SingTel – CIMB

Investor Day takeaways

At its Investor Day, SingTel said it plans to list its investments in the digital space to unlock value. The growth driver across the group is mobile data via bundling of services in more developed markets while it is dependent on lower smartphone prices in emerging markets.

It wants to focus more on monetising pay TV subscribers in Singapore and less on acquisition. SingTel remains an Underperform with an SOP-based target price of S$3.23. Likely de-rating catalysts are earnings disappointment and regulatory developments in India.

Interest aplenty in Group Digital Life

Investor interest was strongest in Group Digital Life, which complements the group’s consumer offerings with digital services. SingTel’s investments in the digital space must have a competitive edge, the ability to leverage its existing assets and involve the core daily activities of customers. It is eyeing video, digital advertising, games, e-commerce and advanced communications. While it did not reveal how much it is setting aside for investments in digital, SingTel will detail this during its FY13 results announcement. It will also disclose milestones achieved by GDL and its targets. SingTel is prepared to list these investments on the stock market to unlock their value.

Group Consumer

At the Group Consumer level, SingTel is changing its business model in terms of: 1) customer experience, 2) monetisation and scientific marketing, 3) network, and 4) the introduction of Digital Life in Singapore and Australia. SingTel plans to extend these strategies to its associates. SingTel’s lack of management control over its associates and the disparate maturities of the markets in which SingTel’s associates operate are key challenges in driving these initiatives across the group, in our view.

Dialling up data

The growth driver across the group is mobile data as wallet share rises when users move up from 2G to 3G and to 4G. In Australia and Singapore, SingTel plans to: 1) offer digital services to stimulate data usage and encourage loyalty, and 2) bundle multiple services which lowers user churn. In emerging markets, the key to data usage is lower smartphone prices. Most of its associates say the sweet spot for greater smartphone uptake is US$100 or less.