Month: August 2008
SingTel – BT
Telco’s cellphone user base up 6.6% amid re-invigorated mobile landscape
By WINSTON CHAI
THE first bout in Singapore’s re-invigorated mobile landscape has gone the way of Singapore Telecommunications, with the company reporting the largest increase in cellular subscribers for the second quarter of this year.
SingTel added 182,000 new local customers for the three months ended June 30, bringing its cell-phone user base here up 6.6 per cent to 2.75 million.
The increase was the largest among the three local operators for the quarter, a period which marked the introduction of true mobile number portability (MNP) in Singapore.
The new government directive, which took effect on June 13, is aimed at intensifying competition in the mobile sector by allowing subscribers to easily switch operators while retaining their current phone numbers. In the wake of MNP, all three telcos have increased their marketing efforts and upped handset subsidies to retain and attract customers.
In the second quarter, StarHub added 178,200 subscribers to bring its cellular user base to 1.8 million. M1 recorded the smallest customer gain of 57,000 to take its customer tally to 1.6 million.
Collectively, Singapore’s handphone subscriptions have now swelled to 6.15 million, translating to a mobile penetration of 134.2 per cent.
According to SingTel, its subscriber growth in the second quarter was fuelled by strong demand for its prepaid mobile business, especially among the growing population of foreign workers. The group added 151,000 new prepaid customers in the quarter, cementing SingTel’s lead in this space with a total of 1.34 million customers.
On a regional level, SingTel, which reports first-quarter results today, said its total number of mobile customers in Asia has reached a new of high 197.71 million in June.
The group’s cellular subscriber base across eight markets – Australia, Bangladesh, India, Indonesia, Pakistan, the Philippines, Singapore and Thailand – grew 45 per from 136.35 million a year ago. On a quarterly basis, the increase was 6.7 per cent.
Excluding Pakistani telco Warid, SingTel’s regional associates grew their customer bases from 14 per cent to 63 per cent in the second quarter compared with 2007, the group said in a statement yesterday. For example, Indonesia’s Telkomsel added 1.11 million customers, while Philippines-based Globe boosted its customer base by 1.46 million.
SingTel’s Indian associate Bharti, the country’s largest telco, recorded the biggest improvement with 7.4 million new subscribers during the period, bringing its total to 69.38 million customers.
Singtel – BT
By WINSTON CHAI
Singapore Telecommunications Limited has officially confirmed that it will launch the much-anticipated iPhone 3G in Singapore on Aug 22.
‘Consumers who have registered will be given first priority,’ SingTel Singapore CEO Allen Lew said at the company’s results briefing earlier today.
He added ‘tens of thousands’ of potential buyers have registered their interest at SingTel’s iPhone Web site since it was launched in June, and the company is confident that it ‘can meet the demand’. Consumers have until Sunday to submit their pre-orders with SingTel for Apple’s second-generation touch-screen phone. The upgraded model boasts of enhanced features such as support for faster Internet speeds and satellite positioning.
The company is set to reveal pricing details for the iPhone over the coming week.
SingTel is the first local operator to bring the device to Singapore but rivals StarHub and M1 are confident of landing a similar deal by the end of this year.
Starhub – Kim Eng
SELL
• The stock has fallen below the long term trendline established since mid 2004.
• Support at $2.58 is likely to be tested in near term.
• 2Q08 net profit of $64m (-20.5% yoy ) is well below consensus of $83m. The disappointing results is due to margin squeeze as equipment subsidies, higher marketing costs and loss of Euro 2008 rights arising from intense competition ate into EBITDA margins.
• Although competition in 2H08 is expected to ease, management guided lower FY08 revenue growth of 7% and margin of 31% while maintaining DPS at 18¢.
• At $3.80, the stock currently offers a dividend yield of 6.4% vs MobileOne’s 7.5%
• Recommend sell.
Starhub – DBS
Management lowers guidance
Story: Net profit fell 21% y-o-y to S$64.2m, lower than our below-consensus estimate of S$75m (consensus S$83m). This was due to 650 bps y-o-y decline in EBITDA margin to 28.9%.
