuters, DBS Bank
‐640
‐500 ‐526
‐1,000
‐1,500 ‐1,689 ‐1,830 ‐1,489
‐2,104
‐2,000
‐2,863
‐2,500
‐2,425
‐3,000
‐3,500 ‐3,347 ‐3,279
‐4,000 ‐3,774
‐4,500 ‐4,252
‐5,000
2013 2014 2015 2016 2017 2018F 2019F 2020F
XL Axiata Indosat

(IDR) Share Price movement
8,000

7,000 Lower operating profits due to

subscriber losses and tight
6,000 competition causes a sharp fall in
EVA
5,000

4,000

3,000

2,000 High capital infusions and lower

operating profits during XL’s Steady improvement in XL’s EVA
1,000 transformation period, sent both EVA over 2017
and share price down
0
Jan‐14 Jul‐14 Jan‐15 Jul‐15 Jan‐16 Jul‐16 Jan‐17 Jul‐17 Jan‐18 Jul‐18

XL Axiata Indosat

Companies, DBS Bank

Page 8
Industry Focus
ASEAN Telecom Sector

EVA history and Outlook – Indonesian Tower

Rp m EVA History and Outlook ‐ Indonesian Tower

 2,000,000 1,819,317 
1,694,260 
 1,800,000 1,603,138 
1,498,716 
 1,600,000
 1,400,000 1,181,925  1,249,052 
1,083,051 
 1,200,000
 1,000,000
 800,000
 600,000 322,235 
 400,000 304,316  264,170  223,896  196,640  257,404 
125,748  169,362 
 200,000
188,334 
 ‐
2013 2014 2015 2016 2017 2018 2019F 2020F
PT Sarana Menara Nusantara Tower Bersama Infrastructure

Share price  Share Price ‐ Indonesian Tower

(IDR)
12,000

10,000

8,000

6,000

4,000

2,000

Sarana Menara Tower Bersama

Source: Companies, DBS Bank

Implied EVA CAGR for Indonesian operators

Indonesia (Rp) Share WACC FY18F Avg. Book Value Market Value EVA (2018F) Implied EVA Past 5-yrs
price ROIC 2018 CAGR over next EVA
10-yrs CAGR
PT Telkom 3,720 9.2% 23% 114,917,817 350,085,873 18,247,709 0.8% 7%
XL Axiata 2,010 9.4% 4% 21,557,162 19,960,835 (1,829,755) nm nm
Link Net 4,810 10.2% 28% 4,832,323 15,365,379 722,296 4.1% 31%
Indosat 1,695 9.4% nm 13,475,628 9,607,194 (3,774,158) nm nm
Sarana Menara 620 9.6% 20.7% 7,659,407 31,445,414 1,603,138 2.0% 38%
Tower Bersama 3,490 9.4% 10.1% 3,215,652 15,779,694 169,362 23.0% -2%
Source: Companies, DBS Bank

Page 9
Industry Focus
ASEAN Telecom Sector
EVA prospects and key risks
PT Telkom’s ~1% EVA CAGR is justified as competitors may
steal most profitable ex-Java business. PT Telkom is reasonably
valued, with an implied 10-year EVA CAGR of ~1% vs. 7%
recorded over the last five years. PT Telkom is likely to see the
pace of EVA growth shrinking as i) Telkomselis likely to shed
market share outside Java, which is the most profitable part of
the business, to XL Axiata, which could weigh on Telkom’s
ROIC, and ii) the growing proportion of non-Telkomsel
businesses (~32% of Telkom’s topline) have lower ROIC vs.
Telkomsel given their capital-intensive nature and lower
margins.
Link Net is attractive with an implied EVA CAGR of 4% vs 31%
CAGR over the past five years. Link Net has recorded high
double-digit growth in EVA over the past five years, supported
by the company’s strategy of conducting network rollouts to
maximise ROIC. While Link Net is likely to see lower ROICs
going forward, as the company has now taken a more
aggressive stance on network rollouts, we believe Link Net is
still likely to beat mid-single-digit EVA growth implied by the
current valuation.
Key risk for Link Net is potential decline in broadband
penetration in existing areas. If broadband penetration in areas
with home-passed drops by 20bps each vs our base-case
assumption of stable penetration, this may lead to our bear-
case valuation of Rp4100.
XL Axiata’s negative EVA likely to narrow down. XL Axiata has
recorded narrowing down of its negative EVA since 2016 and
we believe this would continue to be the norm going forward,
supported by above-average industry growth in topline and
continued streamlining of XL’s cost structure. However, XL
Axiata is unlikely to turn in a positive EVA in the near term,
owing to another year of peak capex of ~Rp7tr in 2019.
Key risk for XL Axiata will be Telkomsel disrupting benign
competition. If Telkomsel instigates price wars both within and
outside Java, it will result in only 3% growth in cellular revenues
for FY19 vs +10.2% growth under our base-case scenario and
lead to our bear-case valuation of Rp1,900.
Indosat EVA likely to remain in negative territory. Indosat is
likely to keep generating negative EVA over the near term due
to mounting pressures on the topline. Indosat is also planning
to pump over Rp30tr over the next three years to expand its
presence in regions outside Java. ROIC generation on these
investments is likely to be low as competition in ex-Java regions
already remains intense and gaining enough market share to
generate double-digit ROICs could prove to be difficult within
the first few years.
Our investment thesis
XL Axiatato gain revenue share in 2019. The market is overly
concerned over XL Axiata further lowering its data pricing 8%
q-o-q in 3Q18, which we think, has bottomed out in 3Q18. XL
intends to double its revenue market share in the ex-Java region
to 30% in 4-5 years largely at the expense of Telkomsel that
derives over 60% of its revenue from ex-Java vs 20% for XL.
This coupled with below average exposure to legacy services
(~20% of XL Axiata’s top line vs 42% for Telkomsel in 3Q18)
should allow XL Axiata to record 10% revenue growth in 2019
vs 8% growth for Telkomsel.
PT Telkom (TLKM) is not cheap as we expect capex to rise and
consensus EPS to be cut. Firstly, ~60% of Telkomsel’s (TLKM’s
cellular arm) revenue comes from outside the Java (ex-Java)
region wherecompetition is ramping up and may erode
Telkomsel’s market share. Secondly, Telkomsel has ~42%
exposure to declining voice and SMS services, much higher than
its competitors. Thirdly, non-Telkomsel businesses (~32% of the
group’s revenue) not only have lower EBITDA margins but also
suffer from high operation expenditure and depreciation costs.
In conclusion, consensus FY19F EPS is likely to be cut 8%. TLKM
is not cheap either at 17x 12-month forward PE around its
historic 5-year average.
Indosat’s negatives are largely priced in with 60% YTD
contraction. We expect ISAT to post ~6% growth in cellular
revenue over FY19F, supported by benign competition in Java.
We expect ~7% EBITDA growth in FY19F, supported by cost-
cutting initiatives and lower churn rates. While ISAT has
improved its network over the last six months, it may take
another 12 months to change the perception and Indosat is
likely to lag behind the industry growth rate of 7-8%.
Page 10
Industry Focus
ASEAN Telecom Sector

Sarana Menara Nusantara (TOWR) is trading near replacement
cost despite solid return on invested capital (ROIC). TOWR is
trading at an attractive 12-month forward EV/EBITDA of 6.0x,
~2SDs below its historical mean of 11.0x while offering 6.7%
FY18F-20F EBITDA CAGR and ~5.5% yield. It is now trading
near the replacement cost of towers despite generating an ROIC
over its average cost of capital. Being the largest operator in the
Indonesian tower sector, TOWR will benefit from 4G
capacitygrowth in Java and coverage expansion outside Java
(ex-Java).
Link Net to benefit from accelerating subscriber growth amid
benign competition. Link Net has upgraded its guidance on
homes passed to 250k for FY19F from 180k in FY18 indicating
a potential pick-up in subscriber growth. We think the timing is
quite opportune as its key competitor Telkom has been raising
pricing for its premium subscribers. We project revenue and
EBITDA CAGRs of 11% and 10%, respectively, over FY18-21F
at Link Net and we think the counter is attractive trading at an
FY19F EV/EBITDA of 5.1x vs. ~7x peer average.

Tower Bersama’s (TBIG) over 60% valuation premium to its

peers may narrow. TBIG is trading at a 12-month forward
EV/EBITDA of ~10.5x, at 65% premium to Sarana Menara
Nusantara (TOWR) vs its 3-year historical average premium of
35%. We think that the premium may narrow as TBIG is likely
to face similar pressure on tower leasing price from top-3
customers. TBIG offers 5.5% FY18F-20F EBITDA CAGR while its
5.3x net debt to EBITDA limits the potential for big acquisitions.

Page 11
Industry Focus
ASEAN Telecom Sector

Malaysia EVA vs share price

Digi’s EVA has suffered declines ever since 2014, due to 4G
rollout capex and worsening competitive dynamics with the
entry of Telekom Malaysia into the mobile space, coupled with
aggressive pricing behaviour of smaller operators after the
spectrum re-farming exercise. Digi’s share price dipped in 2015,
reflecting the fall in EVA and has remained fairly stable since
then, despite seeing declines in EVA.
Time Dotcom has seen steady improvements in EVA, owing to
growth in operating profit. This is clearly reflected in Time’s
share price, which showed steady improvement over 2014-
2017, mirroring the improvement in EVA. Maxis’s EVA, on the
other hand, exhibits a relatively weak correlation with the share
price, as reflected by the limited upward movement in the share
price, despite marginal improvements in EVA over 2014-17.

