• 1 hit, 2 near-misses
  • Defensive story intact
  • Yield compression also likely

StarHub again above forecast

Out of the three telcos, StarHub again posted 3Q12 results that were above our forecast, aided by a stronger-than-expected margin recovery (mainly coming from lower traffic expenses). M1 and SingTel both posted results that were slightly below our estimates, with the former citing continued upfront smartphone subsidy expensing for the shortfall, and the latter hit by weaker Optus performance and also a slide in regional currencies against the SGD.

Review of Singapore mobile operations

On the core post-paid mobile market, SingTel continues to dominate with ~48% share, then StarHub with ~28% and M1 ~26%. But we note that post-paid subscriber base grew 55k QoQ to 4180k, even though the market already has a penetration rate of nearly 150%, with some 70% of post-paid subscribers using smartphones. Monthly ARPUs are relatively stable; but could see increases once LTE (or 4G) takes off from 1Q13, aided by the introduction of more LTE-enabled phones and also tiered pricing plans with less generous data bundles.

Biggest surprise from SingTel

Both M1 and StarHub are still guiding for relatively stable outlook for 2012, albeit with potential erosion in service EBITDA margins. However, SingTel surprised by guiding for consolidated group revenue to see a low single-digit (versus single-digit growth previously), mainly dragged down by continued weakness in Australia. However, we think that all the three telcos should continue to generate very positive operating cashflows and this should keep their healthy dividend payouts intact.


While the three telcos have performed reasonably well this year, led by StarHub, we continue to like their defensive business against the still-uncertain economic backdrop. Further yield compression could also be another price catalyst over the next 12 months. Hence we maintain our OVERWEIGHT rating and keep M1 as our top pick.

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