Special Report: 3rd Telco Play Analysis, with Target Prices for GLO and TEL (Feb 2018)

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Our Partner Broker’s Analysis

Welcoming the entry of the third operator

The third operator is anticipated to enter the market by the 1st Quarter 2018, heavily supported by the government. According to the Department of Information and Communications Technology (DICT) the timeframe for the selection process of the new telco operator is scheduled on February 19, 2018 and bidding will be until March 2018.

Recently, PLDT surrendered the frequencies of Connectivity Unlimited Resources Enterprise (CURE) without monetary compensation from the government, indicating cautious optimism on the nearing competition. Incumbents’ initiatives to densify network services may shoot up debt level. With the anticipated tightening of competition, both telco giants raised CAPEX spending for this year.

However, looking at the interest-bearing debt-to-equity ratios may shoot up if CAPEX is funded by additional debt. We note that as of 2017, both companies are still within their debt covenants.


Our Partner Broker’s Recommendation

We assumed the new player to gradually acquire 10% of the total wireless subscriber market share in the next five years. We think that GLO will be more affected since it is currently the leader in the said segment.

Maintain Buy rating on TEL and Hold rating on GLO. We believe TEL is poised to capitalize on the postpaid segment. For GLO, we project further improvement in ARPU, but maintain our rating as current price limits Target Price upside.


Summary of Recommendations and Target Prices:

PLDT (TEL) – Buy, Target Price of PHP 1,787.00

Globe Telecom (GLO) – Hold, Target Price of PHP 2,030.00

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Unicapital Securities
Unicapital Securities

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