Author: tfwee
Telco – Macquarie
Singapore telecoms sector
Misplaced fears on 3G auction
Event
There appear to be fresh concerns over a possible increase in competition in the mobile market post the 3G auction date announced by IDA (Infocomm Development Authority). We believe the fears are misplaced and that the market should concentrate on the more important event of NGNBN. We reiterate our view that StarHub is the best proxy to NGNBN and any weakness in the share price over the 3G auction event should be seen as an entry opportunity.
Impact
What is up for grabs?
⇒ 3 lots of 2 X 5MHz 3G spectrum up for auction: Reserve price of S$20m/lot has been set with the auction date as 15 November.
⇒ These lots have been lying idle since 2001: Ever since the three telcos were awarded 3G spectrum in 2001, these three lots have been lying idle.
What are the possibilities?
⇒ A fourth mobile operator could jump in: Two lots of 2 X 5MHz should be sufficient for a new mobile operator to start operating in Singapore with a target base of 1m subscribers. The reserve price is also attractive.
⇒ One of the existing telcos could bid for the future: In the light of exponentially increasing data traffic, one or more of the existing telcos could bid for one or more slots. This could spike up the reserve price.
⇒ If no one bids, IDA could distribute the spectrum: The three telcos have been asking for this for a while. However, IDA has been resisting this proposal as it wants a transparent auction and a higher price for lots.
⇒ Spectrum remains idle: The existing telcos have upgraded to HSPA+ network and are trialling LTE technology, which should aid network capacity as greater traffic occurs. There is also room to re-farm the 2G spectrum. Thus, the three telcos could abstain from bidding for spectrum.
Outlook
Remote possibility of a fourth player: We expect the likely outcome to bein favour of existing telcos, as we do not see a new player entering the Singapore mobile market in a hurry. Our reasons are:
⇒ Singapore is 140% penetrated in mobile: We believe penetration is at its peak with annual growth in mobile expected to be in the low single- digits. We doubt new operators would want to enter such a market.
⇒ Requires huge capex to roll out services: In addition to spending at least S$40m for two lots of spectrum, the new operator will have to shell out at least S$200–300m in upfront investments.
⇒ Virgin Mobile entered in 2002 but lasted only a year: In the less competitive market of 2002, a fourth player lasted but a year.
⇒ Only an international player with capacity to absorb initial losses could enter: Given the high capex and long gestation period to recover costs, we believe the probability of local players entering such as LGA or SuperInternet is low. An international player could take a chance on the improving 3G market and play on differential pricing.
Telco – Macquarie
Singapore telecoms sector
Misplaced fears on 3G auction
Event
There appear to be fresh concerns over a possible increase in competition in the mobile market post the 3G auction date announced by IDA (Infocomm Development Authority). We believe the fears are misplaced and that the market should concentrate on the more important event of NGNBN. We reiterate our view that StarHub is the best proxy to NGNBN and any weakness in the share price over the 3G auction event should be seen as an entry opportunity.
Impact
What is up for grabs?
⇒ 3 lots of 2 X 5MHz 3G spectrum up for auction: Reserve price of S$20m/lot has been set with the auction date as 15 November.
⇒ These lots have been lying idle since 2001: Ever since the three telcos were awarded 3G spectrum in 2001, these three lots have been lying idle.
What are the possibilities?
⇒ A fourth mobile operator could jump in: Two lots of 2 X 5MHz should be sufficient for a new mobile operator to start operating in Singapore with a target base of 1m subscribers. The reserve price is also attractive.
⇒ One of the existing telcos could bid for the future: In the light of exponentially increasing data traffic, one or more of the existing telcos could bid for one or more slots. This could spike up the reserve price.
⇒ If no one bids, IDA could distribute the spectrum: The three telcos have been asking for this for a while. However, IDA has been resisting this proposal as it wants a transparent auction and a higher price for lots.
⇒ Spectrum remains idle: The existing telcos have upgraded to HSPA+ network and are trialling LTE technology, which should aid network capacity as greater traffic occurs. There is also room to re-farm the 2G spectrum. Thus, the three telcos could abstain from bidding for spectrum.
