Category: SingTel
TELCOs – BT
A new era of telco competition
MDA cross-carriage policy, Next-Gen NBN to transform telco landscape
A CONTROVERSIAL government policy and the Republic’s growing fibre-optic readiness will ring up a new era in telco competition next year as all three operators go head-to-head in mobile, pay-TV and broadband services for the first time since they locked horns a decade ago.
In contrast to last year’s subdued start, 2010 kicked off on an industry-shaking note when the Media Development Authority (MDA) introduced its cross-carriage policy in March. After a lengthy deliberation, the mandate is set to kick in early next year and change the modus operandi of the pay-TV sector.
The mandate forces operators who sign exclusive programming deals to share such content with their rivals.
The move is envisioned to cap rising subscription costs and alleviate the hassle of having multiple set-top boxes for viewing content from different providers. It could also open the door to new contenders as they can now force incumbents to carry their programmes.
‘Nevertheless, we believe that there is still merit in being the original broadcaster of the content as all revenues – subscriber and advertising – will accrue to that party. As such, we may still see some fairly aggressive bidding for popular content,’ OCBC Research analyst Carey Wong said in a recent report.
‘And because of the common carriage, we also think that the move may provide an opening for other players such as M1 to enter the market without having to spend too much on building their own pay-TV infrastructure,’ he added.
And M1, which offered only mobile services before its broadband foray in 2008, did eventually throw its hat into the ring. Last month, it introduced OneBox, a service which allows customers to stream movies and concerts to their TV sets.
‘We will support government’s initiative in the pay-TV sector and develop M1 further in this aspect,’ the company said.
While consumers cheered the prospect of lower prices and greater choice, MDA’s policy was met with fierce resistance from the content industry.
The displeasure culminated in the form of a verbal lashing from the Cable and Satellite Broadcasting Association of Asia (Casbaa).
The trade group repeatedly accused local authorities of breaching international trade agreements. In addition, it warned that the implementation of cross-carriage would harm Singapore’s economy in the long run as foreign media investments will dry up.
Despite the protests, MDA stood its ground and it will soon issue a final decision on the mandate and how it is to be carried out.
Meanwhile, SingTel’s mio TV base swelled this year after it paid top dollar to pry the Barclays Premier League (BPL) broadcast rights away from StarHub. The consumer outcry that followed was widely seen as one of the triggers for MDA’s intervention in the pay-television sector.
The red camp’s pay-base jumped nearly 60 per cent in the past year to 250,000 subscribers as it started its first season of BPL broadcast in August.
‘2010 has been an iconic year for us, and has certainly placed SingTel firmly on its transformational journey from a telco into a multimedia services company,’ said SingTel Singapore CEO Allen Lew. In what could be the most significant telco infrastructure upgrade of the decade, Singapore’s new broadband highway – dubbed the Next-Gen NBN (Nationwide Broadband Network) – started to take shape this year.
The new fibre-optic network raises local Internet access speeds by 10 times or more, and is expected to reach all homes and offices by the end of 2012.
The new network also opens the door to new competitors as they can use it on the same terms as entrenched incumbents SingTel and StarHub.
And new competition did emerge with LGA Telecom and SuperInternet joining the three existing operators in launching new fibre-optic broadband packages in September when the Next-Gen NBN became partly operational.
For just under $400, StarHub and M1 now offer 1Gbps (gigabit per second) broadband plans through the new network, 10 times faster than the previous speed cap of 100 Mbps (megabits per second).
The fibre-optic rollout is supposed to reach 60 per cent of all homes and offices by the end of this year.
However, deployment hit a temporary snag as the management committees of condominiums refused to let OpenNet carry out its cabling works for fear of ruining their estates’ facade.
The impasse was eventually resolved when the Infocomm Development Authority of Singapore (IDA) stepped in and forced building owners to comply.
As the rollout is still a long way from completion, industry watchers say that it is not expected to make a big difference to the telcos’ bottom lines over the next 12 months. ‘I don’t think consumers will be rushing to switch to Next-Gen NBN in 2011 and we are more likely to see a gradual migration to fibre in 2011,’ said telecommunications consultant Soh Siow Meng.
‘It really depends on how hard the telcos want to push but I think telcos are likely to step up their efforts when the coverage is more pervasive in 2012,’ he added.
On the mobile front, all three operators managed to strengthen their cellular strongholds this year in spite of the country’s sky-high mobile adoption rate.
According to IDA’s latest estimates, some 142.1 per cent of the population now carry cell phones and nearly half of local handset users are now on high-speed 3G subscriptions.
Beyond the perennial consumer favourite – the iPhone, consumers also snapped up smart phones that are powered by Google’s Android operating system, seen as the closest contender to Apple’s runaway hit.
In addition, the growing popularity of tablets such as the iPad also helped to lift 3G subscriptions. All three telcos started offering standalone data plans that allow users to surf and check their e-mails on these devices in the second half of this year.
