Telecoms groups in hunt for cash

A RASH of equity issues and strategic sales by regional telecoms is expected to raise US$11 billion or more in the next two years, according to S G Warburg Securities.

The first issue of Warburg's Asian Telecom Highway bulletin quotes regional telecoms analyst Jason Billings as saying that many firms look set to make equity issues.

He says the sector will look strong as long as companies keep meeting earnings estimates, and expected licences are issued on time.

'It is expected that over $4 billion will be raised this year, and most likely more in 1996,' Mr Billings says.

In the Philippines, Piltel, Pocketbell, P T & T, Philcom and Extelcom are all waiting for better market conditions before making issues.

In South Korea, Korea Mobile Telecom has already issued $150 million of global depository receipts and Korea Telecom is widely expected to go public this year in an issue which might raise $1.8 billion. A $2 billion issue is on the cards from P T Telekom of Indonesia while yet more shares in Indosat are likely to come on the market.

The country's largest private telecom firm, Satelindo, is also thought to be eyeing equity markets and Mr Billings predicts an issue this year or in 1996.

In India, MTNL looks as if it is heading for a listing in a move which should raise $1 billion. In addition to listings, other telecoms companies are also likely to be hunting cash, Mr Billings says.

'More capital is going to be raised for projects in China, Vietnam and other countries which could easily exceed $2 billion over the next two years,' Mr Billings says.

It is hard to put accurate values on regional firms, he says.

'Are the firms overvalued? It is easy to focus on one number and then state a company is overvalued. For example, TelecomAsia of Thailand looks overpriced on a discounted cash flow of its 25-year concession while United Communications looks overpriced on 1995 earnings,' Mr Billings says.

An overview of all figures is required and investors have to look towards the potential in stocks, he says.

'The best example has been the additional 1.1 million lines in Thailand and, in other countries, the substantial growth in cellular subscribers,' Mr Billings says.

'Finally, a year later, we see the resolution of the extra lines and share prices rise sharply. Foreign investors waited until after the fact and missed the opportunity.' Warburg is tipping locally listed Champion Technology because of the huge sell-off which has hit its share price.

It suggests investors reduce holdings in Hongkong Telecom because competition is entering the market just as the local economy has started to slow.

'This will seriously affect growth prospects,' Mr Billings says. He favours TRI of Malaysia, Indosat of Indonesia and five Thai stocks.

He rates Telekom Malaysia as 'reduce' and Singapore Telecom as 'hold'.