Author: tfwee
TELCO – CIMB
7-Eleven enters prepaid space
New MVNO player
7-Eleven has entered the prepaid market in Singapore by launching its mobile virtual network operator (MVNO) cards called 7-Connect, following similar successes in the US and Canada. The cards will be available in more than 400 7-Eleven stores in Singapore. Its partner is US-based MVNO Ztar Mobile and the service will ride on M1’s 3G network.
Who is Ztar Mobile? It is a mobile virtual network enabler (MVNE) offering wireless solutions that enables any party to provide private-brand wireless services to its own customers. It offers services to MVNOs such as billing and customer care, without any required investment in wireless infrastructure or expertise. It has partnered with leading wireless manufacturers and other handset manufacturers to deliver the first MVNE solution in the US.
What is on offer? 7-Connect offers users who sign up for S$30/month the following features :
• Free local voice calls on nights and weekends.
• Call tariffs of 15 cts/min for the first two minutes followed by 8 cts/min thereafter for all other hours.
• SMS rates at 5 cts/SMS for local SMS and 15 cts/SMS for global SMS.
• S$10 bonus for other features (SMS, IDD, etc)
• Fill-up cards for as low as S$18/month (free calls on nights and weekends not applicable here)
• Carry-forward minutes (minutes can be carried over to the next month) and free caller ID, voice mail, call waiting, conference waiting.
Comments
Not a significant threat. We do not foresee 7-Connect posing a threat to any of the incumbents because:
• Its tariffs are the same, if not higher than those of the incumbents, except for the free calls at nights and weekends if the user tops up S$30 as its costs are controlled by M1. In addition, the minimum S$30/month spend required for users to enjoy free calls on nights and weekends is above the prepaid ARPUs (S$16-22) generated by the three major telcos, limiting upside and take-up of the service, we believe.
• It does not offer special IDD rates, hence, not addressing the large migrant worker
market in Singapore made up mostly of high-ARPU users.
• 7-Connect sells only 3G SIMs, which limits its users to 3G handset owners. This is
likely to exclude a significant portion of the price-sensitive prepaid market. The small 3G prepaid market is reflected in the fact that only M1 offers 3G prepaid services, while StarHub and SingTel do not. Having said that, we gather that 95% of the handsets sold in Singapore are now 3G phones.
Hence, carving out a foothold will be difficult in a mature market like Singapore, what with competition in the prepaid segment already very intense. Low-cost set-up. 7-Connect appears to be keeping its costs low by using 7-Eleven to distribute, unlike the now-defunct Virgin Mobile which opened up its own outlets. The 7-Eleven brand is well-known but not for its phone services. 7-Evelen sells reload coupons for all the existing telcos and it remains to be seen if it will be pushing 7-Connect harder.
SingTel – DBS
Marked slowdown in the regional growth story
Story: Underlying net profit at S$865m was down 0.3% y-o-y and down 10% q-o-q, in line with our estimate of S$850- S$875m. However, it was 7% below the consensus estimate of S$929m.
Point: Following are the major highlights of the result. Pre-tax contribution from regional associates declined 11% yo- y to S$582m. While weak regional currencies were a major factor, weaker operating performance of Telkomsel (down 23% y-o-y due to intense competition), Globe (down 26% yo- y due to high inflation) and Warid (S$22m loss from network expansion) were other factors. Bharti and AIS performed in line with street estimates.
If not for exchange rate movement, pre-tax earnings from associates would have increased 6% y-o-y, but even then management guidance of double-digit growth in pre-tax contribution from associates appears too bullish to us. Current weakness in AUD is also something to worry about in 2QFY09.
Singapore EBITDA at S$523m, up 1.2% y-o-y was slightly above expectations while Australia EBITDA at A$494m, up 2.7% was slightly below expectations. Overall, these two markets contributed a combined EBITDA of S$1146m, up 2.6% y-o-y, inline with our expectations.
Relevance: Our FY09 earnings estimates are 4% below consensus estimates with street too bullish on regional contributions, which can potentially be downgraded with this set of result. Infact, we see downside risk to our earnings estimates, if regional currencies or AUD weaken against SGD. We maintain HOLD for SingTel with SOTP based target price of S$3.70. However, if we use current market prices (instead of target prices) of regional associates in our SOTP valuation, SingTel is worth S$3.35.
M1 – BT
M1’s fixed-line foray: too little, too late?
M1’s RECENT diversification into fixed-line broadband services is an attempt to quell longstanding market concerns about its lack of headroom in the mobile space. However, the dependence on rival technology, coupled with shifting dynamics in the local broadband sector, means this foray is unlikely to raise M1’s revenue ceiling significantly in the near term.
Last week, M1 finally joined SingTel and StarHub in providing wired broadband services to consumers with the launch of four new high-speed Internet packages.
Unlike larger rivals SingTel and StarHub, M1 is the only local telco that does not have its own Internet pipes. Without a direct connection to homes, the company is at a natural disadvantage as it has to depend on infrastructure and bandwidth from others to power the broadband venture. In M1’s case, potential revenue is thinned by the need to pay StarHub’s monthly cable leasing bill.
This limitation aside, Singapore’s swelling broadband user base simply does not leave M1 with much room to grow. According to statistics from the Infocomm Development Authority of Singapore (IDA), the country’s household broadband penetration rate hit 86.8 per cent at the end of June.
