Global experts see 'emerging' gains in global telecoms

For their favorite stocks for 2008, three leading global investing experts turned to telecom companies that are focused on emerging markets.

Here, Nick Vardy looks at  Millicom International Cellular (NASDAQ: MICC); Yiannis Mostrous recommends Mobile TeleSystems (NYSE: MBT); and John Christy chooses Philippines Long Distance Telecom (NYSE: PHI). Here are their reviews.

Yiannis Mostrous, editor of The Silk Road Investor, explains, "Mobile TeleSystems is the largest cellular operator in Eastern Europe, with 50 million subscribers. It has licenses in 87 Russian regions, Ukraine, Belarus, Uzbekistan and Turkmenistan, covering a population of more than 233 million people.

"Russia accounts for almost 80% of consolidated revenue, while Ukraine is the second largest contributor. This is a company that offers good exposure to Russia’s domestic demand growth. 

"Russia is currently in a sweet spot: It’s a net oil exporter, has good GDP growth, isn’t dependent on foreign capital flows, is relatively stable politically, boasts reasonable market valuations and, above all, enjoys solid exposure to the biggest growth story of our time, Asia.

"Mobile Telesystems will continue to experience strong growth given the regional economic strength.  Its valuations are still reasonable and it actually trades at a discount to a lot of its peers in the emerging market universe. This should make it a stock to own going into what is shaping to be an uncertain New Year.

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"The company’s investments in its various markets have started producing positive results and it is also continues to consolidates operations while taking advantage of market growth."

Nick Vardy, editor of The Global Stock Investor,  says, "My favorite conservative investment idea for 2008 is Millicom. The explosion in cell phone usage is one of my favorite 'top down' themes in global investing.

"No technology has spread wider and more quickly than cell phones. While it took TVn 30 years to penetrate households across the globe, cell phones managed to achieve this in less than a single decade.

"Millicom is  the 'Indiana Jones' of the cell phone industry. It is one of a handful of global players that are profiting from expansion in cell phone markets where others fear to tread.

"Millicom's strategy has been unique and daring. It has cobbled together a patchwork empire that consists of 16 countries in Central America, South America, Africa, South and Southeast Asia. Today Millicom has 20 million subscribers.

"By picking unsexy markets -- ones that are under the radar of the major wireless firms -- Millicom has been profiting handsomely as demand for cell phone services has exploded. Just how successful has this strategy been? Millicom's split adjusted stock price has increased close to 120-fold since July of 2002.

"Today, it boasts market capitalization of more than $12.5 billion. Not bad, for the runt of the cell phone litter. Although most of Millicom's sales growth has come from traditional Latin American properties, more than half of Millicom's customers today are in Africa and Asia.

"Given the relatively low cell penetration rates, Africa is the fastest growing region of the world in terms of cell phone use.  Cell phone penetration is only 14% compared with 20% in the Middle East, 25% in Asia and more than 80% in Western Europe.

"Another vote of confidence? The chief executive officer of Millicom recently exercised 700,000 shares of stock options. Whether the company grows on its own or is taken over by one of the major cell phone companies, I expect Millicom's stock to continue to soar in 2008."

John Christy, editor of The Forbes International Investment Report, explains, "If China is Asia's ultimate growth story, the Philippines qualifies as the region's biggest turnaround story.

"Long plagued by political instability and disastrous economic policies, the Philippines is finally getting its act together under President Gloria Macapagal Arroyo. Economists expect GDP growth of nearly 7% this year and foreign investment capital is pouring into the country.

"My favorite stock for 2008 is Philippines Long Distance Telecom, which is an easy way for U.S. investors to get a piece of the action. It is the leading provider of wireless telecom services in the Philippines with nearly a 60% market share.

"But wireless penetration rates in the Philippines are among the lowest in Asia, suggesting considerable room for future growth before the market becomes saturated. And broadband services in the Philippines are still in their infancy.

"PHI is currently trading at 13 times estimated 2008 earnings and roughly 7 times earnings before interest taxes depreciation and amortization (EBITDA). That makes PHI one of the cheapest names in the emerging markets telecom universe. Investors in PHI also enjoy a dividend yield of more than 5% as an added bonus."