Outlook
Remote possibility of a fourth player: We expect the likely outcome to bein favour of existing telcos, as we do not see a new player entering the Singapore mobile market in a hurry. Our reasons are:
⇒ Singapore is 140% penetrated in mobile: We believe penetration is at its peak with annual growth in mobile expected to be in the low single- digits. We doubt new operators would want to enter such a market.
⇒ Requires huge capex to roll out services: In addition to spending at least S$40m for two lots of spectrum, the new operator will have to shell out at least S$200–300m in upfront investments.
⇒ Virgin Mobile entered in 2002 but lasted only a year: In the less competitive market of 2002, a fourth player lasted but a year.
⇒ Only an international player with capacity to absorb initial losses could enter: Given the high capex and long gestation period to recover costs, we believe the probability of local players entering such as LGA or SuperInternet is low. An international player could take a chance on the improving 3G market and play on differential pricing.
M1 – BT
M1 Limited announced on Thursday that its net profit for the second quarter ended June 30, 2010 was up 10 per cent from a year ago, at S$40.8 million, fuelling the telco's optimism that FY2010 net profit will be better than FY2009.
'Based on the current outlook, net profit after tax for the year 2010 is likely toimprove, compared to 2009,' said Karen Kooi, M1's chief executive officer,
The improved bottomline was due to higher service revenue.
Operating revenue for the second quarter was up 17 per cent year-on-year atS$223.1 million.
M1's total customer base was 1.849 million as at 30 June 2010. For 2Q10, M1 added 53,000 customers, of which 21,000 were postpaid customers and 32,000 were prepaid customers.
Non-voice services contributed 30.8% of service revenue, up from 25.1% a year ago, driven by growth in the mobile broadband and smartphone customer base.
M1's board has declared an interim dividend of 6.3 cents per share, up from 6.2 cents a share a year ago.
SPH – BT
SINGAPORE – OCBC has raised its target price for Singapore Press Holdings to $4.63 from $4.31 and kept its 'buy' rating, citing stronger than expected third-quarter earnings and positive outlook for the rest of the fiscal year.
'In view of the strong results and positive outlook, we therefore believe that the group is likely to gain further traction within its various business segments,' said OCBC in a report.
But OCBC noted newsprint prices are likely to rise due to cost pressures, hence potentially increasing newsprint charge-out rates. Staff costs are also expected to rise amid higher bonus provisions.
SPH shares have risen about 7 per cent year-to-date to its last closing price of $3.93.
On Monday, SPH said its February-May net profit rose 29.9 per cent from a year ago to $164.6 million (US$119.3 million). — REUTERS
SPAusNet – BT
MELBOURNE – Victims of Australia's deadly 2009 firestorm have launched legal action against a Singapore power firm alleging poorly-maintained electrical wires sparked the blaze, reports said on Saturday.
Lawyers representing almost 600 people lodged a class action in Victoria's Supreme Court against Singapore Power for allegedly failing to maintain an ageing line, which fell and started the Feb 7 fire at Kilmore East.
It was the deadliest blaze of 'Black Saturday', Australia's worst natural disaster, claiming 119 of the 173 lives lost. Legal firm Maurice Blackburn said the suit could be worth hundreds of millions of dollars.
'We have heard strong evidence at the Royal Commission (into the fires) that Singapore Power could have taken a number of steps to prevent the devastating Kilmore East-Kinglake bushfire,' firm chairman Bernard Murphy told The Age newspaper.
'Electricity distribution companies are commercial enterprises that have a responsibility to ensure that public safety is not compromised simply in order to keep costs down. Singapore Power's failures have had very tragic consequences.'
The action currently has 598 plaintiffs but could grow to as many as 1,300, including people who lost family members in the fire, suffered physical injuries and lost property, or had ongoing psychological damage, The Age said.
It will allege Singapore Power failed to fit a A$10 (US$8.70) anti-vibration device to guard against metal fatigue and that the circuit-breaker system was not adequate for a dry, windy, fire-prone area.
The 1.1-kilometre single-strand line, one of the longest in Victoria, was only checked every five years and rust and wire deterioration could not be detected by ground crews, the case will also claim.
Unusually for an Australian civil case, Maurice Blackburn has asked that it be decided by a jury instead of a judge.
The Black Saturday fires rushed into small communities with little warning, killing 173 residents as they sheltered in their homes, or fled in cars. Entire towns were razed, reducing more than 2,000 homes to ash. — AFP