Lehman Brothers' Sarathy says many analysts were burned over the last few years because they used a flawed method for valuing telecommunications stocks. It was as if, he says, phone counters should trade at a stiff premium simply because some other stocks in Asia did. Eventually, reality sets in. He says analysts and investors forgot to take into account technical breakthroughs, especially in the cellular business. You can go from analog to digital to satellite phones.
New technology keeps creating new spectrum.
Asian cellular stocks experienced a double-whammy. Even as technology increased capacity, the expected growth in demand did not happen. In reality, less than one-third of the 60 million people in Thailand can afford cellular phones. There is a thin crust of wealthy people who go out and subscribe to services like cellular phones when they are first introduced, but after that you are scraping the bottom of the barrel. Nor have fixed-line operators done well.