“A Second Chance to Buy AT&T at the Turn of the Century”

This teaser ad is from Jim Nelson, who’s trying to sell us his Lifetime Income Report for about $100 a year — this is a dividend-focused newsletter, and we’ve written about them before when they were teasing their system as “Plan B Pension Paychecks” (or if you prefer plain language, “dividend reinvestment”).

But this time we’re teased with a specific stock, one that offers you “a second chance to buy AT&T at the turn of the century” (I assume they mean the previous turn of the century, not the one we just enjoyed a few years back — buying AT&T for $60 or so in 1999 or 2000 wouldn’t have been all that exciting).

What makes this a big potential growth story is just what made AT&T a huge growth story in the early years of the 20th century — a green field of potential customers who haven’t yet been reached, and a rapidly growing economy. And, of course, a monopoly (this company being teased today isn’t a monopoly, but you can argue that it’s a duopoly).

The country? Indonesia. In Jim’s words:

“The country has made some progress of late through the presidency of Susilo Bambang Yudhoyono. Elected in 2004, Yudhoyono was an already important and popular figure in Indonesia after a few stints in the first couple cabinets of the fairly new democracy. He has the rank of General and is a very influential military leader worldwide.He continues to stay popular and will, in all probability, get reelected later this year. Yudhoyono is not only a military-focused politician, he’s also an economic visionary in a country that desperately needs that kind of vision.

“In just his first term, he’s already signed an important trade agreement with Japan, opening his country’s enormous population to the world’s second largest economy.Barack Obama recently invited Yudhoyono to the White House to discuss the U.S.’s role in helping developing countries during this economic recession. The two met again a few weeks later at the G-20, which Indonesia recently joined.

“All of this prestige helped Yudhoyono make Time’s 100 Most Influential Persons list this year. And it’s also helped segments of Indonesia’s population obtain some new G-20 benefits.Even with all of the international help, Indonesia may not ever become a superpower. But the country does provide unique opportunities…if you know where to look.”

And of course, Jim thinks he knows where to look. And he’ll tell you, for a fee.

“One of the most exciting growth industries in the Far East is Internet service providers. According to InternetWorldStats.com, 73.8% of Japanese and 76.1% of South Koreans are online. Even about one in every four Chinese citizens now has Internet access…Indonesia is trailing in the region with just 10.5% of its population online. Here’s our growth opportunity! In 2000, only two million Indonesians had the Internet. That number is set to reach 25 million this year. But this growing ISP industry is only part of the story…

“While Indonesia continues to struggle with some basic luxuries that the Western world takes for granted — such as cable television and wireless Internet access — its citizens do have cell phones. In fact, around 58% of the population already has a cell phone subscription — that’s over 130 million subscriptions. Even with so many current subscribers, growth hasn’t slowed at all. The mobile phone industry is still growing at a 36% clip annually.”

OK — so we’re talking about a promising telecom company in Indonesia. Which one?

“I found a company with a 46% market share of both the broadband Internet and the cellular industries. That’s the top spot. This is like finding Ma Bell at the turn of the 20th century — minus the anti-trust issues.You see, this company’s largest investor is the Indonesian government. It’s a rock solid company …”

And that’s what we get, clues-wise. So what is this company?

Well, if you’re talking big telecom companies in Indonesia, there are really only two: Indosat and Telkom Indonesia. They’re both publicly traded and both spent at least some time as government-controlled corporations, but Indosat’s largest shareholder most recently was Singapore Telecom, and is now Qatar Telecom (which also issued a tender offer for a controlling stake that appears to have been largely accepted) … so I think this must be Telkom Indonesia, which is still majority owned by the Indonesian government.

Telkom Indonesia also pays a significantly higher dividend, as befits an income-focused investment newsletter. It also has an ADR, so you can trade the shares in NY under the symbol TLK … though you’ll probably see it also listed with several different names — P.T. Telekomunikasi Indonesia and Perusahaan Perseroan Perseropt Telekomunikasi Indonesia are two that I’ve run across. The stock has also been recommended by the Global Gains service at the Motley Fool in the past and from current disclosures it looks like it’s still in their portfolio.

And Singapore Telecom is also a partner of Telkom Indonesia through their 35% ownership of the market-leading Telkomsel mobile service — which appears to be part of the reason why SingTel had to sell off its Indosat holdings. This has been a strange business in Indonesia, with lots of cross-ownership and a history of government both nationalizing and privatizing companies and controlling access to distinct markets, but that appears likely to be changing soon — Telkom Indonesia is apparently losing its monopoly on fixed-line telephony in 2011 under the current liberalization plan. It remains government controlled, with Indonesia holding just a touch over 50% of the company (they also control some aspects of competitor Indosat as a minority shareholder, thanks to “golden share” rights over some strategic and board decisions).