EVA history and Outlook –Malaysia

Steady rise in Time’s share price mirrors the

improvement in EVA
Growth in EVA over
2014

4G network roll-out and tightening

competition weighed on EVA

Source: Companies, Reuters, DBS Bank

Page 12
Industry Focus
ASEAN Telecom Sector
Axiata group’s EVA witnessed a sharp decline over 2016, largely
owing to subscriber losses and pricing pressures experienced by
Celcom, lower associate contributionsand currency woes further
exacerbating the decline in operating profit of the Axiata group,
driving EVA deep into negative territory over 2016/17. Axiata’s
share price corrected over 2016 with EVA decline
EVA history and Outlook –Malaysia
Share price remained stable
despite sharp fall in EVA
Sharp fall in EVA led to
only a marginal decline
in the share price
Source: Companies, Reuters, DBS Bank
Telekom Malaysia (TM) has recorded steady declines in EVA
since 2015, owing to the contraction of operating profit with
Telekom Malaysia’s entry into the mobile sector, coupled with
high capital infusions on mobile and fixed network rollouts.
Despite the fall in EVA, TM’s share price declined only
marginally over 2015-18, before contracting sharply over 2018
on news of the regulatory changes to lower fixed broadband
prices. This mirrors the sharp fall in EVA that TM is likely to
witness over 2018.
Share price correction on
news of regulatory changes
to broadband pricing and
resultant decline in EVA
Page 13
Industry Focus
ASEAN Telecom Sector

Implied EVA CAGR for Malaysian operators

Implied EVA Past 5-
FY18F Avg. Book Value CAGR over next Year EVA
Malaysia Share price WACC ROIC 2018 Market Value EVA (2018F) 10-years CAGR
Digi.Com 4.3 7.0% 62% 519 33,474 1,415 4.2% -3%
Maxis Bhd 5.3 6.8% 16% 7,159 40,944 1,309 5.4% -1%

Time Dotcom 8.0 7.6% 10% 2,368 4,670 46 15.7% nm

Telekom Malaysia 2.3 8.2% 2% 7,447 8,681 (872) nm nm
Axiata Group 4.0 7.1% 5% 30,828 36,065 (805) nm nm
Source: DBS Bank

Axiata Group to return to positive EVA territory by FY20F. We
expect the Axiata group to record narrowing negative EVA
over 2018/19 with a potentially positive EVA over FY20F. This
would be primarily driven by i) Improving operating conditions
in Malaysia, with limited disruptive pricing practices by smaller
operators, potential margin improvements through digitisation
and lower capex, improving ROIC by Celcom, ii) above-
industry growth and cost controls of XL Axiata, improving
operating profit contribution, and iii) lower associate losses
from Idea-Cellular after the divesture following the merger of
Idea and Vodafone and potential monetisation of Axiata’s
remaining stake in Idea-Cellular, allowing capital to be better
deployed elsewhere. Deployment of capital to more profitable
ventures could further buttress growth in EVA for the Axiata
Group.
Key risk for Axiata will be potential disappointment from XL
Axiata and forex. Earnings contribution could be lower than
expected if XL Axiata is not able to win revenue share despite
seeing a rise in capex.
High expectations for Digi and Maxis.The market is pricing in
EVA CAGRs of~4% and 6% for Digi and Maxis respectively,
which are at the higher end of our expectations. While we
believe the duo would be able to record low-mid single-digit
growth in EVA given flattish growth in the mobile sector, we
believe at current valuations, the counters have little room for
disappointment.
Telekom Malaysia unlikely to see positive EVA in the near
term. TM’s EVA dipped into negative territory in 2016, with its
entry into the mobile sector, thus weighing on the operator’s
high single-digit ROIC for its fixed line and enterprise
businesses. Negative EVA has since persisted with growing
competitive pressures in both broadband and segments and
rising regulatory pricing revisions. With regulatory
uncertainties and pricing pressure expected to remain
recurring issues for TM, we believe TM’s negative EVA would
continue to be the norm over the near term
Our investment thesis

Time DotCom likely to see near 17% growth in EVA over the
next two years. Market share gains in the fixed broadband
segment and growth in the wholesale (domestic &
international) and retail segments should allow Time DotCom
to improve ROIC over the near term, with potential EVA
CAGR of ~17% EVA over the next two years, marginally
above market expectations. EVA generation over and above
market expectations could prompt a re-rating of the counter,
as the market re-adjusts its expectations of future growth in
EVA.
Top pick is Axiata for recovery play in 2019. Axiata’s share
price is down by 30% YTD, and we believe this has largely
priced in the near-term weak performance by its operating
subsidiaries. We expect to see gradual improvement in
Celcom and XL Axiata’s results over the next 12 months,
which will be the key catalyst to drive a recovery in its share
price. Asset monetisation of its stake in edotco and Idea-
Vodafone will be a bonus, if they materialise.

Key risk for Time Dotcom will be steeper decline in bandwidth

prices. Steeper-than-expected decline in bandwidth prices
and/or slowdown in data demand will be an earnings risk for
TIME's bandwidth business.

Page 14
Industry Focus
ASEAN Telecom Sector
BUY on TIME due to its strong growth in data. We like TIME
for its strong growth profile, contributed by both its wholesale
(domestic & international) and retail segments. While the
reduction in fixed broadband prices might have short-term
impact on margins, we believe this is beneficial for TIME in the
medium to long term as it gains meaningful market share. The
stock trades at an attractive valuation of 16x FY19 PE (-1SD)
and has a strong balance sheet to support its network
expansion.
TM - still facing regulatory pressures. We believe the sharp fall
in TM’s share price has priced in most of the negatives for the
company (i.e. declining broadband prices, regulatory
pressures, exclusion from FBM KLCI, dividend cut, etc.).
However, it remains hard for us to be constructive on the
stock, given that regulatory uncertainties and pressures would
be key recurring issues for TM in the medium term.
Maxis and Digi – supported by domestic liquidity. Domestic-
focused operators such as Digi and Maxis are trading at
around 11.5-12.4x CY19 EV/EBITDA, a premium relative to
the regional average of 7.7x. Given the ample domestic
liquidity, we believe the premium valuations can be sustained
as long as dividend yields remain decent and are backed by
strong free cashflow generation.
Page 15
Industry Focus
ASEAN Telecom Sector

Thailand EVA vs share price

Advanced Info Service’s (ADVANC) EVA remained stable over
2013-15 before sharply declining over 2016, due to heavy
capital infusions on spectrum assets acquired at high prices and
ADVANC’s expansions into fixed broadband. The impact of
capital infusions was further exacerbated by tight competitive
conditions in the mobile segment, weighing down ADVAC’s
operating profit. The decline in EVA is captured by the sharp fall
in ADVANC’s share price in late 2015. EVA has largely remained
stable since then, as reflected in ADVANC’s share price.
Total AccessCommunications’ (DTAC) EVA entered negative
territory in 2016, owing to continued pressure on operating
profit, as Truemove, equipped with a strong network,
aggressively poached DTAC’s subscribers. The decline in DTAC’s
EVA explains the steady correction of DTAC’s share price from
2014-2016. EVA has only marginally improved since then, while
DTAC’s share price has also remained largely stable since 2016.
Digital Telecommunications infrastructure Fund’s share price, on
the other hand, exhibits a weak correlation with EVA.

EVA history and Outlook – Thailand

THB m
EVA history and Outlook ‐ Thailand
32,594 32,986
35,000 31,504
30,000 25,019 25,631
23,952
25,000 22,346 22,234

20,000
15,000
10,0006,765 6,081
5,000 0 1,329 1,741
‐2,453 ‐1,844 ‐2,692
0
‐1,875 ‐1,078 ‐1,593 ‐2,429 ‐2,970
‐5,000 ‐2,322 ‐3,051
2013 2014 2015 2016 2017 2018F 2019F 2020F
Total Access Com. Advanced Info. Digital telecom Infra.

AIS, DTAC THB Share Price movement ‐ Thailand

DIFU THB
300 16
14
250
12
200
Sharp fall in EVA on 10
higher capital infusions
150 and lower operating
8
profits
6
100
4
50
Steady decline in EVA due to tight 2
competition in the mobile segment
0 0
Jan-14 Jul-14 Jan-15 Jul‐15 Jan‐16 Jul‐16 Jan‐17 Jul‐17 Jan‐18 Jul‐18
Total Access Comm. Advanced info. Digital Telecom. Infra

Source: Companies, Reuters, DBS Bank

Page 16
Industry Focus
ASEAN Telecom Sector

Implied EVA CAGR for Thailand operators

Thailand (THB m) Share WACC FY18F Avg. Book Market EVA Implied EVA CAGR Past 5-Year
price ROIC Value 2018 Value (2018F) over next 10-years EVA CAGR

Advanced Info. 171.0 8.2% 23% 54,885 502,902 22,234 4.7% -7%
Total Access Com* 43.0 9.0% 4% 30,853 100,158 1,741 16.0% nm
Digital Telecommunications 14.5 7.2% 6% 117,009 136,955 (2,322) nm nm
Infrastructure Fund
*2019F EVA for Total Access Communications.
Source: Companies, DBS Bank

EVA prospects and key risks

ADVAC likely to see high single-digit growth in EVA over the
next two years. ADVANC’s EVA declined in 2016, no thanks to
its move into the fixedbroadband segment and intensifying
competitive pressures on the mobile front that was driven by an
aggressive TRUE. Intense competitive conditions on the mobile
front, however, have now subsided, allowing ADVANC to
improve its temporarily depressed ROIC in the mobile segment.
Furthermore, ADVANC’s fixed broadband segment should also
see an upliftment in ROIC going forward, with ADVANC
penetrating deeper within regions with existing coverage 2-3
years back. This should allow ADVANC to record high single-
digit growth in EVA over the next two years vs. market
expectations of ~5% growth, potentially prompting a re-rating
of the counter.
Failure to maintain market share will be a key risk for DTAC. If
DTAC’s market share is threatened by other operators, the
telco’s fixed costs might be affected.
Digital telecommunications Infrastructure Fund (DIF) EVA likely
to remain in negative territory in the near term. DIF’s
infrastructure driven business model and the existence of an
anchor-tenant, TRUE, offers limited room for major
improvements in DIF’s ROIC, which hovers around 6% currently,
below its WACC of 7%. However, possible improvements in
tenancy ratio, with potential rentals secured from DTAC and
ADVANC or inorganic growth driven by DIF’s healthy balance
sheet, may help DIF improve current ROIC over the medium
term, with potential to yield positive EVA.