‘Tablets aren’t really new, but they seem to have taken off this year, with the iPad, the Dell Streak and others. We expect growing demand for smart phones and the rising predominance of touch tablet devices to become the key focus for 2011,’ said StarHub CEO Neil Montefiore.
On the handset front, more than half of the phones that were sold by the local operators in the January to September window were smart phones.
However, these are offered with higher subsidies to lower the retail pricing for consumers, and they are also accompanied by generous data bundles that once cost a premium on an ala carte basis.
As a result, profitability took a hit across the board but the three telcos said that they should see payback from smart phone users after a six to nine-month period.
With speculation running wild that a new iPhone and iPad are now in the works, consumers and telcos are likely to be bitten by the smart phone bug all over again in 2011.
SingTel – DBSV
Apple, Airlines and AirTel
• SingTel keen to reduce its reliance on Apple and plans to use “airlines model” to service customers. Target to double non-carriage business in Singapore over the next 3 years.
• Bharti AirTel confirmed end of price wars in India and expects an improved Zain next year. Telkomsel highlighted price inelasticity in Indonesia, effectively ruling out price wars.
• BUY for ~6% yield & earnings recovery in FY12F. Trading at 12.1x FY12F, below historical average of 13.4x.
SingTel partnering with smartphone vendors. SingTel is developing several apps, customized for Singapore. Three of the most popular apps are AMPed, BPL and “I love deals”. Currently AMPed and “Traffic Live” apps are pre-loaded on smart phones from vendors like Samsung, Ericsson and are only available to SingTel subscribers. SingTel also plans to work with vendors like Dell and ZTE in the future for more customized phones. If successful, this may differentiate SingTel offerings while lowering subsidy burden. SingTel revealed its plan to service premium mobile customers, by adapting “airlines model” of offering first-class and business-class kind of service levels.
Inflection point for non-carriage business in Singapore. Management aims to grow its non-carriage (IT & pay TV) business contribution from 25% to 45-50% within 3 years. IT business should benefit from increasing focus on cloud computing where SingTel is far ahead of its peers, while pay TV business should benefit from continued subscriber addition of at least 20K subscribers each quarter.
Bharti led FY11F decline, should lead FY12F recovery too. Bharti confirmed stable competition in India with hopes of an improvement from Zain next year. Bharti could surpass our forecast of 10% earnings growth in FY12F (March YE), if Zain transformation remains on track. SingTel is trading at ~6% yield for FY12F, which we deem too attractive for a blue-chip company.
SingTel – DBSV
Apple, Airlines and AirTel
• SingTel keen to reduce its reliance on Apple and plans to use “airlines model” to service customers. Target to double non-carriage business in Singapore over the next 3 years.
• Bharti AirTel confirmed end of price wars in India and expects an improved Zain next year. Telkomsel highlighted price inelasticity in Indonesia, effectively ruling out price wars.
• BUY for ~6% yield & earnings recovery in FY12F. Trading at 12.1x FY12F, below historical average of 13.4x.
SingTel partnering with smartphone vendors. SingTel is developing several apps, customized for Singapore. Three of the most popular apps are AMPed, BPL and “I love deals”. Currently AMPed and “Traffic Live” apps are pre-loaded on smart phones from vendors like Samsung, Ericsson and are only available to SingTel subscribers. SingTel also plans to work with vendors like Dell and ZTE in the future for more customized phones. If successful, this may differentiate SingTel offerings while lowering subsidy burden. SingTel revealed its plan to service premium mobile customers, by adapting “airlines model” of offering first-class and business-class kind of service levels.
Inflection point for non-carriage business in Singapore. Management aims to grow its non-carriage (IT & pay TV) business contribution from 25% to 45-50% within 3 years. IT business should benefit from increasing focus on cloud computing where SingTel is far ahead of its peers, while pay TV business should benefit from continued subscriber addition of at least 20K subscribers each quarter.
Bharti led FY11F decline, should lead FY12F recovery too. Bharti confirmed stable competition in India with hopes of an improvement from Zain next year. Bharti could surpass our forecast of 10% earnings growth in FY12F (March YE), if Zain transformation remains on track. SingTel is trading at ~6% yield for FY12F, which we deem too attractive for a blue-chip company.
SingTel – BT
Bharti’s latest woes may be a drag on SingTel
Indian telco may face big fine over cellular licences controversy
Singapore Telecommunications could be weighed down further by its Indian investment as Bharti Airtel is currently mired knee-deep in a controversy which might result in the unsavoury prospect of a billion-dollar government fine.
At the heart of the storm is the Indian government’s allegation that local telcos may have underpaid for a series of second-generation (2G) cellular licences that were issued in 2008, a fiasco which has resulted in the resignation of telecommunications minister Andimuthu Raja.
India’s chief auditor has already indicted the official for undervaluing these licences as he is said to have awarded them to new market entrants based on an outdated policy formulated in 2001.
At the same time, incumbents Bharti, BSNL and Vodafone were reportedly allotted more than their stipulated share of the 2G spectrum without incurring any upfront fees.
