Affected by the 5G frequency auction sentiment, this is the recommendation for TLKM, FREN, EXCL & ISAT shares

Reporter: Hikma Dirgantara | Editor: I knew Laoli

KONTAN.CO.ID – JAKARTA. PT Telekomunikasi Selular (Telkomsel) and PT Smartfren Telecom Tbk (Smartfren) won the auction selection for the 2.3 Ghz radio frequency band. The frequency band is considered to be later used for 5G networks.

Telkomsel gets two blocks, namely A and C, while Smartfren only gets one block, namely Block B with an auction price of Rp 176.9 billion per block.

BRI Danareksa Sekuritas analyst, Niko Margonis, wrote in his research on April 23 that the victory in general would be a positive catalyst for the performance of Telkomsel and Smartfren.

He sees that the operational performance of both of them will increase along with improvements in the efficiency of their operational spending. In addition, both of them will benefit from the development of 5G networks in the future.

“Especially for Smartfren, their success in winning this block will strengthen their network. Smartfren will also be more competitive with other telco operators with exposure to the segment. low-end,“wrote Niko in his research.

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Meanwhile, Henan Putihrai Sekuritas analyst Muhammad As’ad explained that the ribbon auction results will not only benefit the winners, but also the telco sector itself as long as the government does not cancel the winner of this auction.

“This is because the Job Creation Law and PP No. 46/2021 allow telecommunication operators to share spectrum in implementing new technology networks,” As’ad told Kontan.co.id, Friday (30/4).

However, As’ad said that the positive impact would only be felt in the long term. This is because adjusting the frequency with devices that can take advantage of 5G technology takes a long time

One quarter of money, Reliance Sekuritas analyst Anissa Septiwijaya also said, with each issuers of cellular operators currently preparing a 5G network, the frequency auction in the future will have an important role to play in accommodating this.

Apart from that, the frequency auction is also said to help improve the network quality of current cellular operators. Moreover, with the increasing need for internet, improving network quality will support the performance of the issuer going forward.

“The period of the month of Ramdan and Eid in general will also be a positive catalyst because it will encourage internet consumption in the community. So this is expected to have a positive impact on the performance of telco issuers in the second quarter of 2021,” added Anissa.

Also Read: The issuer’s performance in the second quarter of 2021 is predicted to be better

As’ad added, one of the other catalysts that could boost the performance of this sector is merger and acquisitions (M&A) actions. According to him, this action could be a positive sentiment because it would make price competition between operators healthier.

For this sector, Niko gives rating overweight by making PT Telkom Indonesia Tbk (TLKM) as his top pick.

According to him, the M&A process creates uncertainty in the telco sector. However, with Telkom not being involved in the process, and instead continuing to build network excellence and digital coverage, it has the potential to be superior.

Niko also saw PT Smartfren Telecom Tbk (BRAKE) can be selected. He assessed that FREN has the potential to become a dark horse in this sector as it is willing to dilute most of its share ownership structure to open up opportunities for large investors to enter.

Meanwhile, both As’ad and Anissa made TLKM and PT XL Axiata Tbk (EXCL) as his top pick because he is considered to have a low stock valuation.

Following are the recommendations of telco issuers’ shares:

1. PT Telkom Indonesia Tbk (TLKM)

TLKM is considered to further strengthen its position as it continues to expand its digital reach. Most recently, TLKM has invested in Gojek, which will later merge with Tokopedia to become Goto. Telkomsel through Goto can increase its revenue through fintech and digital marketing along with increasing demands for data. TLKM can also penetrate B2B by offering cloud services, data centers to Tokopedia merchants.

BRIDanareksa Sekuritas analyst Niko Margonis recommended buying TLKM shares with a target price of IDR 4,600 per share.