Macquarie Equity Research said consolidation is an option that could benefit the Indonesian telecommunications sector, given higher rational competition and strong data growth.
"Exponential data growth is driving up capex, adding pressure to already congested networks, making consolidation increasingly relevant. Moreover, second-tier players have the benefit of hindsight, making M&A more important," analyst Riaz Hyder said in a note on Thursday.
"We estimate an additional $8.5 billion of value from consolidation ex-acquisition costs," it added.
Macquarie's preferred stock is telecom operator PT Indosat Tbk which is backed by solid quarterly growth, with strong top line momentum expected to continue near term.
"We therefore highlight ISAT as the best way to play the M&A theme, given its lack of direct participation removes price or execution risk, but it should still be a passive beneficiary. Strategically," Macquarie said.
The research house said it saw M&A as the right path to obtain additional spectrum and drive better long-term returns.
Indosat shares were up 0.78 percent at 6,450 rupiah, while the broader index was up 0.66 percent.
1553 (0853 GMT) (Reporting by Andjarsari Paramaditha, Editing by Sunil Nair)