Category: SingTel
SingTel – BT
SingTel seen eyeing stake worth US$500m in Ghana telco
It’s conducting due diligence, with Merrill as adviser
SINGAPORE Telecommunications is now hunting for high-growth assets far beyond its traditional grounds in Asia, having spent over US$12 billion in acquisitions closer to home in recent years.
Banking sources told Reuters that SingTel, South-east Asia’s largest telecoms company, plans to bid for a major stake in state-owned Ghana Telecom, the West African country’s dominant operator.
The deal, for half of the unlisted company’s shares, may cost SingTel up to US$500 million and pit it against European names like France Telecom, whose mobile arm Orange operates in several African countries, including Botswana and Senegal.
SingTel declined to comment but people close to the deal confirmed that the company, advised by Merrill Lynch, was conducting due diligence and hopes to be short-listed for the bidding process likely to start in about a week’s time.
A telecoms firm in Africa – where only 15 per cent of the population owned a mobile phone at the end of 2005 – would fit well with SingTel’s strategy to invest in low-penetration markets for hyper growth, analysts said.
If the deal goes through, it would be the first major acquisition by a Singapore company in Africa. But not everyone is convinced that an African adventure is a good idea.
‘The further you go (from your traditional markets), the higher the risk you face,’ said Michael Lim, Singapore-based fund manager at Prudential Asset Management.
‘But having said that, if the price is right and the returns are rewarding, then investors may take a positive view,’ he said.
SingTel, facing a small, saturated home market of 4.5 million people, has bought several mobile operators in high-growth Asian nations and in the bigger Australian market.
It owns Australia’s No 2 mobile operator Optus and has major stakes in six Asian telecoms companies, including India’s Bharti Group , Indonesia’s PT Telkomsel, and Thailand’s Advanced Info Service.
Most of these investments have shown phenomenal growth in wireless subscribers in recent years. SingTel’s Indian associate Bharti added over two million customers – about half the population of Singapore – in September alone, lifting its user base to 48.9 million.
Despite that, Priya Gupta, director in credit rating agency Fitch’s Asia-Pacific telecoms, media and technology team believes that an aggressive acquisition strategy could compromise the company’s financial stability, given the scarcity of high-quality assets.
However, investors such as Peter Wilmshurst, senior vice-president of Templeton Global Equity Group, said that he understands why the company was eager for emerging market assets.
‘Telecom is a declining (growth) industry overall,’ he said.
‘But there are some areas within the industry that have strong growth potential and two of them are broadband (Internet) and emerging market mobile,’ he said.
Mr Wilmshurst said that SingTel’s operations in Singapore and Australia offer steady cash flow but little promise of future growth as telecoms penetration has reached around 100 per cent.
‘It’s SingTel exposure to emerging markets that gives it access to the strong growth potential, especially in the mobile segment in these markets,’ he said.
Investors seem encouraged by the prospects. From a decade low of S$1.19 in January 2003, SingTel stock has shot up to a high of S$4 this month, pushing its market value above US$40 billion. The stock has gained 61 per cent in the past 12 months alone. — Reuters
SingTel – BT
SingTel plans to bid for Ghana Telecom: report
Ghana telco valued at US$1b; up to 66% stake up for grabs
SINGAPORE Telecommunications, South-east Asia’s largest telecommunications firm, plans to bid for a majority stake in state-owned Ghana Telecom, in a deal likely to be over US$500 million, banking sources told Reuters.
An acquisition in Africa would take SingTel beyond its traditional footprint in Asia-Pacific where it has spent S$18 billion in recent years, buying operators in high-growth Asian nations, and in the bigger Australian market.
According to Ghana Telecom’s website, strategic investors are undertaking due diligence of the company for taking part in a privatisation auction for the majority stake.
One source said the auction would be for at least a 51 per cent stake or as much as 66 per cent in the company valued at around US$1 billion.
Sources close to the deal said Merrill Lynch was advising SingTel. Both SingTel and Merrill declined to comment.
‘We do not comment on market rumours,’ said a SingTel spokesperson.
The sources said SingTel would be competing for the stake with French telecom giant France Telecom and Portugal Telecom.
Local telecom companies in Ghana include payphone operator Westel, and mobile operators Scancom Ltd, Mobitel and Kasapa.
Ghana Telecom’s mobile phone services arm, Onetouch, is the country’s second-largest after Scancom.
Ghana is considered to be one of the fastest growing sub-Saharan economies with its gross domestic product growing at about 6 per cent in 2006 and the government aiming for 6.5 per cent growth in 2007.
