TELCOs – DBSV
Regulator tightens belt to press the pedal on fiber
Singapore telecoms regulator IDA is raising the weekly fiber installation capacity to 3,100 per week from Aug 2 onwards. This is up 30% from 2,400 earlier and exceeds our forecast of a 15% rise highlighted in our report on SingTel released on 2nd July. A dynamic mechanism to raise capacity in line with demand has also been put in place.
200 installations out of the quota will be for commercial buildings. This is the most attractive pie for retail service providers as each commercial connection commands much higher ARPUs than residential connections. IDA wants OpenNet (the fiber backbone provider) to offer an activation period of 10 days from its side, unless building owners cause a delay in wiring up their buildings.
Slightly negative for SingTel but positive for others. The commercial broadband market represents the biggest slice of the market, accounting for an estimated 60% of the total, with residential accounting for less than 40%. SingTel is the leader in the commercial space with an estimated 80% share of the commercial broadband market while StarHub has less than 20% due to difficulties in accessing commercial buildings. SingTel has differentiated itself on the basis of its strong managed service portfolio, cloud computing and strong IT support. However, SingTel's market share and margins may still feel the heat as retail service providers offer services to price-sensitive small and medium (SME) customers. SingTel may barely achieve stable Singapore EBITDA in FY13F compared to our expectations of 3% growth. Ongoing re-structuring and its mobile advertising business are other cost pressures in the near term.
S-curve ahead as Singapore lags Malaysia in fiber adoption. Fiber adoption stands at 12% of rollout in Singapore versus 25% in Malaysia, due to the various bottlenecks the regulator IDA has identified and wants to quickly resolve. Compared to only 99k fiber subscribers in Singapore at the end of 2011, we project at least 150K subscribers to be added each year for the next three years in line with the "S curve".
No change to our TP and recommendations on stocks under our coverage.