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Blind Faith
Joe Locke, regional head of telecoms at ABN Amro, on what WAP really does stand for
By MAUREEN TKACIK
March 29, 2000
Web posted at 6:30 p.m. Hong Kong time, 5:30 a.m. EST
Joe, let's get straight into it...
Q: City Telecom has been back in the news this week, as that mercurial little ADR it has on the NASDAQ imported its volatility over here and we got a nearly 25% bounce. But it is way, way off its high, which reached $24 on Wall Street, and it has been for awhile. Do you buy it?
A: It was a screaming buy last week, and I would still buy it at these levels but it's going to bounce around. City Telecom doesn't have much of a business outside of its broadband strategy and when people get nervous about broadband or the amount of licenses out there it gets beaten down. It is just one of those higher-octane, higher-risk, higher-reward kind of plays and there's going to be a lot of volatility until they actually roll out the service. You can probably find a better entry price than HK$4 (51 cents), but on the other hand I think the company is worth more than $250 million, which is what the markets are valuing it at now.
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Q: What about CCT Telecom? They're in much the same boat, with a little more than twice the market cap.
A: Their LMDS (Local Multipoint Distribution Service) broadband tie-up with Teligent is very attractive. Teligent is a great company, so they've got a really strong partner with them and a lot of cash. But they've pissed off investors a lot in the past. They promised an IPO of HKNet, which looks like it could never happen. Back during red-chip fever, they were a red-chip. I just think Ricky Wong is more of a straight shooter. The thing with all of these smaller players is that if HKT is worth $30 billion with 90% of the market, if any one of them can grab a mere 10% they're worth a hell of a lot.
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Q: Lets talk about Sunday Communications. They've got a technicolor dreamcoat of a portal, a cute ad campaign, a great management team, and 300,000 subscribers. So basically you buy them as an acquisition target and hope they become the next Orange?
A: Well, a lot of the big players already have partners; British Telecom has SmarTone, NTT has Hutchison, perhaps the Vodafone group will scoop them up. But their strength is WAP (wireless application protocol) and their management. Craig Erlich is an excellent guy. Ric Siemens is a great guy. These are the kind of guys that are going to make WAP work. But you can buy wireless data plays cheaper in a lot of other parts of the world with much more solid subscriber bases and revenue streams. I'd rather buy SK Telecom, so that even if they completely fail and waste a lot of money you've got 10 million subscribers to fall back on. Because the thing is that despite all the hype, no one knows what the killer app is that is going to make wireless data take off. I believe that it will, but we've been talking about WAP for a year now and I just think its going to be a much longer process than people think.
Q: Well, it's the NTT DoCoMo I-mode example that has made everyone start salivating. But I keep hearing that the most popular services are things like cartoons and stuff.
A: People aren't taking into consideration what the real strength behind I-mode is; its cool. It's Japan. All your friends are doing it. I've heard statistics saying 70% of I-mode subscribers don't actually know how to use it. And it is teenagers we are talking about here.
Q: So, like, Britney Spears and Coco Lee could be the killer apps were talking about here?
A: Right. Moreover, Internet access over PCs costs a lot more money than I-Mode, which is dirt cheap. The country likes gadgets, gadgets are status symbols, and so you've got a situation where people will buy it no matter what it is because it's cool, because they're pretty colors... Moreover, what WAP really stands for, so they say, is 'Where Are the Phones?' Japan has the phones; no one else has made them yet. The truth is that we already have wireless data, over PDAs (personal digital assistants) and two-way pagers and for a while I see those devices as filling that niche. I just don't think it's going to happen the same way as it did in Japan.
Q: Speaking of the paging spectrum and PDAs, I haven't heard about Online Credit in a while. Scott Blanchard pushed this stock on account of you, but he has stopped talking about it.
A: To be honest, I had a meeting with the company and it gave me the heebie-jeebies... Exploiting the paging spectrum for wireless data in China is a sexy idea but they have all of these strange, small investments with no rhyme or reason.
Q: So they lacked focus and it seemed sleazy.
A: I questioned their focus a bit. But a company is only sleazy when people start to lose money. There's a fine line between sexy and sleazy.
Be it overvalued tech stocks, high-profile mergers or corruption scandals, the region's stock markets can go on wild rides. Join the discussion here
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