Investors take shelter in resilient telco stocks amid escalating market turmoil

Especially since the threat of a fourth telco is vanishing.

Risk-averse investors are favouring resilient telco stocks on back of escalating uncertainty brought about by Brexit.

Analysts note that telcos offer defensive options for investors in the current environment, particularly on back of the diminishing threat posed by a potential fourth entrant.

"Telco stocks could shine given higher risk aversion and the possibility of a fourth telco player diminishing due to funding difficulties," DBS Vickers noted in a report.

DBS added that its top pick for the sector is M1, which had previously been tagged as the most vulnerable to a the entrance of a new operator.

Meanwhile, CIMB noted that the hefty investment required and the lack of track record by the potential fourth telco could stall the bid for the upcoming spectrum auction, protecting the turf of the existing incumbents in the meantime.

The Infocomm Development Authority (IDA) is scheduled to roll out a spectrum auction in the third quarter. Among the frontrunners are MyRepublic, Consistel and OMGTel, most of which have reported funding hiccups in recent weeks.

“Despite the upcoming spectrum audition, the big question is if the interested players can raise adequate funds for the network rollout before the auction," DBS noted.

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