SingTel – OCBC

Game Changer in Pay TV Arena

Game changer in pay-TV segment. To the surprise of many, SingTel managed to clinch the 2010-2012 broadcast rights for the English Premier League from the incumbent StarHub [under review]; this after just one round of bidding, which suggests that SingTel may have paid handsomely for these rights. We had previously expected StarHub to retain these rights and SingTel to only bid for it more aggressively come 2012 when the NBN fully comes on stream. In addition, SingTel has scored another coup over StarHub by securing the exclusive broadcast rights to a suite of sports networks and services from ESPN STAR Sports (ESS) from mid-2010 – this will add more sports content to SingTel’s fledging mioTV line up.

Lowers EPL viewing prices. And SingTel has also announced the EPL sports package rates – it intends to charge S$23 (before GST) per month and pay another S$2 more, subscribers will be able to get additional ESS channels for events such as Formula 1, Australian Open, Wimbledon and US Open Golf Championship. Consumers also do not need to fork out extra for a basic pay-TV package or for set-top box rental, as it is the case for current sports subscribers under StarHub’s deal. However, SingTel has the option to revise its sports pricing for the subsequent seasons; but we believe it remains unlikely that SingTel can recoup the EPL cost via pay- TV subscriptions alone.

Loses iPhone monopoly status. Meanwhile in the mobile segment, competitor MobileOne (M1) has managed to chip away at SingTel’s stranglehold on the Apple iPhone; M1 will also sell the popular smartphone some time later this year but it has yet to announce the pricing details. Overall, we do not expect the move to have a significant impact on SingTel’s bottom line nor meaningfully erode its market share (46.0% as of end Jun 09).

Maintain BUY with S$3.51 fair value. Overall, we believe that the developments in the pay-TV space are positive for SingTel – especially as it works towards “stickiness” ahead of the NBN launch. This is also in line with SingTel’s vision to transform itself from a traditional telco into a leading multi-media solutions provider. With its 2QFY10 results just around the corner, we hold off revising our estimates. However, we continue to favour SingTel’s defensive earnings and potential to expand regionally. Maintain BUY with S$3.51 fair value.

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