The country of 20 million people at the end of June 2007 had a total of 6.7 million telephone subscribers.
Faced with a saturated home market, SingTel has been tapping into the fast growth in low-penetration countries across Asia and now derives about 75 per cent of sales from operations outside Singapore.
SingTel owns Australia’s No 2 phone operator Optus and large stakes in five Asian mobile operators: Thailand’s Advanced Info Service plc, India’s Bharti Group, Globe Telecom Inc in the Philippines, Indonesia’s PT Telkomsel and Pacific Bangladesh Telecom Ltd.
It recently bought a 30 per cent stake in Pakistan’s No 3 mobile phone operator Warid Telecom. — Reuters
TELCOs – BT
Buy M1, SingTel, StarHub for their safe-haven status: Citi
All 3 outperformed the stock market in last 3 corrections
BUY the three listed telcos for their safe-haven status, given that markets are at all time highs, said Citi in a report this week.
It noted that the telcos outperformed the stock market in the last three corrections earlier this year, in 2006 and 2004, a point Citi had highlighted last month.
‘This track record should encourage ownership of all three Singapore telecom stocks, given that the markets are at all time highs,’ it said.
As domestic consumption stories, the telcos are largely insulated from the risk of a global economic slowdown, Citi had said in a September report on Asian telcos.
‘It’s all about relative outperformance though. No one single telco has delivered a positive return over the last three corrections (StarHub comes close),’ it said.
In the 2004 market correction, M1 outperformed the Straits Times Index (STI) 5.6 per cent while SingTel was 0.2 per cent higher.
StarHub was only listed in October 2004.
During last year’s correction, M1 outperformed 7.6 per cent, SingTel 0.4 per cent and StarHub 13.3 per cent.
During this year’s correction, the outperformance of M1, SingTel and StarHub was 10.9 per cent, 0.3 per cent and 5.9 per cent respectively.
In the latest report, Citi said the Singapore telcos are benefiting from the immigration-driven consumption growth and robust economic activity.
Yesterday, the government said preliminary third-quarter growth was 9.4 per cent. Economists are expecting full-year growth to exceed the official 7-8 per cent forecast.
Last month, government data showed that Singapore’s total population rose 4.4 per cent in 2007 to 4.7 million, boosted by foreigners.
The non-resident population grew about 14.9 per cent in 2007 to cross one million. Non-residents accounted for about 130,000 or 66 per cent of the total population increase.
The resident population grew 1.8 per cent in 2007 and in absolute terms, it was 66,600 from a year ago.
Citi’s economist Chua Hak Bin said: ‘The proportion gives a sense of distribution of current job growth, with about two-thirds of jobs going to non-residents.’
Job growth has been strong with total employment at 2.61 million at end-June 2007, up from 2.5 million at end-2006 and 2.32 million at end-2005.
Job growth was about 113,800 in the first half of this year. Manpower Minister Ng Eng Hen said a record 200,000 jobs at least will be reached this year.
The telcos focus much of their marketing, particularly pre-paid mobile services, on the foreign worker segment.
Citi has revised upwards its price target for SingTel to $4.40 from $3.90.
It likes SingTel for three reasons – its stakes in regional telcos, especially India’s Bharti, solid domestic earnings momentum and capital management efforts.
As for StarHub, the telco has the best exposure to Singapore’s vigorous growth, Citi said, also giving a new target price of $3.60 from $3.30.
M1 has been upgraded to ‘buy’ from ‘hold’. Citi said while M1 is structurally the weakest of the three operators, its good yield offsets lower growth prospect. Citi cites a 11 per cent prospective yield and noted that an interested buyer in Keppel has increased its holdings to 19.9 per cent versus 18.2 per cent in June.
TELCOs – CIMB
Growth surprises, capital management could be next
• 2QCY07 results marked the start of re-rating for Singapore telcos. Earnings for SingTel’s Singapore operations and M1 surprised on the upside while StarHub’s performance was within our expectations. The sector’s 9.5% yoy revenue growth, driven by double-digit increases in mobile (11.5% yoy) and Internet/data services (+14% yoy), was the quarter’s highlight.
• Topline drivers remain a robust domestic economy and immigration influx. A robust domestic economy has lifted mobile postpaid ARPU (+5.6% yoy) and penetration rates for household broadband (Jun 07: 71%, Jun 06: 56%). Meanwhile, an influx of immigrant labour on the back of Singapore’s transformation into a global city continued to drive mobile-subscription growth (+11.5% yoy), despite high penetration rates of 111%.
