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The Asian telecom sector has underperformed the broader market
by 18 percent in the past 12 months due to investor concerns
stemming from uncertainties related to 5G spending and potential
monetization, JP Morgan analysts said.
They, however, believe it is now time to revisit the sector,
with spectrum auctions due in Korea and Australia in 2018 and
Japan and China in early 2019.
JP Morgan recommended investors buy telecom stocks in Japan,
South Korea, China and Australia, saying these companies were
unlikely to build significant standalone 5G networks until a
business case emerges.
However, their rivals in Hong Kong, Singapore and Taiwan face
more competitive spectrum auctions, which are not expected until
2020, due to limited availability of 5G bandwidth, the analysts
said.
The incremental costs of investments in 5G networks could be
minimal as much of the improvements are currently being made
under non-standalone (NSA) 5G networks, which build on the
existing 4G infrastructure, JP Morgan wrote.
Standalone 5G network is likely to require substantially more
capex when compared to NSA 5G, it added.
JP Morgan prefers South Korea's LG Uplus Corp and Japan's
Softbank Group Corp, both rated "overweight."
It remains cautious on China Mobile Ltd, as it sees the company
as most likely to build a wide coverage of standalone 5G
networks.
(Reporting by Derek Francis in Bengaluru; Editing by Amrutha
Gayathri)
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