Key risk for ADVANC will be high handset subsidies. With TRUE
looking to gain market share, it may give out high levels of
handset subsidies in the postpaid segment. To retain its
customers, ADVANC too may have to continue maintaining its
handset subsidies for a longer period.
DTAC likely to fall short on market’s expectations of EVA
growth. DTAC’s EVA is likely to enter positive territory in FY19F,
supported by regulatory cost savings and lower depreciation
and amortisation charges. Whilst, DTAC is likely to see low-mid
single-digit growth in EVA over the next few years, the high
double-digit growth as projected by the market is highly unlikely
to materialise, given the current competitive conditions in the
mobile segment. Lower than expected growth in EVA over the
next two years, could prompt the market de-rate the counter.
We see three key risks of DIF’s share price. i) New technological
risks such as Single radio access network (RAN) and carrier
aggregation could lead to more efficient use of tower slots in
the long run. ii) A weak macroeconomic environment could
result in lower investments by telcos and iii) If DIF fails to be
seen as an independent player, other telcos might not lease
towers from DIF for strategic reasons.
Our investment thesis
Our top pick for the sector is Digital Telecommunications
Infrastructure Fund (DIF). Thanks to its c.7% yield in FY19F and
11% upside to our DCF-based TP of Bt16.20. DIF is an
infrastructure fund that invests in telecom towers and fibre
optics. It has long-term visibility on cashflow, thanks to its lease
agreements made with TRUE group which is an anchor tenant
of its assets. In addition, DIF is also expected to benefit from
DTAC’s network improvement strategy in the coming years.

Page 17
Industry Focus
ASEAN Telecom Sector
In terms of mobile services operators, we prefer ADVANC to
DTAC. ADVANC’s share price has been depressed by its weak
3Q18 results and it is currently trading at c.-1SD. Though the
driver for its top line may be pressured by ARPU in FY19F,
ADVANC has recorded a YTD net gain of 0.59m total
subscribers with a clear uptrend for its post-paid subscriber base
of 0.63m, representing c.1.5% of its total mobile subscriber
base. In addition, ADVANC also has a more diversified portfolio
with its fixedbroadband business which should yield higher
growth compared to the legacy mobile business in the coming
year. Given our DCF-based TP of Bt223 and the potential upside
of 24.6%, we prefer ADVANC to DTAC. DTAC may seem to be
attractive for its almost -2SD valuation, but this can be mainly
attributed to its huge FY19F earnings growth which is mainly
driven by regulatory costsavings as DTAC will be operating fully
under a licence model, and also the decrease in depreciation
and amortisation of the deferred right to use equipment from
the concessionary assets. Given that our TP is based on DCF
model where cash capital expenditure is considered, this leaves
only 3.1% upside to our TP of Bt49.50.
Page 18
Industry Focus
ASEAN Telecom Sector
SingaporeOutlook
We project annual contraction of 5% for the mobile sector in
FY19F. We estimate that mobile service revenues declined
~4.5% over 9M18 vs our projection of a 4% decline over
FY18F. Declines were largely driven by postpaid ARPU due to
SIM-only plans and contractions in legacy usage. We expect the
mobile industry to contract ~5% over FY19F, driven by the
Industry to contract ~5% over FY18/19F
Mobile Service Revenue Growth
0.0%
2016 2017
‐1.0%
‐2.0%
‐2.1% ‐2.0%
‐3.0%
‐4.0%
‐5.0%
‐6.0%
Source: Company data, DBS Bank
Pay-TV business model needs to change to stem the shrinking
of the Pay-TV market. The pay-TV market in Singapore has
shrunk by ~8.5% y-o-y YTD with ~65k subscriber losses over
9M18, as subscribers continued to opt for cheaper OTT
alternatives. We believe that pay-TV subscriber losses will
continue through FY19 with the industry topline contracting
~5-6% over FY19. The management of StarHub believes that,
given the structural decay in the industry's Pay-TV revenues, the
current business model needs to evolve. Under the proposed
Pay-TV business model, subscribers will be able to choose the
content they wish to view. This would also translate to content
costs becoming more variable in nature as Pay-TV providers re-
negotiate industry contracts to make payments based on the
number of subscribers subscribing to a specific channel.
StarHub’s management is re-negotiating contracts to make
payments based on the number of subscribers as and when
they come up for renewal. Content-providers are reaching
subscribers directly and are more open to variable-cost contracts
than in the past.
Resumption of Smart Nation contracts to benefit telcos amid
intensifying competition in the enterprise segment. As the
government has lifted its moratorium on new Smart Nations
projects, Singtel and StarHub’s investments in fields such as
adoption of SIM-only plans (12-13% of postpaid user base
currently vs 25% in 2-3 years) and commercial launch of TPG’s
services in 2Q19F. However, if TPG faces serious network quality
issues, incumbents may not hesitate to raise their pricing in our
view, implying room for positive surprises.
2018F 2019F
‐4.8% ‐4.8%
cybersecurity are expected to bear fruit over the next few years.
Singtel is set to benefit from the resumption of Smart Nation
projects, and might benefit from a rebound in ICT revenue with
~S$300m of additional ICT revenue over 2H19F (March YE) vs.
1H19 largely stemming from Smart Nation contracts. However,
with the entry of StarHub and other mobile operators into the
enterprise services segment, Singtel’s pricing premiums in the
enterprise segment have come under pressure. StarHub’s joint
venture partner Certis Cisco has strong ties with the Singapore
government, with its executive team comprising several former
government officials from the Ministry of Home Affairs and
Singapore Armed Forces. The company has also managed the
Cyber-Watch Centre of the Singapore government since 2007,
providing round-the-clock monitoring of the government's IT
systems and networks. This should make StarHub’s
cybersecurity division a likely candidate for clinching future
government cybersecurity contracts pertaining to Smart Nation
projects.
Hot issues
TPG’s low capex spend and launch delays bring reprieve to telco
incumbents. TPG has so far spent A$66.7m (S$65.7m) in
cumulative capex on its Singapore rollout, or ~22-32% of its
Page 19
Industry Focus
ASEAN Telecom Sector
planned S$200-300 of capex. The telco revealed that its
production network covers ~90% of outdoor areas during its
FY18 results briefing and mentioned that is on track to meet the
nationwide coverage requirement by December 2018, as set
forth by IMDA. TPG has delayed the commercial launch of its
services to 2Q19 from late-2018, citing delays in negotiating
access to the jointly built common antenna systems of the
incumbents and network testing. TPG is slated to launch 4G
trials in 4Q18, followed by a commercial launch of services in
2Q19.
At the current level of capex spend, TPG’s network at
commercial launch is unlikely to pose a major threat to the
incumbents, in our view. We estimate that StarHub, the second
largest operator in Singapore, is likely to have spent over
S$600m on its 4G network since 2013, almost 10x of the
current capex spend of TPG on its 4G network. We are of the
view that to become a disruptive market player in Singapore,
TPG would need to significantly ramp up its capex rollout to
provide ubiquitous coverage. While TPG is likely to meet the
outdoor coverage requirements by 2018, the quality of the
outdoor network is likely to be poor with patchy and
inadequate coverage inside buildings and MRTs given its current
capex spend. This would make it difficult for TPG to lure low-
end subscribers, who already enjoy much better network quality
and coverage through Mobile Virtual Network operators
(MVNOs) that ride on the incumbents’ mobile networks.
TPG not meeting coverage requirements could lead to penalties
or forced industry consolidation. We believe TPG would need to
significantly boost its capex spend and network rollout over
2019, in order to meet IMDA’s road tunnel and in-building
coverage requirements by December 2019. TPG would also
need to negotiate access to common antenna systems of the
incumbents, given the limited availability of space for deploying
antennas in key sites. Any potential delays in TPG’s network
ramp up or negotiating access to the incumbents’ network
could lead to TPG failing to meet the coverage deadlines set by
IMDA. While this is likely to result in only a fine (S$5,000-
S$50,000) in the first few instances, continued failure to meet
coverage requirements, particularly owing to issues in securing
funding for capex, could prompt the regulator to mediate a
forced consolidation of the industry or push TPG to dispose of
its spectrum assets to an incumbent.
Mobile Virtual Network Operators (MVNOs) march on with their
aggressive expansion plans. Against a backdrop where TPG was
expected to enter Singapore in 2H18, each incumbent operator
partnered with MVNOs takes the total number of mobile service
providers in the country to seven from three players at the end
of 2015. By partnering with MVNOs, the incumbents are 1)
making it difficult for TPG to succeed by stirring up competition
in the SIM-only segments, which TPG is likely to target first, and
2) generating wholesale mobile revenues, offsetting any
potential revenue impact in the low-end segments that is likely
to be caused by TPG.
MVNOs such as MyRepublic and Circles.Life, with their low-cost
model, superior network quality (as they leverage on the
network assets of established players) and convenient customer
service (100% app-based), may attract a substantial number of
customers, especially the low-income segments, in shifting to
cheaper SIM-only plans. As the majority of MVNOs’ revenues
will flow back to their telco partners, telcos are better off losing
revenue share to MVNOs than TPG by offering flexible
wholesale pricing to their MVNOs. TPG is likely to compete on
cheaper pricing but will be challenged by MVNOs that offer
superior network quality and differentiated services. As MVNOs
are already disrupting the Singapore telco market, we do not
expect a major disruption from TPG in 2H19 when it launches
its services in Singapore.
Page 20
Industry Focus
ASEAN Telecom Sector

