TELCOs – Phillip
Results Season Takeaways
The Telecommunications Sector under our coverage consists of SingTel, Starhub & M1. Starhub (STH) and M1 are pure plays to the Singapore market, while SingTel (ST) has exposure to the Asia-Pacific region through its regional mobile associates.
• Positive earnings for SingTel & Starhub
• Starhub is still the highest yielding Telco counter
• SingTel dominates fibre market share
• Neutral on SingTel & Starhub, Reduce on M1
Starhub’s results beat our expectations for the second consecutive quarter with profit increase of 28% y-y. While revenue increased by merely 6%, better cost control due to lower marketing and promotion expenses improved Starhub’s profitability. M1’s net income declined by 5% y-y as operating expenses outpaced the relatively stagnant top line growth. Adjusting for the effects of a one off gain from an exceptional S$270mn tax credit received, SingTel’s results were in line.
Starhub & M1 reported stagnant Postpaid Mobile subscriber base in the quarter. SingTel added 30k subscribers, but reported a dip in Postpaid ARPU in the quarter. For the PayTV market, SingTel added 15k subscribers and increased its market share to c.40%. By our estimate, SingTel dominated the fibre broadband space with a market share of 60%, with M1 ranking second with a 23% share. While Starhub does not disclose its fibre base, the company probably has a lower fibre subscriber count as it could still offer high speed MaxOnline plans on its cable network.
Fundamentally, we rate SingTel & Starhub as Neutral and have a Reduce rating on M1. We continue to prefer SingTel for its growth potential outside of Singapore and cheaper valuation over its local peers.