Category: SingTel
SingTel – Kim Eng
A CEO Who Deserves Every Cent
A fair day’s wage for a fair day’s work. For running an organisation of SingTel’s complexity and the most highly valued, most profitable Singapore company to boot, SingTel CEO Chua Sock Koong is fairly and not excessively compensated. Arguably, Ms Chua has made a significant contribution to improving SingTel’s executive remuneration system since she stepped up to the role in 2007. We currently have a SELL call on SingTel (with a SOTP-derived TP of SGD2.82) but this is certainly not due to the way its top executive is paid.
Good value for money. Despite our currently negative view on the stock, SingTel’s recently-released FY3/12 annual report showed that Ms Chua has given good value for what she was paid. In FY3/12, she received SGD4.9m in cash compensation, putting her just somewhat above the median for other CEOs of similar stature in Singapore, although SingTel is one of only two Singapore companies that earn an annual net profit of over SGD3b (excluding the Jardine Group).
Executive pay tightly correlated to total shareholder return. In the past few years, SingTel has linked its CEO compensation to Total Shareholder Return (TSR), a benchmark that combines both capital appreciation and dividends. In Ms Chua’s case, this tight correlation is not so surprising as she was group CFO before being appointed to the CEO position in April 2007, and she had played a key role in developing SingTel’s remuneration system. This correlation did not appear to have been so clear with her predecessor, Mr Lee Hsien Yang.
Yin and yang, night and day. While Ms Chua’s compensation has been more closely related to TSR, Mr Lee’s had at times lagged shareholder returns, particularly in FY3/04 when TSR rose 79% while Mr Lee’s pay rose by only 32%. This might have led to the big increase in his remuneration when he stepped down in 2007. In Ms Chua’s case, despite the fact that she had also cashed in on her performance shares recently, the discrepancy was not so large.
SingTel – TODAY
SingTel CEO pay rises 8.7%
SingTel’s chief executive officer Chua Sock Koong received S$4.9 million in total remuneration for the firm’s financial year ended March ths year.
This is 8.7 per cent higher compared to her pay package of S$4.5 million in the previous year.
In its latest annual report, SingTel disclosed that Ms Chua received a fixed component of S$1.6 million. She also received cash bonuses of S$3.2 million.
The other components of her pay include the company’s contribution to the provident fund amounting to S$9,474, and benefits such as car and club memberships totalling S$74,251.
The CEO’s hike in remuneration came as the telco rang in a net profit of S$3.99 billion or a 4.3 per cent on-year increase for the full year.
The group’s operating revenue for the year also increased 4.2 per cent to S$18.8 billion compared to the previous year.
SingTel’s next highest paid senior management staff is Allen Lew, Country Chief Officer (Singapore) and CEO Group (Digital L!fe), who earned S$3.4 million.
In third is CEO Group Consumer and Country Chief Officer Australia, Paul O’Sullivan, who earned S$3.27 million.
In a statement, Ms Chua said despite looking for new growth areas, the “core telco business remains the critical lynchpin to our success”.
She added that the company will continue to review “the core foundations of our carrier business to anticipate industry changes rather than simply react to them”. CHANNEL NEWSASIA
TELCOs – Kim Eng
Let the BPL Money Games Begin
Buy StarHub to hedge rising cost of BPL TV rights. British soccer fans have just agreed to hand over GBP3b to the Premier League, the richest soccer league in the world, as the 2013-2016 UK TV rights were recently sold at a 71% premium over the last three seasons. In Singapore, soccer fans will have no choice but to tighten their belts yet again. However, we think StarHub will be the ultimate winner, even if SingTel decides to throw caution to the winds and bids aggressively. BUY StarHub to hedge against the rising cost of watching your favourite team; SingTel remains a SELL.
BPL scores huge TV rights win at home. The world’s richest soccer league, Premier League, just got a billion pounds richer. British pay TV broadcasters BSkyB and BT recently agreed to fork out GBP3.04b over the next three years for the UK domestic live TV broadcast rights for the 2013-2016 seasons, a 71% rise over the cost of the rights for the 2010-2013 seasons. BPL stars Yaya Toure and Mario Balotelli (despite his goal drought) can look forward to even more lavish pay hikes.
What will happen to Singapore? The worst case scenario is both telcos and Premier League walk away from the negotiation table, which we think is unlikely. Given the presence of cross-carriage laws this time round, it is more plausible that Premier League will allow a joint bid between SingTel and StarHub that will result in it receiving a sum more than the estimated SGD425m SingTel paid for the 2010-2013 seasons.
No good news for soccer fans. Whichever the scenario, there is unlikely to be any good news for soccer fans; just various degrees of bad. Assuming a joint bid is possible and a 30% rise in TV rights cost over the 2010-2013 seasons, as mooted in Hong Kong-based reports, our best case scenario suggests that subscribers will still need to pay between SGD27 and SGD35 more a month to watch BPL, which we think is still reasonable.
Odds are with StarHub. In the final analysis, we think StarHub will watch the dollars and cents and refrain from harming its generous dividend policy by bidding too aggressively, even if it does bid jointly with SingTel. If SingTel decides to be as aggressive as it was in 2009 and clinches the rights to the three seasons, the cross-carriage law will work to StarHub’s advantage. In such a tactical strategy game, we think the odds (and investors’ favour) are with StarHub.