Point: Lower margins were due to (i) decline in pre-paid mobile ARPU (-23% y-o-y, -10% q-o-q) and broadband ARPU (-5% y-o-y, -3% q-o-q) as a result of intense price competition (ii) Huge increase (41% y-o-y, 32% q-o-q) in marketing and promotional (M&P) costs ahead of MNP and (iii) a one-time increase of S$4-5m in content cost due to Euro cup rights. Going forward, we expect M&P and content cost to fall from 2Q08 levels. However, pre-paid mobile and broadband might continue to see competitive pressures. The launch of iPhone by SingTel, most likely in late Aug, could put fresh pressure on StarHub’s post-paid mobile business in 2H08.
Relevance: We have changed our valuation methodology to PER basis, given lower long-term earnings visibility. Based on its historical PER band (13.3x-19.4x), we peg our target price to 14x average FY08-09F EPS, comparable to SingTel’s 14.5x PER on FY09F EPS and M1’s 11.0x PER on FY08-09F EPS. Downgrade to FULLY VALUED with a lower TP of S$2.60. Management clarified that potential for capital reduction would depend on its decision to participate in the OpCo bidding. From StarHub’s track record, we see more likelihood of capital reduction than special dividends, resulting in additional cash yield of 3% assuming net debt to EBITDA (FY08) target of 1.5x.
Management finally lowers 2008 guidance. We had highlighted the risk to FY08 management guidance last quarter. Management has lowered its FY08 guidance for revenue growth to 7% y-o-y (from 10%) and EBITDA margin to 31% (from 33%), which are conservative. We have imputed 32% EBITDA margin in our FY08 estimates, assuming SingTel will cool off competition to fulfill its own margin guidance. We lowered our FY08F and FY09F earnings by 7.5% and 6.3%, respectively.
Starhub – OCBC
Disappointing 2Q08 results
Disappointing 2Q08 results. StarHub Ltd posted a disappointing set of 2Q08 results. Although revenue rose 8.6% YoY to S$531.4m, it was down 0.7% QoQ, missing both our S$540.2m estimate and the street’s S$552.5m figure. Meanwhile, net profit tumbled 20.5% YoY and 19.9% QoQ to S$64.2m, way shy of our S$76.2m estimate and the street’s S$83.6m number. Management attributed the sharp earnings decline to three reasons – 1) a 4% fall in mobile pre-paid revenue; 2) increased acquisition & retention costs; and 3) higher Pay TV content costs. Together, these resulted in a compression of EBITDA margin from 33.5% in 2Q07 (31.4% in 1Q08) to 27.6% in 2Q08. On an interim basis, revenue rose 10.9% to S$1066.3m, meeting 48.2% of our FY08 estimate, while net profit fell 4.3% to S$144.3m, or 43.1% of our FY figure.
Intense competition in mobile segment. Mobile business sales rose 6.5% YoY (down 1.4% QoQ) to S$269.3m, or about 50.7% of total revenue. Although StarHub recorded its highest quarter net adds (36k) for its postpaid segment in over five years, its pre-paid segment saw a 40k net drop after it failed to respond promptly to a competitor’s aggressive strategy. And as expected, average acquisition cost jumped by another 19.4% QoQ (+27.8% QoQ in 1Q08) ahead of the implementation of true mobile number portability (MNP) in June 2008. But on the flip side, StarHub has managed to reduce its churn rate to 0.9%, the lowest level since 4Q05.
Slower growth and lower margin expected. Going forward, management has moved to slash its revenue guidance from 10% previously to 7%, citing flat pre-paid revenue growth projection. In addition, StarHub has cut its EBITDA margin guidance from 33% previously to 31%, even though it expects the aggressive handset subsidies to ease towards the end of the year. However, it kept the total dividend payout of S$0.18/share for the year; it has also made S$0.045/share for 2Q08. In light of the latest developments, we have cut our FY08 forecast for sales by 3.3% and earnings by 9.9%.
Fair value eases to S$3.19. Our DCF-based fair value also eases from S$3.51 to S$3.19. Given the disappointing 2Q08 results and more muted outlook, we do expect the stock to suffer some near-term weakness, which we view as a good entry point. We still like StarHub as a defensive play with its still attractive 6.5% dividend yield for this year, and hence we retain our BUY rating on the stock.