3.5% and 4% revenue share grab by MVNOs and TPG respectively by 2022 under our base case scenario

0.4% 1.2% 2.0% 2.7% 3.5%

100.0%
1.0% 2.0% 3.0% 4.0%
90.0% 19.1% 18.8% 18.6% 18.4% 18.2% 17.9%
80.0%
70.0%
27.5% 27.0% 26.6% 26.1% 25.6%
60.0% 25.1%

50.0%
40.0%
30.0%
53.4% 53.7% 52.7% 51.6% 50.5% 49.5%
20.0%
10.0%
0.0%
2017 2018 2019 2020 2021 2022
Singtel StarHub Other TPG MVNOs*
We have assumed that 65% of MVNO revenue will flow back to their telco partners
Source: Company data, DBS Bank

SIM-only plans to continue weighing on ARPU. Both Singtel and
StarHub witnessed y-o-y declines of 10% and 8% in postpaid
ARPUs over 3Q18, respectively, largely owing to the growing
adoption of SIM-only plans. We believe SIM-only plans will rise
in popularity over the medium term, with lengthening
smartphone replacement cycles, which could further incentivise
subscribers to move away from bundled plans. The growing
adoption of SIM-only plans presents a challenge to operators,
with potential declines in mobile service revenues, dilution of
ARPU and profitability. Customer spend over the life of SIM-only
contracts tends to be substantially lower than handset plans,
and SIM-only plans remain less profitable than handset plans,
even after taking handset subsidies into consideration.
Our industry checks indicate that SIM-only plan adoption
among Singapore postpaid customers grew from 8-9% in 1Q18
to 12-13% by 3Q18. Judging from Australia’s experience,
where SIM-only plans constitute ~25% of the total postpaid
plans, Singapore is likely to see a leap in these plans. Customer
spend on SIM-only plans vis-à-vis handset plans tends to be
substantially lower and growing uptake would negatively
impact mobile service revenues and dilute industry ARPU going
forward.
Regulations and Risks
Significant capex outlay by TPG in 1H19. The telco revealed that
its production network covers ~90% of outdoor areas during its
FY18 results briefing and mentioned that is on track to meet the
nationwide coverage requirement by December 2018, as set
forth by IMDA. We believe that, whilst, TPG is likely to meet the
outdoor coverage requirements by 2018, quality of the outdoor
network is likely to be poor with patchy and inadequate
coverage inside buildings and MRTs given its current capex
spend. However, there is a risk of TPG incurring high capex in
1H19 to create a formidable network to compete with the
incumbents. This could potentially disrupt pricing and mobile
services revenue.
Cost-cutting initiatives may be less impactful than expected.
Singtel has spoken of plans for a ~S$70m cost savings initiative
while StarHub has announced plans to save ~S$210m in
operating expenses over a period of three years, largely through
reductions in staff expenses, procurement, leasing, maintenance
and sales and distribution expenses. StarHub is expected to
terminate ~300 full-time employees, leading to annual cost
savings of ~S$30-35m along with digitisation and
rationalisation of expenses in other categories that support
savings. Even though telcos have announced ambitious cost-
cutting plans, the actual savings may be materially less than
those announced due to their investments in new businesses
such as cybersecurity.

Page 21
Industry Focus
ASEAN Telecom Sector

Indonesia Outlook

Mobile sector to witness 7-8% revenue growth in 2019. We
assume benign competition in Java over FY19, despite intensive
competition outside Java under our base case. XL Axiata is likely
to grab ~2-3% revenue market share outside Java through
aggressive pricing strategies as the telco plans to double its
market share in ex-java regions to 30% in 4-5 years. This should
allow XL Axiata to grow its ex-Java base by high double digits,
which coupled with benign competition in Java (~80% of XL
Axiata’s topline) should allow XL Axiata to grow at ~10% in
FY19. The bulk of the market share gains forXL Axiata would
likely stem from Telkomsel (~80% market share in regions
outside Java) which, coupled with declines in legacy services
(~42% of Telkomsel’s top line in 3Q18) would lead to ~8%
growth in Telkomsel’s revenue base over FY19. Supported by
benign competitive conditions in Java, which accounts for
~90% of Indosat’s (ISAT) topline, ISAT should be able to record
mid-single-digit growth, in our view.
High-speed fixed broadband penetration in Indonesia on a
growth trajectory. We estimate that high-speed fixed
broadband penetration (connections over 5Mbps) in Indonesia
doubled over the past year from 4% household penetration
in1H17 to 8% household penetration as of 3Q18. This was
largely driven by aggressive expansions by Telkom Indonesia
(TLKM), which added nearly 2.7m subscribers over the same
period. All major fixed broadband players are aggressively
expanding their coverage regions to capitalise on the growing
appetite for high-speed data among the expanding middle-
income class in Indonesia. Extrapolating the growth in high-
speed broadband penetration over the past year coupled with
the growing interest in the segment by incumbents and new
operators like XL Axiata and ISAT, we expect to see penetration
of high-speed broadband services rising to at least 20% over
the next three years, adding ~9m new households to the high-
speedbroadband segment.

Accelerating coverage and high-speed fixed broadband coverage in Indonesia

High Speed Fixed Broadband Total high speed broadband

Coverage (Homes Passed in
25% Penetration - Indonesia 000's) 4Q17 3Q18 Growth
20% Telkom Indonesia* 18,700 27,925 49%
20%
Link Net 2,000 2,146 7%
15% MNC Play Media** 1,209 1,399 16%
BizNet N/A 448
10% 8%
MyRepublic* 500 575 15%
4% * - Estimated based on 17% penetration rate
5% ** - Estimated based on 20% growth in homes passed over 2017
*** - Estimated based on 15% growth in broadband subscribers and 28%
penetration
0%
1H17 3Q18 FY21F
Sources: Telkom Indonesia, Link Net, MNC Play Media, MyRepublic,
Department of Statistics Indonesia, World Bank estimates, DBS Bank

Hot issues

Mobile Sector
Ex-Java to be the key focus in FY19. XL Axiata’s management
reiterated its commitment to keep expanding coverage
outside Java with ~50% of capex allocated to expanding
coverage in the region. XL Axiata hopes to achieve ~80% 4G
population coverage outside Java by the end of the year vs
40% penetration 3-4 years ago. XL Axiata is now the second
operator in many second and third tier cities outside Java and
continues to push hard with a focus on commodity related
markets, such as Sumatra, Kalimantan and Sulawesi.
Based on our checks with tower operators, ISAT is currently
upgrading the equipment of its network in existing coverage

Page 22
Industry Focus
ASEAN Telecom Sector

regions, but order flows for ex-Java coverage has been slow. Data pricing may have bottomed out. XL Axiata lowered the
The new management has pledged to invest ~Rp30tr(US$2bn) data pricing 8% q-o-q in 3Q18 as its data-pricing discount to
over the next three years to close the existing network gaps of Telkomsel had narrowed to 15%-20% in 1Q18-2Q18 vs an
ISAT with other operators. ISAT currently covers only ~27% of average discount of 34% in 2017 when XL Axiata had gained
the population outside Java via 4G and plans to improve this significant market share. Witha 32% discount to Telkomsel in
to 60% over the next few years. Hence, we expect to see 3Q18, we think that XL Axiata should be looking to sustain
more ex-Java action from ISAT in 2019 once the ongoing 32% discount to optimiseits subscriber and revenue share.
network upgrade is complete. Data-pricing outside Java (ex-Java) is higher than the pricing in
Java, so overall data-pricing is likely to trend upwards for XL
Telkomsel is also expanding 4G coverage and quality in the Axiata from gains in the ex-Java region.
region aggressively with the recently acquired 2.3GHz
spectrum. With all three operators racing to expand coverage,
to leverage on the rising adoption of smartphones in the
region, we believe the market’s focus should shift to
operations outside Java in FY19, as ex-Java would likely
account for the lion’s share of incremental growth in the
mobile industry.

Data-pricing differential had narrowed too much in 1H18

Rp per MB
25
Revenue per MB - Indonesia
21
19
20
15
14
15 15 15
12 13 12 10 10
11 11 9
10 10
9
8
7
7
6
5 6

0
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Telkomsel XL Axiata Indosat
Source: Companies, DBS Bank

Telkomsel likely to cede revenue market share to XL Axiata in
2019. We estimate that XL Axiata shed ~0.6% revenue
market share in 3Q18, largely due to the re-pricing of data
services by Telkomsel. However, we believe the service
revenue growth of Telkomsel would normalise in 4Q18, with
the impact of the re-pricing largely baked into its 3Q18
numbers.
Telkomsel controls ~80% of market share outside Java with
XL Axiata accounted for ~15% of the remainder. XL Axiata is
planning to double its market share over the course of the
next five years. We believe that the bulk of these gains would
stem from Telkomsel as, 1) with XL Axiata aggressively
bridging its network gaps with Telkomsel, we may see price-
sensitive customers switching to XL Axiata, and 2) with XL
Axiata becoming the second operator in most second- and
third-tier cities, any market share gains for XL Axiata would
have to stem from Telkomsel.
XL Axiata is also at an advantage with the lack of exposure to
legacy revenues, the declines of which are accelerating in ex-
Java regions as seen in Telkomsel’s recent quarterly results.
Telkomsel, which generates ~60% of its top line from regions
outside Java (vs. ~20% for XL Axiata), has seen legacy
revenues contracting in the recent past, primarily due to rising
smartphone adoption in ex-Java regions that is supported by

Page 23
Industry Focus
ASEAN Telecom Sector

the proliferation of cheap Chinese handsets. This could further

exacerbate potential revenue share losses for Telkomsel in the
region.
Revenue market share in Indonesia- Telkomsel benefited from re-pricing in 3Q18 despite subscriber losses