TELCOs – Kim Eng
SingTel Crimps The Data Pipe Further
Step forward for telcos. SingTel’s decision to cut data caps for smartphones is a big step toward better data monetisation opportunities for Singapore telcos. That said, the short-term impact will be minimal as the majority of 3G data users do not exceed 2GB of data a month. Over time however, it will encourage more data usage, especially on the video front, and this should lead users to adopt LTE as well as upgrade their plans, thus benefiting the telcos’ data revenue and margins. We retain our BUY calls on StarHub and M1, and SELL on SingTel.
SingTel reins in generous data caps. SingTel’s new 4G plans were significant not because it is the first telco to launch 4G smartphone plans, but because it has slashed data caps for both its 3G and 4G plans. From a two-tiered 12GB and 30GB (although not unlimited, these caps were still very generous), SingTel now offers four tiers of 2GB, 3GB, 4GB and 12GB. Monthly subscription prices have remained the same but SingTel has also increased the number of bundled SMS.
StarHub and M1 likely to follow suit. Now that the giant has stepped forward to lead the way, the other telcos are likely to follow. According to the media, StarHub will soon cut its single-tier 12GB smartphone and iPhone plans to tiers of 1GB, 2GB and 5GB to match its Multi-SIM plans for tablets and mobile phones. Similarly with M1, although it has said it will only unveil its plans in 2H12. Also, we think both smaller telcos will take the opportunity to do away with their unlimited plans.
Churn could rise in rush to lock in larger data caps. SingTel’s churn rate could rise in 3Q12, as its out-of-contract subscribers may switch to the other two telcos to lock in their still-generous data caps for another two years. This is especially so if StarHub and M1 hold off on dumping their higher data caps for a couple more months. We reckon this is probably why StarHub warned it would also be cutting caps soon but provided no other details.
Gradual adoption. The decision to cut down on data caps should be positive for ARPUs further out but the short-term impact will likely be minimal as the majority of data users do not exceed 2GB of data a month. Over time, more 4G handsets will become available, and the faster speeds will encourage more data usage and prompt users to upgrade their plans, thus benefiting data revenue. Higher adoption of tablets will also drive more data usage. More importantly, data margins will also benefit.
Prefer StarHub and M1 to SingTel. This development does not change our calls, which stand at BUY on StarHub and M1 and SELL on SingTel. We still like StarHub and M1 for their attractive yields of about 6%. In fact, StarHub’s yield could get more attractive as we believe its balance sheet can support a higher regular dividend. While the cut in data caps will benefit its domestic business, SingTel faces significant risks from overseas, particularly on the currency and regulatory fronts.
TELCOs – Kim Eng
SingTel Crimps The Data Pipe Further
Step forward for telcos. SingTel’s decision to cut data caps for smartphones is a big step toward better data monetisation opportunities for Singapore telcos. That said, the short-term impact will be minimal as the majority of 3G data users do not exceed 2GB of data a month. Over time however, it will encourage more data usage, especially on the video front, and this should lead users to adopt LTE as well as upgrade their plans, thus benefiting the telcos’ data revenue and margins. We retain our BUY calls on StarHub and M1, and SELL on SingTel.
SingTel reins in generous data caps. SingTel’s new 4G plans were significant not because it is the first telco to launch 4G smartphone plans, but because it has slashed data caps for both its 3G and 4G plans. From a two-tiered 12GB and 30GB (although not unlimited, these caps were still very generous), SingTel now offers four tiers of 2GB, 3GB, 4GB and 12GB. Monthly subscription prices have remained the same but SingTel has also increased the number of bundled SMS.
StarHub and M1 likely to follow suit. Now that the giant has stepped forward to lead the way, the other telcos are likely to follow. According to the media, StarHub will soon cut its single-tier 12GB smartphone and iPhone plans to tiers of 1GB, 2GB and 5GB to match its Multi-SIM plans for tablets and mobile phones. Similarly with M1, although it has said it will only unveil its plans in 2H12. Also, we think both smaller telcos will take the opportunity to do away with their unlimited plans.
Churn could rise in rush to lock in larger data caps. SingTel’s churn rate could rise in 3Q12, as its out-of-contract subscribers may switch to the other two telcos to lock in their still-generous data caps for another two years. This is especially so if StarHub and M1 hold off on dumping their higher data caps for a couple more months. We reckon this is probably why StarHub warned it would also be cutting caps soon but provided no other details.
Gradual adoption. The decision to cut down on data caps should be positive for ARPUs further out but the short-term impact will likely be minimal as the majority of data users do not exceed 2GB of data a month. Over time, more 4G handsets will become available, and the faster speeds will encourage more data usage and prompt users to upgrade their plans, thus benefiting data revenue. Higher adoption of tablets will also drive more data usage. More importantly, data margins will also benefit.
Prefer StarHub and M1 to SingTel. This development does not change our calls, which stand at BUY on StarHub and M1 and SELL on SingTel. We still like StarHub and M1 for their attractive yields of about 6%. In fact, StarHub’s yield could get more attractive as we believe its balance sheet can support a higher regular dividend. While the cut in data caps will benefit its domestic business, SingTel faces significant risks from overseas, particularly on the currency and regulatory fronts.