Telecom Rising in the East
11/17/2006 12:00 am EST
Finding investment opportunities in the East is Robert Hsu's specialty. In his latest Asia Edge, he recommends a company that is making waves by acquiring and developing market share in the world's leading emerging economies.
"Hong Kong's Hutchison Telecom(HTX NYSE) is one of the world's leading telecom providers, operating in Hong Kong, fast-growing Macau, India, Israel, Thailand, Sri Lanka, Ghana, Indonesia, and Vietnam.
"Hutchison Telecom is a subsidiary of Hutchison Whampoa Limited, a massive conglomerate that operates ports, property and hotels, retail, energy, infrastructure, finance, and investments, and which is controlled by Hong Kong billionaire Li Ka-shing, the wealthiest man in East Asia.
"The company has over two million subscribers in Hong Kong, one of the world's most sophisticated telecom markets with over 100% penetration rate. Hutchinson is the leading 3G operator and one of the largest mobile operators, growing its 3G customer base by 31% during the third quarter.
"And emerging markets, especially India, Indonesia, and Vietnam, should become major revenue generators for the company.
"India is one of the fastest-growing wireless markets in the world, and Hutchinson became one of its leading telecom providers through acquisitions that expanded its coverage from 13 to 16 license areas. Last month, the company purchased Essar Spacetel, which has telecom licenses in India's seven remaining service areas. India's mobile market services over 65 million customers, but that's less than 8% of the country's total population.
"Hutchison Telecom also has a 60% stake in PT Cyber Access Communications, an Indonesian mobile operator with both 2G and 3G capabilities. Hutchison is set to launch commercial services in Indonesia before the end of this year. After its economic downtown in the late 90s, Indonesia has come back strong, and with more than 217 million people, it is one of the key growth markets in all of Asia.
"Hutchison is building a nationwide mobile telecommunications network in Vietnam with Hanoi Telecommunications. With Nortel, its supplier, the company expects to launch commercial service in the next couple of months.Vietnam's 84 million citizens make up an exciting growth market for the company.
"Both Indonesia and Vietnam currently have below-average mobile phone penetration rates (around 20% for Indonesia and 10% for Vietnam), rising disposable income, and promising economic prospects.
"Hutchison Telecom earned $13.2 million in the third quarter. Its global subscriber base for its mobile services grew by three million, or 12.8% year-on-year. Its total customer base stood at 26.5 million, more than a 76% increase over last year, thanks mostly to growth in India.
"Buy HTX under $34. I'm targeting gains of 40% from today's prices in six months or less."