Revenue market share

80% 70.3% 69.8% 70.7%
67.5% 68.1% 67.7% 67.2% 67.3% 68.1%
70%
60%
50%
40%
30% 18.9% 18.3% 18.4% 18.5% 17.6% 16.6%
20% 14.2% 14.2% 13.9%
10% 15.4% 15.5% 16.0% 15.4%
13.6% 13.5% 14.0% 14.3% 15.1%
0%
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18

Telkomsel XL Axiata Indosat

Sources: Companies, DBS Bank

Fixed broadband industry concentrated in the greater Jakarta region. MyRepublic,

TLKM dominates the market but smaller players are creeping
up. TLKM continued its dominance in the high-speed fixed
broadband market, accounting for ~82% of subscriber
market share as of 3Q18. TLKM’s early entry to fixed
broadband and extensive legacy network infrastructure is
driving the telco’s dominance in the fixed broadband space,
but smaller operators are aggressively expanding their
coverage regions, with the hope of claiming dominance in
selected regional clusters that are yet to be occupied by two
or more players. Link Net is the second biggest operator by
subscriber market share, with its network predominantly
BizNet and Media Nusantara Citra (MNC) operate smaller
regional networks concentrated on residential areas and
central business districts in Jakarta.
Competition in the fixed broadband segment remains benign,
as indicated by TLKM’s decision to raise pricing by 5-10% on
a selected set of its subscribers. Link Net followed TLKM’s lead
and instituted similar price changes in its package offerings.
Given the low penetration of fixed broadband services,
providing enough room for several operators, and the heavy
investments required to provide regional coverage, we do not
expect major price wars between operators.

Page 24
Industry Focus
ASEAN Telecom Sector
TLKM dominates the fixed broadband market in Indonesia
High Speed Fixed Broadband Market Share - Indonesia
83%
TLKM 11%
4.7m Households
3%
4%
Assuming 8.4% High speed fixed broadband penetration in Indonesia. Estimated subscribers for
MyRepublic and MNC Play Media. Ignoring subscribers of other operators such as BizNet, Indosat
and XL Axiata
Sources: Company Data, DBS Bank
Fixed broadband market getting crowded with the entry of XL
Axiata and ISAT. In 1H18, XL Axiata announced plans to invest
US$ 500m to introduce triple-play service packages covering
mobile/fixed broadband and Pay TV services. The telco also
launched ‘XL Home POW!’ home internet broadband services
targeting areas with difficult internet access. Although the
service is still in pilot stages, XL Axiata’s management indicated
its ambition to target not only tier 1 but also tier 2 and tier 3
cities. The service, with packages starting at Rp300,000 is
currently online in selected regional clusters of tier 1 cities
surrounding Jakarta such as Bogor, Depok and Bekasi.
Assuming that XL Axiata sets aside ~US$100m for preliminary
network set-ups and bandwidth purchases, and spends
~US$400m on rolling out its broadband network, we estimate
that XL Axiata could provide coverage to over 1.1m households,
based on our estimate of ~US$350 roll-out capex per home
passed. ISAT also made its entry to the fixed broadband space
with the launch of GIG early this year, offering triple play
services via fixed fibre networks. In relation to this, ISAT
launched GIG 2 Go in April 2018, a prepaid Wi-Fi home fibre
service available in main cities like Jakarta, Tengah, Yogyakarta,
Timur and Banten and plans to expand to cities such as
Jabodetabek, Bandung, Surabaya and Semarang. ISAT’s
broadband-only packages start at Rp280,000 for 20Mbps
speed.
Link Net
600,000 Households
MyRepublic
160,000 Households
MNC Play Media
216,000 Households
Regulations and risks
Regulator pushes hard for M&A in the industry. The Indonesian
mobile market is dominated by five licensed network operators
accounting for ~99% of the market share: Telkomsel, ISAT, XL
Axiata, Tri and Smartfren. BOLT! and Hinet are also present in
the country, accounting for ~1% of the market between them.
With many operators in competition, smaller players have
attempted to scale up, sparking price wars and eroding ARPUs.
Besides the allocation of limited spectrum resources among a
larger number of players has raised quality issues and restricted
the ability of large scale incumbents to expand. Kemkominfo,
the regulatory body of the telecom industry, has called on the
country’s mobile phone operators to consolidate through
mergers and acquisitions. Kemkominfo has renewed the public
campaign to encourage M&A among the operators
encouraging the smaller operators without sufficient resources
for network investments to merge with one another or with
larger operators. Going forward, in the absence of any
voluntary M&A among operators, Kemkominfo may seek to
force smaller operators to consolidate with large-scale operators
or re-allocate the spectrum assets of the smaller operators to
large-scale incumbents.
Page 25
Industry Focus
ASEAN Telecom Sector

Thailand Outlook

To record a mild topline growth in FY19F.Despite healthy Thailand’s mobile subscribers market share
growth in data consumption, the sector is expected to see only
a mild topline growth of c.2-3% in 2019, no thanks to the 50% 45.9%
45.7% 45.6% 44.8% 44.8% 44.7% 44.6% 44.8% 44.7% 44.8%
impact of the popular fixed-speed, unlimited-data plans offered 45%
by operators in FY18, especially during the DTAC transition
40%
period from concessionary model to licence model. The
35% 30.9% 31.3% 31.7%
migration of subscribers wasprompted by ADVANC and TRUE’s 29.1% 28.4% 27.2% 28.4% 29.0% 29.7%
30.3%
attractive packages including low-priced, fixed-speed, unlimited 30%
23.5%
data plans. Nonetheless, we expect the value-driven offering for 25% 27.2% 26.8% 26.2%
25.0% 25.9% 25.7% 25.1%
24.4% 24.1%
service quality upgrade in both mobile and fixed broadband 20%
services to be the key driver for FY19F. 15%
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18

Shifting from aggressive handset subsidies to value-for-money DTAC ADVANC TRUE

package offerings. The Thai telecommunication industry has
experienced less intense competition in FY18 in terms of
handset subsidies.However, the operators competed in terms of
mobile data packages instead. The notable strategy adopted in
FY18 is the fixed-speed, unlimited data plan which was first
launched by DTAC in its attempt to defend its market share
during the transition period from concessionary model to a full
licence model in mid-September 2018. Other operators like
ADVANC and TRUE have caught up with DTAC’s strategy and
started to offer the same packagesat a lowprice starting from
Bt299 per month. In addition, ADVANC and TRUE also
competed head-to-head in selected areas in northeast Thailand
with a more localised campaign, thus minimising the acquisition
cost per subscriber.
Thailand mobile subscriber revenue market share (9M18)
DTAC
TRUE 23%
29%
ADVANC
48%
Source: Companies, DBSVTH
Mobile/fixed broadband outlook for FY19
Pressure on APRU uplift mainly due to the popularity of low-price
unlimited-data plans. A stable to a slight downward trend in
average mobile ARPU is expected, as witnessed in the downward
movement of 3Q18 weighted average ARPU by subscriber base.As
Thailand has a mobile penetration rate of over 130%, we expect
to see minimal increments in the number of subscribers over the
next few years. Hence, the major revenue driver for the mobile
sector will be price increments rather than volume-driven factors.
ADVANC had recorded a net gain in subscriber number in 2Q18,
for the first time after five consecutive quarters of net losses. The
net addition momentum also carried into 3Q18, thanks to
concerns over DTAC’s long-term service quality during the
transition period from concessionary model in September 2018.
For the first ninemonths of FY18, ADVANC and TRUE had
recorded net subscriber gains of 0.6m and 1.5m respectively.
Though both operators’ subscriber base has expanded in 3Q18,
both had experienced a decline in an ARPU. ADVANC has suffered
from the impact of the low-priced fixed-speed, unlimited data
plan. TRUE also offers a low-priced unlimited data plan and is at
the same time gaining more pre-paid subscribers which generally
yield lower-than-average ARPU per subscriber per month.

Source: Companies, DBSVTH

Page 26
Industry Focus
ASEAN Telecom Sector

Weighted average mobile ARPU by no. of subscribers also ink a similar deal, we see potential downside risks to the
forecast in terms of higher network costs.
 250
Spectrum roadmap for 5G technology is unclear. According to
 245 the latest statement released by the National Broadcasting and
Telecommunications Commission (NBTC), a committee will be
 240
set up in December 2018 to carry out the review and revision of
Bt/Sub/month

 235 auction guideline for spectrums that can be supported by 5G

 230
technology. Given the upcoming general election expected in
February 2019, we also expect to see some changes in NBTC
 225
committee that may impact the spectrum roadmap for 5G
 220
technology.
4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18

