Introduction

The ASEAN telecom sector enters 2025 with a mix of challenges and opportunities. After delivering a stellar total USD return of 19% in 2024, the sector faces headwinds such as spectrum auctions, elevated competition, and ownership changes among smaller players. While some companies exhibit strong growth potential, others grapple with market saturation and regulatory uncertainty. Maybank Research offers a comprehensive outlook on key players in the ASEAN telecom landscape, including Singtel, XL Axiata, Globe Telecom, and others. Here is an in-depth look at each company’s performance, prospects, and investment recommendations.

Singtel (Singapore Telecommunications Limited)

Performance and Prospects

Singtel remains a strong performer in the ASEAN telecom space, with projected earnings growth of 19% YoY in FY26. Key drivers include a 6% increase in Optus EBITDA through cost optimization, 10% growth in data center revenue due to capacity ramp-ups, and a 24% rise in associate contributions, particularly from Bharti and AIS. Over FY25-27, Singtel is expected to generate SGD4.9 billion in free cash flow (FCF), complemented by a capital recycling buffer of SGD8 billion, bringing its total cashflow to SGD13.2 billion.

Capital Recycling and Dividends

Singtel’s management has outlined plans for significant capital recycling as part of its ST28 strategy. Potential divestments in Bharti and Gulf Energy could yield an additional SGD6-7 billion and SGD3 billion, respectively. With expected dividends totaling SGD8.9 billion over FY25-27 (SGD16-20 cents per share), excess capital of SGD4.3 billion could support share buybacks, enhancing shareholder value.

Investment Recommendation

Recommendation: Buy | Target Price: SGD3.65 | Current Price: SGD3.08

XL Axiata

Performance and Transformation

XL Axiata is poised for transformation following its merger with Smartfren (FREN), creating a stronger third player in the Indonesian market. The merged entity will boast a spectrum market share of 34% compared to its current revenue market share of 25%. This strategic move is expected to bridge the gap between spectrum and revenue market shares, enabling XL Axiata to compete more effectively with larger players like Telkomsel and Indosat.

Valuation and Risks

Trading at 3.8x FY25 EV/EBITDA, XL Axiata offers attractive valuations at the lower end of its peers. However, execution risks, particularly around network integration and balance sheet leverage, remain challenges.

Investment Recommendation

Recommendation: Buy | Target Price: IDR3,200 | Current Price: IDR2,250

Globe Telecom

GCash and Data Centers as Growth Catalysts

Globe Telecom stands out primarily due to its e-wallet, GCash, which accounted for 14% of pre-tax earnings in 3Q24. GCash is expected to contribute around 20% of FY25 earnings, driven by increased transactions and higher interest income from loans. The planned IPO of GCash in 2H25, aiming to raise USD1.0-1.5 billion, could further unlock value.

In addition to GCash, Globe’s data center business, operated in partnership with STT GDC, is another growth engine. With a CAGR of 58% in capacity expansion over the next two years, Globe is well-positioned to capitalize on the rising demand for data centers in the Philippines.

Investment Recommendation

Recommendation: Buy | Target Price: PHP2,750 | Current Price: PHP2,184

PLDT

Challenges and Opportunities

PLDT, a key player in the Philippine telecom market, faces potential headwinds from increased competition if Summit Telco finalizes its acquisition of Dito. However, its digital bank, Maya, and ongoing investments in data centers offer promising growth avenues. PLDT’s financial metrics remain robust, with an attractive valuation of 8x FY25 P/E.

Investment Recommendation

Recommendation: Buy | Target Price: PHP2,070 | Current Price: PHP1,295

CelcomDigi

Merger Synergies

CelcomDigi is set to benefit from merger synergies, with margins expected to improve by 2.5 ppt in FY25. Despite regulatory uncertainties and 5G capex risks, the company is well-positioned for growth in Malaysia’s telecom sector.

Investment Recommendation

Recommendation: Buy | Target Price: MYR4.50 | Current Price: MYR3.60

True Corp

Post-Consolidation Synergies

True Corp, one of Thailand’s two major telecom operators, is expected to achieve a 4.5 ppt margin improvement in FY25 due to residual synergies from its consolidation and the end of spectrum leasing fees. While its EV/EBITDA valuation at 9x is higher than the ASEAN average, the company’s growth prospects remain strong.

Investment Recommendation

Recommendation: Buy | Target Price: THB13.80 | Current Price: THB11.10

Indosat

Merger Impact

Indosat’s 2022 merger with Hutch has already yielded a 3 ppt increase in revenue market share and a 5 ppt improvement in margins. The company remains a strong contender in Indonesia’s telecom market, with anticipated revenue and margin growth in FY25.

Investment Recommendation

Recommendation: Buy | Target Price: IDR2,900 | Current Price: IDR2,480

Conclusion

The ASEAN telecom sector presents a mixed bag of opportunities and challenges in 2025. While market saturation, regulatory hurdles, and heightened competition pose risks, innovative ventures like GCash, data centers, and strategic mergers offer compelling growth stories. Investors should remain selective, focusing on companies with strong fundamentals and growth catalysts.