SingTel – BT

Makes sense holding on to leader SingTel

LAST week, the three listed telcos had very good news. A report on Friday said Singapore’s foreign population crossed the one million mark. According to the Department of Statistics (DOS), foreigners coming here in unprecedented numbers have pushed Singapore’s population to 4.68 million as at June, a 4.4 per cent rise over the previous year.

The foreign population, which includes professionals, workers, students and their family members, was estimated to hit 1,005,500 in June this year – crossing the one million mark for the first time.

This is a 14.9 per cent rise over a year ago and represents the highest jump in at least seven years, according to DOS. The previous year’s increase was 9.7 per cent.

The number of Singaporeans and permanent residents here also grew, by 1.8 per cent – the same as the previous year.

More foreigners mean higher mobile phone sales and the telcos, especially giant Singapore Telecommunications, have been reaping the benefits.

SingTel already showed that in its first-quarter results ended June 30, where it reported higher-than-expected net profit of $927 million, up 10.4 per cent, bolstered by unprecedented double-digit growth at home as the resurgent economy led to more mobile phone sales and higher business demand.

Market on fire

A recent report by Merrill Lynch said SingTel is leading the pack in home-market penetration.

Describing the local mobile market as on fire, it said that despite the 111 per cent headline market penetration, the Singapore mobile market grew revenue at double-digit rates in Q2 2007 and third-ranked MobileOne’s success to date in mobile broadband points towards more sustained growth in the medium term.

As for SingTel, its revenue growth in Q2 2007 was the highest in the market – the first quarter it has achieved this in many years.

The US brokerage noted that SingTel’s mobile revenue growth was largely achieved without significant contribution from mobile broadband, considering that the telco’s mobile broadband was launched only in late May.

It was also a milestone in another respect for SingTel’s domestic business: its revenue growth outstripped its smaller rival StarHub’s for the first time.

Regaining market leadership

StarHub has been posting double-digit revenue growth for the last three years while M1 and SingTel had yo-yoed from low single-digits to negative growth over the same period.

‘Over the past year, SingTel has been much more aggressive, particularly in the mobile and broadband markets as it looked to regain market leadership from the surging StarHub,’ said Merrill Lynch.

While it is unlikely StarHub will not strike back, SingTel’s momentum, given its size, is probably going to be a formidable challenge to take on without a bruising price war.

The surging share price performance of SingTel recently, however, might make investors wonder if the stock has priced in all the good news.

Yesterday, SingTel closed at $4, up $1.60 from its 52-week low of $2.40.

For a long-term hold, though, SingTel will remain a good bet, given its track record of stable and sensible management, having shown restraint in not chasing after telco acquisitions and being committed to returning excess cash to shareholders.

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