Indonesia is indeed one of those incredibly tantalizing economies — a massive population, relatively underserved by modern telecom and internet service, and possibly becoming a more stable and growing economy. I know little about the country or the economy, and have a bare hint of knowledge about TLK, but they do pay a nice dividend of close to 6% that has been climbing with recent earnings growth (they currently pay out about 70% of earnings as a dividend).

Personally, if I were going to make a bet on emerging market telecom in Asia I might be more tempted by SingTel, since that company operates as almost a mutual fund of investments in other leading wireless companies (they have large stakes in wireless firms in India, Australia, Pakistan, Thailand and The Philippines, as well as Indonesia). That’s not going to be as big a leveraged bet on Indonesian wireless or broadband, of course, and its returns are subject to the performance of its home market of Singapore, which is very mature, but it pays a decent dividend (close to 5% on a trailing basis, though it changes every year) and I like the stability and the diversification. Oh, and it’s also government controlled, thanks to the ubiquitous shareholdings of Temasek (the Singapore sovereign wealth fund).

That’s just me, though — if you’ve got something to say about Indonesian telecom, or about emerging market wireless companies in general, well, feel free to jump right in and share. Happy Investing!

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10 Comments on "“A Second Chance to Buy AT&T at the Turn of the Century”"

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womanwithportfolio
Guest
0
May 11, 2009 11:55 am
I’ve been perusing some heavy duty research on telecoms in emerging markets, with some interesting conclusions. The company with the biggest potential for subscribers is China Mobile, but because of competition, it doesn’t appear to be as good a bet as two others. One, everyone has heard of, America Movil, which ranks high on potential subscriber growth as well as competitive edge. The surprise is an African company, MTN Group (MTNOY), which has service all over Africa and into the Middle East. Mobile phone use is growing like crazy in Africa, and this company is positioned well, both in capacity… Read more »
EYOUNG
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0
EYOUNG
May 11, 2009 12:48 pm
Speaking from the left field corner,,, I am curious about the satellite capability of the telecom providers,,, and the ISP’s as well,,, How does all this fit into the infrastructure of the Cell and Wireless providers??? There would seem to be some growth possibilities in that area, It seems to me, that with the growth of the internet, cell and wireless that the capabilities of the satellites would need be enhanced, or am I totally out of the ballpark here? I do NOT know the answers here, and am looking for information,,, WWP, you are a smart Lady,,, what is… Read more »
Gravity Switch
Admin
11
May 11, 2009 1:23 pm

Thanks — interesting fund, it trades at about a 7% discount right now.

If you like international telecom there are also some ETFs, including DGG and IST, though neither focuses just on emerging markets.

Cool Soupy
Guest
0
Cool Soupy
May 11, 2009 3:13 pm

Back on the subject recomendation Jim needs to speculate with his own money and not charge his clients for such rubbish!

advantedges
Guest
0
July 23, 2009 2:19 am

So, I was going through 1000 emails that were plugged into my system, and this one caught my eye from May of 2009,,,,recommending TLK as a play on emerging telecomunication.

It seems that if readers had bought that little gem, they would be up @25% or more….

Gravity Switch
Admin
11
May 11, 2009 12:03 pm

Thanks WWP — haven’t ever looked at MTN, sounds interesting. Others that have been hyped in the past include TurkCell, Orascom in Egypt, Telkom in South Africa, and the big daddy Vodafone, and I’m sure I’m missing some.

Katie Catt
Guest
0
Katie Catt
May 11, 2009 12:44 pm

Suggest you take a look at the closed-end fund (etf) emerging-market telecom fund.

Katie Catt
Guest
0
Katie Catt
May 11, 2009 12:59 pm

top holdings include:
China Mobile
America Movil
MTN Group LTD
Chunghwa Telecom
China Unicom
Telefonos de Mexico
Mobilnye Telesistemv oao
Telekomunikacja Polska SA

In the years 2003-2007 fund had double digit growth each year

Clex
Guest
0
Clex
May 11, 2009 10:43 pm

Whats the Ticker for the fund?

Katie Catt
Guest
0
Katie Catt
May 12, 2009 6:43 am

Ticker symbol for Emerging- Market Telecom Fund is (ETF)

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