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And that's why, tonight, we're going to Indonesia.  I'm saying that TELKOM Indonesia (TLK) is a triple buy...

This is the largest telco company in Indonesia and, even though it's 51% state-owned, I still think it's a great stock...

TLK controls more than half of both the wireless and wireline businesses in Indonesia.  But wireless is where the growth is coming from...

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What's so great about TLK?...

On the wireline side, they're the leading provider in Indonesia and, in the wireless, they control 65% of Telkom Cell, which has 50% of the Indonesian wireless market.  Wireless is the biggest chunck of their business, making up 40% of TLK's revenues.

They've got nearly 50 million total subscribers and 35 million wireless subscribers but, get this man...  we've got 234 million people in that country...  4th largest by population in the world... and that's over 50% of the total wireless market...

Best of all, they're the top company in a happy oligopoloy... something I adore... because the top 3 Indonesian carriers control about 90% of the their wireless market...

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But back to underpenetration... the reason we went to Indonesia in the first place...

The general concensus is that wireless penetration in Indonesia is around 40%, and a lot of analysts think that the real percentage is lower... lower... because there's a sizeable group of people using multiple phones...

But, even if we take that 40% number at face value, it means that TLK still has a huge opportunity to grow before the market gets saturated like we are.  That's a gigantic point in favor of this company... 

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I've got another word for you... underutilization.

The people with phones in Indonesia are using them a lot less than people in comparable countries like India and China...

The average Indonesian with a cell phone uses about a quarter of the minutes that the average Indian or Chinese person uses...

The reason for this is that rates in Indonesia are way too high.  Indonesian wireless companies like TLK charge 4-6 cents a minute, compared to 2 cents a minute in India and China...  That's not anything to complain about if you're TLK...  which is why I'm telling you all this stuff about the number of minutes and the price per minute.

Because the big fear about TLK is that competition in Indonesia will cause cellular rates to move lower and hurt profits... I don't think that's a problem for this company...  Remember, TLK is by far the largest wireless carrier... So, when rates go down, they're going to benefit the most, as people use more minutes, and more people get phones...

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TLK has already seen a doubling in their network use, and a small pickup in their average revenue per user - which is one of the key metrics in the wireless business - since it launched a special promotion, encouraging users to talk more...

I think this is a premonition of what's to come when wireless prices in Indonesia go lower...

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What else?...

Dividend... 55% of profits, which should yield a 2.6%...  Well, that's not bad for a telco company that goes down... you've got good yield support.

How about TLK's absurdly low valuation?...  The stock trades at 13x earnings, growing at 21%...   I call the stock cheap, when the fundamentals are good, and the growth rate is equal to the multiple.   When the growth rate is much higher than the multiple - as it is with TLK - I call the stock a steal...

The stock's come down from a high of over $56 in October, dropping to $38 at times in January...  But it's got its little momentum back this year...  It's at $45 and change...  I don't think you've missed much of the move...   TLK has a long way to go.

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The Bottom Line!:      Remember my two words, underpenetration and underutilization.  Taken together, they mean buy TELKOM Indonesia (TLK)...  Part of our series, TLK... That's one for you.

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