EOD Update (3 Mar 2006)

Normally I don't like to put down long commentaries or opinions because laying down persuasive justifications may cloud others' personal judgments. But today, the unthinkable happened and a somewhat lengthier post is warranted.

In my mind, there was no doubt that DIGI would be the strongest contender for the 3G spectrum licence. The other slot would, I thought, naturally go to TIMECOM because well, ... it's a GLC. Which is why I put my bet on TIMECOM. What in the world did MiTV have? Hell, it couldn't even make a decently operable set-top box for its pay-TV offering (or write a proper intelligible manual to go with it).

Not even for a moment did I think DIGI would lose out to MiTV. And this is exactly what happened. DIGI lost out to MiTV. DIGI did not lose out to TIMECOM, despite a lot of people slagging TIMECOM out there. TIMECOM was a given. Anyone who thought otherwise has obviously not lived in this part of the world over the last 20 years. DIGI lost out to MiTV and that's the fact of the matter. At least, with a GLC one can argue that if it goes under, ultimately it's the taxpayers' money, but what's the angle on MiTV vs DIGI? This type of unanswerable question will not send the right signal to foreign investors.

But what I also can't understand is the massive sell-down that DIGI experienced. DIGI had 2 recent quarters of earnings growth which were remarkable by most standards. 3G didn't have a hand in producing that. At prices approaching RM9.00 per share, some people (research analysts included) were suggesting it was worth around RM10.00 in the near term, based solely on its fundamentals.

So what's all the hoo-ha about its price dropping a buck? Those strong fundamentals justifying a strong BUY at 8.90 must surely be adamantium-solid now at 7.85! Isn't this a golden opportunity to load up more of this wonderful stock at fire-sale prices? Shouldn't hard-core DIGI "investors" be rubbing their hands in glee and rejoicing at this sure-fire bonanza handed to them on a silver platter? Then, why are we hearing otherwise?

By the way, so what if DIGI didn't get the 3G spectrum licence? Even TM and Maxis are openly saying they don't expect their 3G operations to be profitable until 3-4 years' time. There's just no content out there to drive user takeup. What's the use of having a spanking new 6-lane highway if everyone's still riding bicycles? You'll just be racking up the costs and no income in sight.

And who wants to watch TV on a 3x3 inch screen? Sure, if there's a blackout like in the TV ad, you can continue watching Liverpool v Man U on your mobile, but seriously, how often does this happen (I know, it's TNB, but still...)? Besides, other countries are already talking 3.5G and 4G! This kinda technology moves faster than the speed of sound. Let the lemmings blow their wad rolling out soon-to-be obsolete technology. DIGI will save a tonne of cash not having to PAY for the 3G spectrum and fund its roll-out, not to mention the inevitable earnings drag on its current operations over the next few years. They'll find a way to get around this...

So, what's the deal with TIMECOM now? If I were a conspiracy theorist, I would remember that SingTel had made several approaches to take up a strategic stake in TIMECOM before (this was years ago, prior to all this 3G hoo-ha). Then, they were rebuffed by the Govt, ostensibly for national interest reasons.

But now, perhaps times have changed and circumstances have changed, and TIMECOM needs all the help it can get. How? How to lure back the spurned suitor to do a deal that needs to be done at all cost and quickly (you can figure out the reasons yourself)? Simple, just give TIMECOM something "valuable", perhaps with oligopolistic attributes, something that would fetch TIMECOM a significant premium over its market share price ... like .... a 3G licence! Ha ha ... I gotta stop dreaming, must be getting late already ...

Latest purchases:

DIGI: +1,000 (7.95), +1,000 (8.10) ... Total 2,000 (Easy, slowly does it...)

Latest disposals:

TIMECOM: -5,000 (0.60), -5,000 (0.615), -5,000 (0.625) ... Balance 10,000

DGATE: -1,000 (1.68), -1,000 (1.71) ... Balance 5,000 (up 18c, no correction bfr today's strong move ...blast!)


/ichithekiller