Here's why it's high time to invest in Singapore's telco market

Take advantage of impressive 4G penetration.

According to CIMB, to profit from rising mobile data usage, it advocates investing in developed markets like Korea and Singapore. This is because generous/unlimited data plans have been replaced with tiered plans, while rising penetration 4G devices will spur greater usage. 

CIMB also added that the high percentage of users on contracts lock them into a minimum spend and insulate telcos from falling voice and SMS usage, which telcos in emerging markets such as Indonesia and Thailand are vulnerable to. They also face slower-than-expected take-up of 3G devices and rising opex as they aggressively roll out 3G.

CIMB has contrarian Underperform calls on: 1) the Indian mobile carriers, due to regulatory and policy risks, 2) the Thai mobile, operators as their earnings could disappoint due to 3G rollout costs, and 3) Telstra, on valuation grounds after rallying overthe last three years 

Here's more:

We met over 50 investors during our marketing trip in Hong Kong, Singapore, Kuala Lumpur, London, Edinburgh and Paris. Our top picks included smaller caps as we think the large caps have had a strong rally: M1, iiNet (now replaced by Telkom Indo after its strong rally), Thaicom and SK Telecom.

Investors were largely in agreement with our views. Investors also like Telkom Indonesia for the modest valuations and growth, and high ROEs. There was little interest in Indian telcos given the high risks.

There were some pushbacks on our views: 1) Investors were lukewarm to Bharti Infratel as its cash is lent to its parent. 2) Valuations of Malaysian telcos are high. There were some concerns over the political situation in Malaysia. 3) Some concerns over SKT’s corporate governance as its acquisition of Hynix is still fresh in their minds. 4) Thai telcos still have decent yields and offer growth.