Patersons Telecommunications Review
Patersons Telecommunications Review

Topic

This report looks at key themes of the National Broadband Network (NBN) and 5G Mobile to consider the potential impact on stocks in the Telecommunications sector. We expect listed Telecommunications companies to be beneficiaries from both themes as they are well placed to participate in the subsequent increase in data and related services demand.

The below is a preview from our Telecommunications Review research report. To view this report in full visit the Patersons Client Portal.
 

Telecommunications Review December 2018

A key consideration of the NBN and 5G Mobile is the changing basis for competition with once-in-a-generation churn events and the prospect for customers to be offered cheaper, faster and more innovative products over time. This may include the development of new technologies (e.g. augmented and virtual reality) and product offerings (e.g. autonomous vehicles, remote surgery). Albeit this is only likely into the medium term.

Broad based feedback is that Consumer end markets in Australia are challenging. Fixed Broadband (NBN) remains a highly competitive market and on the current economics of NBN Co product pricing, there is very little margin to be made. The pressure on margins has been evident for a couple of years now and with the NBN Co rollout concluding towards the end of CY20, we see ongoing headwinds through to FY21.

As an aside, if NBN Co was to adjust its product pricing to the benefit of Telecommunications companies or the average price point in the market lifted by a meaningful amount (in the order of 10-15%), there would be a step-change in earnings for the top tier players i.e. Telstra (TLS), TPG Group (TPM) and Vocus (VOC). We see TLS and TPM as the most sensitive to any price changes.

We believe this, in conjunction with the thematic of continuing data growth, plays to the strength of operators with Infrastructure ownership or those targeting small to medium-sized corporate customers.

In this report we focus on the following areas of the Australian market:
  • Fixed Communications Networks – National Broadband Network: Overview; NBN Rollout Update; NBN Uptake; NBN Market Share; and Broadband Data Consumption
  • Wireless Communications Networks - Mobiles: Overview; Improved Mobility; Mobile Data Consumption; 5G – The Next Battlefield in Mobile
  • Wireless Communications Networks – Fixed Wireless & Satellite: Fixed Wireless Overview; Satellite Overview; Differences in Fixed vs. Satellite Internet
  • How do Investors Take Advantage of the Above: Market Positioning
We also provide commentary from opinion leaders, news articles and public releases to educate the reader on the differing views in the market.

 


Disclosure: The analyst owns shares in MNF, OTW and ST1.

Warning: This report is intended to provide general securities advice, and does not purport to make any recommendation that any securities transaction is appropriate to your particular investment objectives, financial situation or particular needs. Prior to making any investment decision, you should assess, or seek advice from your Adviser, on whether any relevant part of this report is appropriate to your financial circumstances and investment objectives.