According to the Financial Times, the Comptroller and Auditor General of India claims that the bids involving these three operators have cost authorities some US$8 billion in lost revenue.
Citing an unnamed source, the FT further reported that Bharti and Vodafone could be fined more than US$1 billion each as a result of the fiasco. Bharti Airtel is the largest operator in India with a local subscriber base of 143 million.
‘Those who were given more at less will have to pay something back to the government … the exact amount is being worked out but BSNL, Bharti and Vodafone are the ones that benefited the most so they will pay the most,’ an Indian official was quoted as saying.
Besides the three incumbents, the six other operators that are being implicated are Idea Cellular, MTNL, BPL, Aircel, Reliance and Spice.
Some market watchers believe a government charge would hurt some of these new market entrants more than incumbents such as Bharti.
‘We believe some of the recent events in the regulatory environment appear to be negative for new operators as they risk paying heavy fines or surrendering their licences,’ Goldman Sachs said in a recent report on Bharti.
‘We therefore believe the regulatory environment in the next 12-18 months will be more favourable to incumbents than new entrants,’ it added.
Nonetheless, if a huge fine is indeed levied on Bharti, SingTel’s earnings will undoubtedly be further dented by its largest regional investment.
When contacted, SingTel declined comment. Earlier this month, Singapore’s largest operator reported an unexpected 6.7 per cent dip in second-quarter net profit to $892 million.
SingTel, which has a 32 per cent stake in Bharti, was hit by the Indian operator’s African expansion for the second quarter in a row.
The Indian operator acquired Kuwaiti conglomerate Zain’s mobile assets in June this year in a deal valued at US$10.7 billion.
Beyond chipping in its share of the financing costs for the acquisition, SingTel’s earnings were dented by the inclusion of the first full quarter of losses from Bharti’s newly acquired cellular companies in Africa. If these were excluded, SingTel said its net profit would have dipped by only 3 per cent in the second quarter.
SingTel CEO Chua Sock Koong previously said Bharti would need around six months to restructure its operations and profitability should begin to improve by April next year.
SingTel – BT
Bharti’s latest woes may be a drag on SingTel
Indian telco may face big fine over cellular licences controversy
Singapore Telecommunications could be weighed down further by its Indian investment as Bharti Airtel is currently mired knee-deep in a controversy which might result in the unsavoury prospect of a billion-dollar government fine.
At the heart of the storm is the Indian government’s allegation that local telcos may have underpaid for a series of second-generation (2G) cellular licences that were issued in 2008, a fiasco which has resulted in the resignation of telecommunications minister Andimuthu Raja.
India’s chief auditor has already indicted the official for undervaluing these licences as he is said to have awarded them to new market entrants based on an outdated policy formulated in 2001.
At the same time, incumbents Bharti, BSNL and Vodafone were reportedly allotted more than their stipulated share of the 2G spectrum without incurring any upfront fees.
According to the Financial Times, the Comptroller and Auditor General of India claims that the bids involving these three operators have cost authorities some US$8 billion in lost revenue.
Citing an unnamed source, the FT further reported that Bharti and Vodafone could be fined more than US$1 billion each as a result of the fiasco. Bharti Airtel is the largest operator in India with a local subscriber base of 143 million.
‘Those who were given more at less will have to pay something back to the government … the exact amount is being worked out but BSNL, Bharti and Vodafone are the ones that benefited the most so they will pay the most,’ an Indian official was quoted as saying.
Besides the three incumbents, the six other operators that are being implicated are Idea Cellular, MTNL, BPL, Aircel, Reliance and Spice.
Some market watchers believe a government charge would hurt some of these new market entrants more than incumbents such as Bharti.
‘We believe some of the recent events in the regulatory environment appear to be negative for new operators as they risk paying heavy fines or surrendering their licences,’ Goldman Sachs said in a recent report on Bharti.
‘We therefore believe the regulatory environment in the next 12-18 months will be more favourable to incumbents than new entrants,’ it added.
Nonetheless, if a huge fine is indeed levied on Bharti, SingTel’s earnings will undoubtedly be further dented by its largest regional investment.
When contacted, SingTel declined comment. Earlier this month, Singapore’s largest operator reported an unexpected 6.7 per cent dip in second-quarter net profit to $892 million.
SingTel, which has a 32 per cent stake in Bharti, was hit by the Indian operator’s African expansion for the second quarter in a row.
The Indian operator acquired Kuwaiti conglomerate Zain’s mobile assets in June this year in a deal valued at US$10.7 billion.
Beyond chipping in its share of the financing costs for the acquisition, SingTel’s earnings were dented by the inclusion of the first full quarter of losses from Bharti’s newly acquired cellular companies in Africa. If these were excluded, SingTel said its net profit would have dipped by only 3 per cent in the second quarter.
SingTel CEO Chua Sock Koong previously said Bharti would need around six months to restructure its operations and profitability should begin to improve by April next year.