Source: Companies, DBSVTH Fixed broadband market also facing downward pressure on APRU
uplift. Given the intense competition, the fixed broadband
DTAC to heat up competition in FY19F. Thanks to DTAC’s industry also faceddownward ARPU trend in 3Q18 as witnessed
decision to acquire the 900MHz spectrum and incur a huge by TRUE and ADVANC. TRUE has introduced the plan for
capital expenditure of Bt38bn, we expect DTAC to put customers to upgrade their subscriptions to asuperior package,
togethera marketing campaign to regain market share lost while also offering a discount on the upfront entrance fee,
during the concession’s expiry in last September. We expect therebypressuring TRUE’s ARPU. JAS, which is the second largest
DTAC to aggressively leverage its expanding 2.3GHz network to fixed broadband service provider, also launched new FTTx package
attract higher-ARPU subscribers. Nonetheless, we expect with 50/20 Mbps at a monthly subscription fee of Bt590 on par
ADVANC and TRUE to take cautious steps in reacting to with its xDSL service (30/10Mbps). As JAS previously offered
promotional campaigns rolled out by DTACas the deadline for smaller or larger packages for its FTTx service, therefore we expect
the huge 900MHz licence payments is approaching in FY20F. the competition in this segment to be more intense in FY19F.
Though DTAC may have more room to play in FY19F, as the
timeline for huge cash outflow is further away, we expect DTAC Fixed broadband ARPU trend
to be aggressive in its targeted segment of postpaid subscribers,
as DTAC also needs to preserve cash for a huge 900MHz licence 665

payment in FY23F. 650

635
Settlement on telecom tower ownership. Post DTAC settlement 620
Bt/user/month

on the dispute over the ownership of telecommunication towers 605 TRUE

procured during the concession period with CAT Telecom in late AIS
590
September, TRUE had also announced during its 3Q18 results JAS
575
briefing that it is likely to reach an amicable agreement with
CAT Telecom on the tower ownership issue. Therefore, we also 560

expect ADVANC to follow suit. As a result of DTAC’s settlement 545

plan with CAT Telecom, the former has also entered into an 530
agreement to lease telecom towers and other related equipment anies, DBSVTH
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18

from CAT Telecom. Under the scenario that TRUE and ADVANC
..Source: Company, DBSVTH

Page 27
Industry Focus
ASEAN Telecom Sector

Malaysia Outlook

Flattish mobile revenue growth in 2019. Amid the already high Hot issues
penetration rate in Malaysia, we expect competition and data
pricing to remain stable for the mobile segment in 2019. We Mobile Sector
assume relatively stable market share for the incumbents, with
Digi slightly ahead as it catches up against peers in the Mobile penetration rate in Malaysia
postpaid segment. Meanwhile, service revenue for Maxis could Postpaid Prepaid Penetration rate (%)
148.3 
be tepid as its RAN sharing agreement with U Mobile will be 60.0 142.5  143.8  143.8 
141.3 
150

gradually terminated by 1H19. We think competitive pressures

No. of mobile subscriptions (m)
135.5  140
50.0 131.2 
from smaller players should lessen in 2019 due to company- 40.0
127.7 
36.8 
130
35.2  35.4  34.3  32.1  32.8 
specific internal issues. For U Mobile, this refers to its network 29.6 
34.0 
120
30.0
quality issues post the termination of network sharing with 110

Maxis, while TM will need to focus on its fixed broadband 20.0

100
8.7  9.6  10.2  11.2 
business. 10.0 7.1  7.4  7.8  8.1 
90

0.0 80
2011 2012 2013 2014 2015 2016 2017 3Q18
Overall, data now contribute approximately 55-60% of mobile
operators’ revenue, which means diminishing impact from Sources: MCMC
declining legacy voice and SMS over the next few years. We
Prepaid to postpaid migration to continue. Amid the fall in
believe it is possible for the mobile industry to return to a low-
data pricing and introduction of affordable plans, we saw a
growth period, as long as data pricing stays rational.
general shift in subscriber preference towards postpaid, which
now makes up about 26% of the market (compared to just
Re-pricing in the fixed broadband segment. The fixed
18% a few years ago). In our view, subscribers have fewer
broadband market is dominated by TM with close to 80%
incentives to hold multiple SIMs now – this explains the
market share. Despite relatively flattish fixed broadband
declining mobile penetration rate as well as prepaid subscriber
penetration rate at 35-37% of household over the last few
base over the past few years. After three years of decline,
years, TM was still able to grow its Internet segment revenue
mobile penetration rate seems to have stabilised in 2018 based
by 8-15% annually as more subscribers took up or switched to
on the latest statistics from MCMC.
high-speed fibre broadband plans (Unifi) with ahigher ARPU.
However, we expect TM’s broadband revenue to decline by
In prepaid, Digi still have the highest subscriber base (9.1m
5% in 2019, as the full-year impact from the recent reduction
subs vs. 6.3-6.6m of peers), partly due to its larger market
in fixed broadband prices starting 4Q18 is felt. This was
share in the migrant workers segment. On revenue basis, the
regulatory-driven by the implementation of MSAP (Mandatory
gap is not that huge as Digi has a relatively lower prepaid
Standard on Access Pricing), generally a short-term negative for
ARPU.
incumbent (i.e. TM), but could be potential gains for other
players that can be competitive (i.e. TIME and Maxis).
For postpaid, subscriber market share is finally converging close
Fixed line broadband subscriptions in Malaysia (in ‘000) to equilibrium with the three incumbents having about 2.7m to
3.0m subs. However, there are still clear segmentations in
subscriber profile between Maxis (high-end/corporate), Celcom
(mid-end) and Digi (value-for-money).

A year-long of truce in data pricing. Based on our observation,

baseline pricings and data quota for most popular plans have
largely remained unchanged since 2017. There were only a
few limited promotions during the August-September period,
where free data was given in conjunction with National Day.
On competition, incumbents have been disciplined and did not
respond to some aggressive plans by the smaller players.
Particularly, U Mobile introduced two unlimited plans at very
Source: TM, Maxis

Page 28
Industry Focus
ASEAN Telecom Sector
low price points of RM30 (prepaid) and RM50 (postpaid),
respectively, albeit with a speed limit of 5Mbps.
Growth in data usage remains strong with 50-80% increase y-
o-y as at 3Q18. However, this did not help to lift ARPU for
mobile operators. Beside higher base quota, mobile operators
have also been giving data freebies (i.e. free or extra data for
social media, Youtube, video streaming, etc.) to subscribers,
which remain prevalent till now.
Data usage per subscriber (GB/month)
DiGi Maxis Celcom
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
Sources: Companies
Fixed Broadband Industry
TM – ARPU to decline in FY19-20 but could be compensated
by higher take-up rates. To meet the government’s agenda of
cheaper broadband prices, TM has started to upgrade its Unifi
subscribers to faster speeds (8-10x) since Aug 2018 for free.
Indirectly, this has led to a re-pricing in the fixed broadband
market, where Unifi plans are now among the cheapest in the
market. This has also forced Maxis and TIME to adjust their
broadband packages as well. As a reseller of HSBB fibre
broadband, Maxis is likely to have signed a new access
agreement with TM recently at a lower wholesale price,
following the implementation of MSAP.
All in, we expect Unifi ARPU to fall by 10%/6% in FY19-20 as:
1) some of the low-tier subscribers would take-up the cheapest
basic entry-level plan, and 2) mot all of the subscribers are
technically able to upgrade to >100Mbps speed, while some
subscribers might downgrade.
Overall, we think lower pricing coupled with more variety of
broadband packages offered by TM and access seekers should
accelerate the take-up rate for HSBB services, which is only at
about 55% of premises passed, and only about 20% of
household penetration as at 3Q18.
Market share gain for TIME and Maxis In the long term, we
expect TM’s retail market share for fixed broadband to
gradually fall from the current dominant >80% to 50-60%, as
new and smaller players gain more market share with the aid
of regulations. Apart from lower wholesale prices, we believe
the implementation of MSAP has also given more assurance to
access seekers, as government policy is seen to be shifting
towards promoting more competition in the fixed broadband
market. Maxis and TIME are key potential beneficiaries given
that they already have existing fixed broadband offerings,
while new players might take some time to come out with new
products.
Regulations and risks
Further liberalisation in fixed broadband. To drive growth in
the digital economy, the Government is allocating RM1bn for
the National Fiberisation and Connectivity Plan (NFCP) under
Budget 2019. Compared to previous broadband projects such
as the HSBB and SUBB which were awarded solely to TM, the
NFCP will adopt an “open access” concept where new and
existing providers can participate in providing backhaul and
3Q18
retail broadband services. For example, utilities provider TNB is
currently running a pilot project in rural Melaka to provide
high-speed broadband services using its existing fibre-optics
network. Depending on the outcome, TNB might embark on a
possible larger-scale NFCP participation nationwide, if it is
commercially viable to do so.
For its longer-term target, the government hopes to achieve
broadband speed of 30Mbps in rural areas within five years.
This is in line with our view that the MCMC’s next focus will
likely be on improving service quality and expanding
broadband coverage.
Spectrum risks for mobile operators. MCMC has been quite
hands off with regard to its policy on the mobile segment. This
is mainly due to healthy competition in the mobile space,
where data pricing had declined quite sharply over the past
few years.
Nevertheless, mobile players are still relatively cautious given
the lack of updates on the delayed 700MHz spectrum auction.
We view this as an important development for the industry, as
this would set the tone and expectations for any future
spectrum policy under the Pakatan Harapan-led (PH)
government. To recap, past government policy on spectrum
had been very accommodative for the mobile sector (no
auction, fixed allocation and fees). It remains to be seen
whether this will still be the case, in view of the current
government’s need to raise more revenue.
Page 29
Industry Focus
ASEAN Telecom Sector
Regional Trends
Regional data yields on a downward trajectory
Data pricing trends in Asia (USD per GB)
5.6
4.2
3.5
2.7
1.5
0.9
0.6 0.4
Singapore Malaysia India
3Q16 3Q17
All figures are in USD. Denotes the cost per GB
*2Q18 figures for India, ***AIS
All figures are at constant US$ rates of Singapore Dollar – 1.37, Malaysian Ringgit – 4.14, Indian Rupee – 72.33, Indonesian Rupiah – 14,900, Thai
Baht – 32.18
Source: Companies, DBS Bank
Data yields likely to remain under pressure over FY19.Singapore
is likely to see yields edging down with the anticipated entry of
the fourth mobile operator, TPG, into the market in 2Q19.
While any major pricing disruption from TPG is likely to be
confined in the low-end segments, some pricing pressure is
likely to trickle down to the high-end segments, where
incumbents largely focus on. Yields in Thailand are likely to
edge down too, with the growing uptake of fixed speed,
unlimited data plans popularised by DTAC and now offered by
all three operators. We believe DTAC is likely to maintain an
aggressive pricing stance in FY19, as the operator looks to rake
back the market share it has lost since 2016. India is also likely
torecord declines in yields albeit at a slower pace than 2018, as
Reliance Jio’s continues to maintain an aggressive stance to
reach its goal of ~50% market share.
However, we do not expect to see major disruptions to data
yields in Indonesia over FY19, as we believe yields may have
bottomed out in 1H18. Telkomsel and Indosat have already
raised data pricing in the country and we believe XL Axiata may
also do so over 4Q18/1Q19 in selected regions within and
outside Java. Hence, yields are likely to remain stable or decline
2.2
1.6
1.2
0.9 0.9
0.2 * 0.5
Indonesia Thailand***
3Q18
only marginally in Indonesia over FY19, in our view. Benign
competition in Malaysia should also only lead to marginal
declines in data yields in our view.
Growing data consumption on cheap data and accelerating
smartphone adoption. Consumption of data in the region has
accelerated, fuelled by cheap data, emergence of Over-the-Top
(OTT) video and music services and growing smartphone
adoption. India and Indonesia recorded the highest growth in
data consumption, driven by the proliferation of cheap Chinese
handsets and growing network expansions of operators.
Thailand and Malaysia also witnessed steep improvements,
backed by the emergence of unlimited data plans and growing
popularity of OTT services. Singapore, however, recorded only
marginal improvements in data consumption as wireless data
remains pricey and the ubiquity of fixed broadband, coupled
with unlimited data, provides users with alternative wireless
connectivity such as Wi-Fi. We believe there is ample room for
data consumption to grow by high double digits in the ASEAN
region whosesmartphone adoption remains well below that of
an average developed market.
Page 30
Industry Focus
ASEAN Telecom Sector

