• 1 near-miss, 2 hits
  • Higher capex guidance
  • Yield story likely unchanged

M1 below, rest mostly inline

Out of the three telcos, M1’s 4Q12 results were slightly below our forecast while the other two were mostly in line. Nevertheless, we note that M1 not only managed to post a recovery in its EBITDA margin, but also was the highest among the three. As M1 had earlier guided, the recovery was due to the upfront expensing of its smartphone subsidy. M1 also surprised with a special dividend of S$0.017/share on top of its final dividend of S$0.063. StarHub declared a quarterly dividend of S$0.05 as guided.

Review of Singapore mobile operations

Core post-paid mobile subscribers grew by another healthy 2.0% QoQ to 4.3m in Dec quarter, led by SingTel with 2.5%, StarHub 1.7% and M1 1.6%. Monthly ARPUs were also quite stable; and all three telcos expect to see uplifts this year as more users switch over to the new tiered pricing plans with less generous data bundles; this aided by the introduction of more LTE-enabled smartphones.

Most expecting higher capex this year

For 2013, M1 expects to see a moderate earnings growth as it continues to benefit from the upfront expensing of smartphone subsidies; also expects to maintain a dividend payout of at least 80% of underlying profit. For StarHub, it expects single digit revenue growth and an EBITDA margin of 31%; no change to its quarterly S$0.05/share dividend guidance. But both telcos have started to guide for higher capex this year, which they continue to roll-out their 4G networks and also to cater for the growing data usage pattern. Lastly, SingTel has kept its previous guidance, but note that its year-end is in Mar.


For now, we maintain our OVERWEIGHT on the sector. But as the telcos have already done quite well YTD, further capital appreciation may be limited, although dividend yields are still relatively attractive. M1 remains our top pick.


19 Feb 2013

Sector Update

Singapore | Telecom Sector Asia Pacific Equity Research


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