Our Favorite Telecom Stock in Asia
Merging its J:COM stake and offering converged services have been key to KDDI's success.
While we have fundamentally liked narrow-moat KDDI (KDDIY) since we launched coverage in 2011, we have been particularly impressed by its continued success. Amid concerns of saturation and a slowing market, the firm has regularly outperformed our expectations, first with the success it had with the iPhone and more recently with its smart value program. The stock has become more volatile recently due to concerns about NTT DoCoMo (DCM) receiving access to the iPhone and higher fourth-quarter churn. We think long-term investors should consider the uncertainty as a potential entry point into this narrow-moat company. Although DoCoMo received access to the iPhone in 2013, KDDI continues to take market share. In 2013, KDDI and Sumitomo merged their respective stakes in J:COM and other cable television networks into a 50-50 joint venture. This merger has advanced KDDI's successful bundling of fixed-line telecom and wireless services and is another reason for our favorable outlook for the firm.
Before the end of 2011, Softbank had exclusive rights to the iPhone in Japan and used its exclusivity very effectively to gain market share. Since that time, KDDI has leveraged the iPhone to regain its footing, and its wireless market share has subsequently increased to 30.1% from 26.9%.
Allan C. Nichols does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.