Accelerating data usage in the region

Data consumption trends in Asia - Average MB per User

11,100
10,100
9,221

6,395 5,900
5,500
4,200
3,946
3,400 2,786 2,960
3,020
1,456
847 730

Singapore Malaysia India Indonesia Thailand**

3Q16 3Q17 3Q18
**AIS, Data consumption in MBs
Source: Companies, DBS Bank

Stable ARPU in the region despite competitive pressures.
Average Revenue per User (ARPU) of regional operators have
largely remained stable over the past six years, despite growing
competitive pressures and declines in the usage of legacy
services. ARPU of operators in Singapore and Indonesia have
been on a downward trajectory over the past 2-3 years, owing
to growing competitive pressures in each market, while
Thailand and Malaysia have witnessed an upliftment of ARPU
backed by more stable competitive dynamics. Going forward,
we expect the ARPU of Indonesian operators to trend upwards,
driven by improvements in data yields and growing data usage,
offsetting any potential declines in legacy services. ARPU in
Singapore is likely to continue on a downward trajectory, with
the anticipated entry of TPG in 2Q19. Though data
consumption is growing healthily in Thailand, we expect to see
a stable to slight downward trend in average ARPU in FY19F, no
thanks to the competitive package launched during FY18F to
take market share from DTAC during the transition period out
from the concessionary operating model. Malaysia is likely to
see stable or only marginal decline in ARPU over FY19,
supported by stable competition as internal pressures on smaller
operators discourage them from adhering to disruptive pricing
measures.

ARPU of regional operators have remained stable

ARPU trends in the ASEAN

US$
31.7 31.7 33.2 33.3 31.9
35.0 30.7
30.0
25.0
20.0
15.0 12.0 11.3 11.4 11.2 11.1 11.6 11.8
10.0 7.9 7.7 7.5 7.5 7.8
6.9 7.2
5.0 2.2 2.1 2.1 2.4 2.4 2.2 2.0
-
2012 2013 2014 2015 2016 2017 9M 2018
Indonesia Malaysia Singapore Thailand
9M18 figures for Singapore cannot be used for comparative purposes due to changes in the classification of revenue under SFRS. All figures are at
constant US$ rates of Indonesian Rupiah – 14,490, Malaysian Ringgit – 4.17, Singapore Dollar – 1.37, Thai Baht – 32.26
Source: Companies, DBS Bank

Page 31
Industry Focus
ASEAN Telecom Sector

Data revenues to comprise >60% service revenues for Malaysia
and Indonesia by end0FY19. Contribution of data services to
the industry topline in the region continue to edge up, backed
by declining usage of legacy services and growing consumption
of data. We estimate that Singapore and Thailand already derive
over 60% of service revenue from data services, at which point
the contribution of growing data services becomes substantial
enough to offset the impact of declining legacy revenues.
Contribution of data services to the topline in Malaysia and
Indonesia is likely to exceed this inflection point of 60% over
FY19 in our view, as growing consumption of data services and
stable or marginal declines in data yields continue to support
data revenues.

Data revenues to account for >60% of topline in Indonesia and Malaysia

Data revenue as a % of service revenue

80% 70% 70%
70% 64%
66%
60% 59%
56%
50% 49% 50%
53%
40% 41%
44%
30% 36%
20%
10%
0%
9M16 9M17 9M18
Indonesia Malaysia Singapore Thailand
Total data revenue as a percentage of service revenue of the operators mentioned below has been used to arrive at the country average.
Indonesia – Telkomsel, XL Axiata and Indosat, Malaysia – Digi.com and Celcom, Singapore – Singtel , Thailand – DTAC and AIS, Indonesia Source:
Companies, DBS Bank

Regional 4G capex cycle nearing the end. Singaporean
operators have achieved almost 100% population coverage on
4G networks, followed by Thailand, which boasts >90% 4G
population coverage although 4G speeds lag behind those of
regional peers. The 4G deployments of Malaysian operators
have slowed down amid intense competition, resulting in
population coverage of only 77% as at end-2017. Delays in 4G
spectrum auctions and inherent difficulties in providing
coverage have resulted in only ~55% of population coverage in
Indonesia as at end-2017. Having reached the population
coverage goals on 4G, Thai telcos are likely to trim their capex
allocations going forward and shift their focus to improving
capacity in existing coverage regions in a bid to uplift the
country’s poor download speeds. Capex spend by Indonesian
operators on the other hand is likely to remain elevated as
Telkomsel and XL Axiata are aggressively expanding coverage in
ex-Java regions, with Indosat planning to join the duo in 2019.

Page 32
Industry Focus
ASEAN Telecom Sector

Regional 4G coverage to peak over 2019/20

Regional 4G population coverage

120%

100%

80%

60%
99% 90%
40% 77%
55%
20%

0%
Singapore Thailand Malaysia* Indonesia
* ‐ End 2017
Sources: Info-communications Media Development Authority of Singapore, Malaysian Communications and Multimedia Commission, Kemkominfo
Indonesia, DTAC, AIS and TrueMove

Indonesian operators to see elevated capex ratios in the near term

Regional Capex to Service Revenues

40% 36%
35%
30%
30% 28%
26%
25% 24%
19% 19% 20%
20% 16%
14% 15% 14%
15% 13% 12% 12% 12%
10%
5%
0%
2015 2016 2017 2018F

Singapore Malaysia Indonesia Thailand

Total capex spend by operators has been taken as a percentage of total service revenue to arrive at the country average.
Singapore – Singtel, and StarHub, Indonesia – Telkomsel, XL Axiata and Indosat, Malaysia – Celcom, Maxis and Digi.com, Thailand – DTAC and AIS.
Source: Companies, DBS Bank

Growing interest in network sharing among regional operators.
StarHub rekindled its interest in network sharing in 3Q18 as the
operator looks for avenues to cut costs. StarHub hopes to reach
a commercial agreement on network sharing with an
undisclosed MNO in Singapore by the end of 2018 with
implementation taking place over 2019. Indosat and XL Axiata
also expressed an interest in network sharing in early 2016, but
the plans were put on hold, pending regulatory clarity on
network sharing. Estimates indicate that, the simplest form of
network sharing – Radio Access Network sharing, where
operators share towers and base stations responsible for
connecting individual devices to the network – could save as
much as 30-40% in opex and ~20% in cash flow for operators.
With growing competitive pressures across the region weighing
on operators’ cash flow and interests among regional operators
to deploy 5G(that would resultin a need for operators to closely

Page 33
Industry Focus
ASEAN Telecom Sector

share network infrastructure, according to our research
findings), we believe more operators in the region would look
for network-sharing arrangements over the next 2-3 years.
Singapore and Malaysia trailing 5G but deployment could be 2-
3 years away. Singaporean operators are leading the 5G charge
in the region, with Singtel and StarHub partnering with Ericsson
and Nokia, respectively, to conduct trials. Nokia and StarHub
completed their first outdoor pilot of 5G New Radio on the
3.5GHz frequency band in Singapore in November 2018, while
Singtel plans to deploy a pilot 5G network by the end of 2018
in one-north, the country’s business and IT hub. Malaysian
operators have also commenced 5G trials and trial networks are
expected to be set up in Cyberjaya and Putrajaya over 2018/19.
In Thailand, AIS and TrueMove are competing to be the first
mover in 5G readiness, and are conducting preliminary testing
using the 26GHz spectrum range allocated by the regulator for
5G testing. Indonesian operators have also shown a keen
interest in jumping on the 5G bandwagon, with Telkomsel
conducting limited 5G trials during the Asian Games held in the
country in 2018. However, despite the ongoing hype, the
commercial launch of 5G networks is likely to be 2-3 years
away, given the limited use-cases for 5G at present and the
very-high capex involved in deploying 5G networks.