Close to 990,000 families are already using high-speed Internet packages to surf and e-mail, with StarHub’s cable modem service and SingTel’s ADSL (asymmetric digital subscriber line) offerings accounting for the bulk of paid household subscriptions. With such entrenched beachheads, M1 faces a formidable task in trying to eke out a decent market share.
To be fair, with the heat that M1 is starting to feel in its core mobile business, the company has little choice but to promptly take the broadband plunge. IDA’s mandate for true mobile number portability means that consumers can now jump ship while hanging on to their handphone numbers.
In the lead-up to its introduction on June 13, local telcos have been racking up giant advertising bills in a bid retain customers and attract defectors when the new ruling kicks in.
StarHub has already blamed aggressive marketing tactics for dragging down its second-quarter profits, while M1’s advertising and promotion expenses also went up by a staggering 51 per cent to $5.9 million quarter-on-quarter in Q2.
To add to soaring costs, M1 also appears to be losing out to its competitor’s ability to provide discounted bundles that combine services such as pay-TV, broadband and mobile subscriptions.
The telco added merely 57,000 customers in the second quarter; in the same period, StarHub’s subscriber base swelled by 178,200, while SingTel was the biggest gainer with 182,000 new customers. With SingTel set to launch Apple’s coveted iPhone 3G here within the next two weeks, the red camp’s lead could be extended further in the coming months.
M1 had already signalled its broadband ambitions before last week by partnering with StarHub and Hong Kong’s City Telecom to vie for a tender to build Singapore’s new and improved Internet highway. SingTel is part of a second consortium that is bidding for the same Next-Gen NBN (National Broadband Network) project.
However, this mammoth undertaking is at least four years away from completion, and it will take far longer for the winner to recoup the billion-dollar investment. In the meantime, M1 cannot sit idle and watch its mobile market share slide.
Without a regional strategy, M1 needs to make every local cell phone customer count, or carve out alternative revenue streams to ensure its long-term survival. The main issue here is that last week’s broadband announcement does not convincingly address either of these points.
With the ties that M1 already has with StarHub on the Next-Gen NBN front, perhaps a full-fledged union could be a way for the two Singapore-centric telcos to stem the advancing red tide? After all, the idea is hardly new, since SingTel did think of acquiring M1 back in 2001.
SingTel – BT
SINGAPORE – SingTel, Southeast Asia’s largest phone firm, missed forecasts with flat quarterly earnings as a strong Singapore dollar crimped contributions from its Asian mobile businesses, sending its shares to a four-week low.
Singapore Telecommunications Ltd, which generates about three-quarters of its sales abroad, cut its guidance for earnings contributions from foreign operations and warned that a strong Singapore dollar would hurt its performance.
The currency has risen more than 7 per cent against the US dollar over the last 12 months.
‘The major disappointment came from regional associates’ contribution,’ said Morgan Stanley analyst Navin Killa. ‘While Singapore and (Australian unit) Optus have shown steady growth in revenues, both businesses face margin pressure due to rising competition.’
SingTel shares fell more than 3 per cent on Tuesday and were down 2.5 per cent at S$3.49 by 9.28am, while the broader market fell 0.3 per cent.
Mr Killa, who rates SingTel ‘equal-weight’, recommends investors switch to rival StarHub for exposure to Singapore, and invest directly in SingTel’s affiliates, India’s Bharti Airtel, Indonesia’s Telkomsel and Advanced Info Service in Thailand for exposure to the region.
‘The pretax earnings contributions from the regional mobile associates are expected to grow at low double-digit level and at a pace slower than the past two years,’ the company said.
Pressure at home
SingTel, Singapore’s largest listed firm valued at over US$40 billion, made April-June underlying net profit, before goodwill and exceptionals, of S$865 million (US$612 million), versus S$868 million a year ago, and missing an average forecast of S$930.3 million.
First-quarter attributable net profit was S$878 million, down 5.3 per cent from last year’s S$927 million.
Facing a domestic market of just 4.6 million people where virtually everyone has a mobile phone, the firm has spent S$18 billion in recent years buying stakes in operators in high-growth Asian countries such as India and in Australia.
Speaking to reporters after the results, SingTel CEO Chua Sock Koong said the group was still looking for acquisitions.
‘Our investment focus remains in Asia, but we are trying to learn about new markets in the Middle East and Central Asia. That is in the early stages.’
iPhone launch Aug 22
SingTel, which confirmed it will launch Apple’s third-generation iPhone in Singapore on Aug 22, reported group operating revenue rose 5.9 per cent to S$3.78 billion.
Optus, SingTel’s single-biggest revenue and profit generator, posted flat net profit of A$122 million (US$108 million) after depreciation charges.
Australia’s second-largest mobile operator, which holds a third of the mobile market, faces cut-throat price competition, slowing subscriber growth and regulatory changes in a saturated market.
SingTel also owns big stakes in six emerging market mobile operators, including Globe Telecom in the Philippines, India’s Bharti Airtel and Telkomsel. Most have shown phenomenal growth in wireless subscribers in recent years.
But growth has slowed visibly. Pretax profit from mobile associates in the quarter fell 11 per cent to S$582 million, hit by the strong Singapore currency, lower earnings from Telkomsel and Globe, and losses from Pakistan’s Warid Telecom. — REUTERS
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.