• Potential yield surprises. Consensus is expecting an average CY08 yield of 5.6%. We are going for 8.0%. We believe that topline-led cash-flow growth will set the stage for upside yield surprises over the next two years, particularly for StarHub and M1.
• Risks receding. The risk of cost pressure is declining on the back of healthy topline growth. The three telcos are indicating greater comfort with next-generation broadband network (NBN) risks from a year ago, following dialogues with the regulatory body, IDA. We also believe the IDA’s final decisions will be balanced between introducing greater innovation through competition and limiting the risk of destructive competition for SingTel and StarHub.
• Upgrading sector to Overweight from Neutral; SingTel our top pick on 3-6-month view; StarHub our preferred pick on 6-12-month view. We raise our target prices for SingTel (Outperform), StarHub (Outperform) and M1 (Neutral) as we roll forward our valuation to CY08. Our ratings on the three stocks remain unchanged. SingTel’s target price goes up to S$4.54 (from S$4.27), StarHub’s to S$3.64 (from S$3.50) and M1’s to S$2.40, all based on DCF valuations. Singapore’s telco sector is benefiting from strong consumption growth on the back of an immigration boom and robust domestic economy. Strong cash flow-generation sets the backdrop for attractive sector yields of 8%. SingTel is our top pick for nearterm outperformance, as it is most likely to benefit from fund flows seeking a safe haven together with high growth in regional markets. StarHub is our preferred pick for the medium term. As the leading quadruple-offering operator, StarHub arguably offers the best exposure to Singapore’s immigration boom, with a 10% yield on strong free cash flow. M1 is a pure defensive stock with prospective yields of 9.5%.
SingTel – BT
Makes sense holding on to leader SingTel
LAST week, the three listed telcos had very good news. A report on Friday said Singapore’s foreign population crossed the one million mark. According to the Department of Statistics (DOS), foreigners coming here in unprecedented numbers have pushed Singapore’s population to 4.68 million as at June, a 4.4 per cent rise over the previous year.
The foreign population, which includes professionals, workers, students and their family members, was estimated to hit 1,005,500 in June this year – crossing the one million mark for the first time.
This is a 14.9 per cent rise over a year ago and represents the highest jump in at least seven years, according to DOS. The previous year’s increase was 9.7 per cent.
The number of Singaporeans and permanent residents here also grew, by 1.8 per cent – the same as the previous year.
More foreigners mean higher mobile phone sales and the telcos, especially giant Singapore Telecommunications, have been reaping the benefits.
SingTel already showed that in its first-quarter results ended June 30, where it reported higher-than-expected net profit of $927 million, up 10.4 per cent, bolstered by unprecedented double-digit growth at home as the resurgent economy led to more mobile phone sales and higher business demand.
Market on fire
A recent report by Merrill Lynch said SingTel is leading the pack in home-market penetration.
Describing the local mobile market as on fire, it said that despite the 111 per cent headline market penetration, the Singapore mobile market grew revenue at double-digit rates in Q2 2007 and third-ranked MobileOne’s success to date in mobile broadband points towards more sustained growth in the medium term.
As for SingTel, its revenue growth in Q2 2007 was the highest in the market – the first quarter it has achieved this in many years.
The US brokerage noted that SingTel’s mobile revenue growth was largely achieved without significant contribution from mobile broadband, considering that the telco’s mobile broadband was launched only in late May.
It was also a milestone in another respect for SingTel’s domestic business: its revenue growth outstripped its smaller rival StarHub’s for the first time.
Regaining market leadership
StarHub has been posting double-digit revenue growth for the last three years while M1 and SingTel had yo-yoed from low single-digits to negative growth over the same period.
‘Over the past year, SingTel has been much more aggressive, particularly in the mobile and broadband markets as it looked to regain market leadership from the surging StarHub,’ said Merrill Lynch.
While it is unlikely StarHub will not strike back, SingTel’s momentum, given its size, is probably going to be a formidable challenge to take on without a bruising price war.
The surging share price performance of SingTel recently, however, might make investors wonder if the stock has priced in all the good news.
Yesterday, SingTel closed at $4, up $1.60 from its 52-week low of $2.40.
For a long-term hold, though, SingTel will remain a good bet, given its track record of stable and sensible management, having shown restraint in not chasing after telco acquisitions and being committed to returning excess cash to shareholders.