Regional Peers Valuation

Mkt Pric e CA GR
Company Cap S$ 18- 20 PE (x ) Div idend Y ield (%) P/BV EV /EBIT DA
(US$m) 28- Dec (%) 18E 19F 20F 18E 19F 20F 18E 19F 18E 19F 20F

China / Hong K ong SHCOM P Index 2,494

China Mobile 193,234 73.90 2 11.8 11.5 11.3 4.1% 4.2% 4.3% 1.3x 1.2x 2.8x 2.6x 2.4x
China Telecom 7,053 3.98 10 14.4 13.1 11.9 2.9% 3.2% 3.5% 0.8x 0.8x 3.2x 2.9x 2.6x
China Unicom 31,768 8.13 51 24.8 16.5 10.9 1.4% 2.1% 3.2% 0.7x 0.7x 2.3x 1.7x 1.1x
Smartone Telecom 1,250 8.73 10 15.8 14.8 12.9 4.7% 5.0% 5.7% 2.0x 2.0x 4.9x 4.4x 4.0x
Hutchison Telecom 1,785 2.90 -2 37.0 39.1 38.2 2.0% 1.9% 2.0% 0.9x 0.9x 3.2x 3.1x 2.9x
HKT Trust 10,888 11.26 3 17.3 16.9 16.3 6.0% 6.1% 6.2% 2.2x 2.2x 9.3x 9.0x 8.7x

M alay sia K L CI Index 1,692

Digi.Com 8,386 4.48 2 23.2 23.0 22.1 4.3% 4.3% 4.5% 67.2x 67.2x 12.6x 12.4x 12.1x
Maxis Bhd 10,275 5.46 6 21.4 20.8 19.2 3.7% 4.0% 4.0% 5.8x 5.5x 12.0x 11.7x 11.1x
Telekom 2,398 2.65 1 14.9 17.5 14.5 3.3% 2.9% 3.4% 1.3x 1.2x 3.8x 4.3x 4.0x

Singapore ST I Index 3,053

NetLink NBN Trust 2,168 0.760 16 38.3 33.5 28.4 6.5% 6.7% 7.0% 1.0x 1.0x 13.5x 12.6x nm
Singtel 35,147 2.940 8 15.9 15.2 13.6 6.0% 6.0% 6.0% 1.6x 1.6x 8.6x 8.3x nm
Starhub 2,230 1.760 3 13.8 14.1 12.8 9.1% 6.0% 6.2% 35.7x 25.9x 6.7x 7.1x 6.7x

T hailand SET Index 1,564

Adv anced Info Serv ice 15,754 172.50 8 17.1 15.7 14.6 4.1% 4.5% 4.8% 8.7x 7.3x 8.2x 7.4x 7.3x
Digital Telecommunications 4,263 14.40 -2 13.2 13.9 13.8 7.1% 7.2% 7.3% 0.6x 0.6x 13.9x 14.4x 14.3x
Total Access Comm. 3,146 43.25 75 49.0 15.6 16.0 1.2% 3.2% 3.1% 3.2x 2.6x 4.5x 5.2x 4.8x

Indonesia J CI Index 6,194

Indosat 631 1,685 nm nm nm nm 0.0% 0.0% 0.0% 0.8x 1.0x 4.6x 4.4x 4.2x
PT Link Net Tbk 1,027 4,900 12 12.9 11.3 10.2 3.9% 4.4% 4.9% 2.8x 2.4x 6.1x 5.3x 4.7x
PT Telekom 25,588 3,750 6 18.4 17.0 16.4 4.1% 4.4% 4.6% 4.1x 4.1x 6.6x 6.2x 5.9x
XL Axiata 1,458 1,980 43 34.0 23.0 16.8 1.8% 2.6% 3.6% 1.0x 0.9x 4.6x 4.0x 3.5x
PT Sarana Menara 2,425 690 5 14.2 13.7 13.0 3.4% 4.0% 4.2% 4.3x 3.8x 8.6x 7.7x 7.4x
Tower Bersama 1,124 3,600 9 21.6 20.2 18.2 4.6% 4.8% 4.8% 5.1x 5.1x 9.9x 9.7x 9.3x

21.9 18.6 17.1 7.1 6.9 6.3

Singtel & NetLink 19&20 forecast; Source: DBS Bank; DBS Vickers; AllianceDBS

Page 34
Industry Focus
ASEAN Telecom Sector

DBS Bank, DBSVTH, AllianceDBS recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends

Completed Date: 02 Jan 2019 08:20:37(SGT)

Dissemination Date: 2 Jan 2019 08:38:07(SGT)

Sources for all charts and tables are DBS Bankunless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd, DBSVTH, AllianceDBS. This report is solely intended for the clients of DBS Bank Ltd, its respective
connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form
or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other
factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or
warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without
notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific
investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees
only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial
advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit)
arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not
to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons
associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have
positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and
other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may
not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to
update the information in this report.

This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED
UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and

Page 35
 Industry Focus
ASEAN Telecom Sector

(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public
offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage
in market-making.

ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s)
primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the
issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real
estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the
management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or
2
his associate does not have financial interests in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has
procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of
research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment
banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment
banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the
DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”) or their subsidiaries and/or other affiliates have
proprietary positions in China Mobile, China Telecom, China Unicom, Hutchison Telecom, NetLink NBN Trust, Singtel, StarHub,
Advanced Info Service, Total Access Communication, recommended in this report as of 30 Nov 2018.
2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research
Report.
3. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates have a net long position exceeding 0.5% of the total issued
share capital in NetLink NBN Trust, recommended in this report as of 30 Nov 2018.
4. DBS Bank Ltd, DBS HK, DBSVS, DBSVUSA, their subsidiaries and/or other affiliates beneficially own a total of 1% of any class of
common securities of NetLink NBN Trust, as of 30 Nov 2018.

Compensation for investment banking services:

5. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12
months for investment banking services from Singtel, Indosat, XL Axiata, Tower Bersama Infrastructure, as of 30 Nov 2018.
6. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA, within the next 3 months, will receive or intend
to seek compensation for investment banking services from XL Axiata, as of 30 Nov 2018.
7. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering
of securities for Indosat, XL Axiata, in the past 12 months, as of 30 Nov 2018.
8. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of
securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons

An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which
1

the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person
accustomed or obliged to act in accordance with the directions or instructions of the analyst.
Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a
2

new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term
does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new
listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

Page 36
Industry Focus
ASEAN Telecom Sector

wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any
security discussed in this document should contact DBSVUSA exclusively.

Directorship/trustee interests:
9. Nihal Vijaya Devadas Kaviratne CBE, a member of DBS Group Holdings Board of Directors, is a Director of StarHub as of 30 Sep
2018.

Disclosure of previous investment recommendation produced:

10. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published
other investment recommendations in respect of the same securities / instruments recommended in this research report during the
preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment
recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other
affiliates in the preceding 12 months.

RESTRICTIONS ON DISTRIBUTION
General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of
or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use
would be contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian Financial
Services Licence no. 475946.

DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the
Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and DBSVS
are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the
Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws.

Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by a person(s) who is not licensed by the Hong Kong Securities and Futures Commission
to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures
Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to
DBS Bank (Hong Kong) Limited, a registered institution registered with the Hong Kong Securities and Futures
Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance
(Chapter 571 of the Laws of Hong Kong).

For any query regarding the materials herein, please contact Carol Wu (Reg No. AH8283) at dbsvhk@dbs.com

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Page 37
Industry Focus
ASEAN Telecom Sector

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received
from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection
with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report
are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their
respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties
related or associated with any of them may have positions in, and may effect transactions in the securities mentioned
herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for
the subject companies. They may also have received compensation and/or seek to obtain compensation for broking,
investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn
No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by
the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective
foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the
Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited
Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the
report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327
2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.

United This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore.
Kingdom
This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is
authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and
associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in
any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is
directed at persons having professional experience in matters relating to investments. Any investment activity following
from this communication will only be engaged in with such persons. Persons who do not have professional experience in
matters relating to investments should not rely on this communication.

th
Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608 - 610, 6 Floor,
International Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated
Financial by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the
Centre DFSA rulebook) and no other person may act upon it.

United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as
Emirates defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for
information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or
inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account
the particular investment objectives, financial situation, or needs of individual clients. You should contact your
relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular
investment. You should note that the information in this report may be out of date and it is not represented or
warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or
redistributed without our written consent.

Page 38
Industry Focus
ASEAN Telecom Sector

United States This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s)
named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA.
The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a
subject company, public appearances and trading securities held by a research analyst. This report is being distributed in
the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major
U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons
as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities
referred to herein should contact DBSVUSA directly and not its affiliate.

Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified,
jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE

DBS (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd
Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua
11th Floor The Center 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard,
99 Queen’s Road Central Capital Square, Marina Bay Financial Centre Tower 3
Central, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982
Tel: 852 3668 4181 Kuala Lumpur, Malaysia. Tel: 65 6878 8888
Fax: 852 2521 1812 Tel.: 603 2604 3333 Fax: 65 65353 418
e-mail: dbsvhk@dbs.com Fax: 603 2604 3921 e-mail: equityresearch@dbs.com
e-mail: general@alliancedbs.com Company Regn. No. 196800306E

THAILAND INDONESIA
DBS Vickers Securities (Thailand) Co Ltd PT DBS Vickers Sekuritas (Indonesia)
Contact: Chanpen Sirithanarattanakul Contact: Maynard Priajaya Arif
989 Siam Piwat Tower Building, DBS Bank Tower
9th, 14th-15th Floor Ciputra World 1, 32/F
Rama 1 Road, Pathumwan, Jl. Prof. Dr. Satrio Kav. 3-5
Bangkok Thailand 10330 Jakarta 12940, Indonesia
Tel. 66 2 857 7831 Tel: 62 21 3003 4900
Fax: 66 2 658 1269 Fax: 6221 3003 4943
e-mail: research@th.dbs.com e-mail: research@id.dbsvickers.com
Company Regn. No 0105539127012
Securities and Exchange Commission, Thailand

Page 39