iTunes off, SingTel turns up the music

Singapore Telecommunications aims to fill the local absence of Apple’s wildly popular iTunes music store with a string of new tie-ups that could more than double the repertoire of its free song download service.

‘This year, you will see us announcing partnerships with other music labels,’ said Yuan Kuan Moon, SingTel’s consumer chief and CEO of its mobile division.

‘We are in the final closing stage of negotiations,’ he told BT in an interview last week.

The upcoming deals, which could include alliances with music giants Warner, Sony Music and even smaller independent labels, will greatly expand the library of songs that are offered under Amped. This is the digital music store the operator opened to much fanfare in June last year.

Amped currently serves up a musical buffet of nearly 500,000 songs from Universal Music artistes such as Black Eyed Peas and Lady Gaga.

Consumers who sign up for selected price plans are given the additional perk of being able to download these tracks to their phones for free.

‘We have 150,000 customers on Amped already. That is an extremely good response given it’s only been one year (since the launch),’ Mr Yuan said.

‘A feedback we got is that we have only half a million songs. Once we have all these record labels on board, this (Amped) will become your de facto music player,’ he added.

SingTel Amped is the country’s third legitimate music download service, but it is the only one to support handsets from different manufacturers.

Only Nokia phone users are allowed access to its Comes With Music offering and the same applies to Sony Ericsson’s PlayNow Plus music service.

Within Asia, Apple’s popular iTunes Music store is open for business only in Australia and Japan, as piracy concerns continue to keep its doors shut to consumers in other parts of the region.

SingTel initially tried to offer Amped on as many phones as it could, but it has since changed tack to bundle the service with selected smart phones.

‘The user experience wasn’t as good (on certain phones),’ Mr Yuan explained.

Besides music, SingTel is looking to dial into the booming market for mobile games to boost its cellular revenue.

However, instead of developing its own titles, the operator is trying to work with application store owners such as Nokia and Google on integrated billing arrangements, he revealed.

This means that customer downloads can be automatically charged to a consumer’s phone bill, freeing the handset makers from the burden of maintaining their own payment systems.

‘We want to make sure we tap ourselves into big ecosystems,’ Mr Yuan stressed.

Despite Singapore’s sky-high mobile penetration rate of nearly 140 per cent, SingTel still added 25,000 postpaid cellular subscribers to bring its tally to 1.62 million at the end of March.

With the growing use of mobile broadband and the arrival of new gadgets such as the Apple iPad, Mr Yuan is confident that the firm’s cellular base will continue to swell.

‘There will still be growth because we are not looking at pure population penetration. We are looking at a single user with multiple devices,’ he said.

Telkomsel tower deal still being worked out: SingTel

THE US$1.2 billion deal to sell its stake in some 9,000 telecommunications towers in Indonesia to local operator PT Telekomunikasi (Telkom) is still being worked out and it’s too early to comment on the sale, says Singapore Telecommunications.

‘As shareholders of Telkomsel, both Telkom and SingTel conduct regular reviews of Telkomsel’s business operations and its future directions. One of the on-going discussions focuses on Telkomsel’s tower assets. It is too premature to comment on the subject,’ a SingTel spokesperson said.

The company was responding to Telkom’s comments in a Reuters report that it was looking to close the deal by the end of this year.

In April, Indonesia’s largest telco appointed the Australian Macquarie Group as its adviser to the deal. Earlier this year, the operator also said that it would borrow around US$400 million to finance the transaction.

The towers in question belong to SingTel’s Indonesian associate Telkomsel. Telkom has a 65 per cent stake in Telkomsel and the Singaporean operator holds the remaining 35 per cent interest.

Local authorities frown upon foreign ownership of critical telecommunications infrastructure. As a result of SingTel’s stake in Telkomsel, Telkom is looking to transfer the ownership of these towers to a wholly owned subsidiary called PT Dayamitra Telekomunikasi, or Mitratel.

In a separate announcement, SingTel said that its Australia subsidiary Optus’ HK$1 billion (S$180 million), 10-year note issue will carry an annual coupon of 3.825 per cent per annum and mature on June 10, 2020.

The notes, distributed to institutional investors, come under Optus’ two billion euro (S$3.4 billion) Medium Term Note programme announced in July 2009.

Bharti’s pan-India 3G plan foiled by hot bids

Group paying 123 billion rupees for permits in 13 of the 22 regions

Bharti Airtel Ltd, India’s largest carrier and a unit of Singapore Telecommunications Ltd, scrapped plans to offer nationwide high-speed mobile phone services after bidding in a government auction drove prices ‘beyond reasonable levels.’

India’s 34-day auction of third-generation licences for airwaves in its 22 telecommunications zones ended on Wednesday with none of the nine approved bidders buying all the permits for national coverage. The auction raised 677.2 billion rupees (S$20.4 billion) for the government.

‘I am sure every pan-Indian operator would love to get their hands on pan-Indian spectrum, but the price needs to be right,’ Theo Maas, who owns Bharti shareholder Singapore Telecommunications Ltd as part of the US$4.5 billion in assets he oversees at Arnhem Investment Management in Sydney, said.

As bids surged beyond initial expectations, there was a ‘trade-off that every operator would make,’ he said.

The licence prices stoked concern that carriers won’t be able to recoup their investment from a market where calls cost a penny a minute, the cheapest in the world.

France Telecom SA and Deutsche Telekom AG posted record losses after European phone companies paid more than US$100 billion to buy 3G licences a decade ago.

‘The auction format and severe spectrum shortage along with ensuing policy uncertainty drove the prices beyond reasonable levels,’ Bharti, which is paying 123 billion rupees for permits in 13 of the 22 regions, said in a statement on Wednesday.

‘As a result, we could not achieve our objective of pan-India 3G footprint.’

In some areas of the country, building new base stations and towers might have been a cheaper alternative to buying new spectrum, according to Arnhem’s Mr Maas.

Bharti rose one per cent to 262.4 rupees at 11.33 am in Mumbai trading yesterday, while Reliance Communications added 1.7 per cent to 139 rupees, and Idea Cellular Ltd climbed 4.3 per cent.

Bharti has fallen 16 per cent since the auction began on April 9, while Reliance dropped 24 per cent, and Idea Cellular Ltd slumped 22 per cent.

That compares with an 8.5 per cent decline for the benchmark Sensex index in the same period.

Morgan Stanley raised its investment rating for India’s telecommunications companies yesterday to ‘in-line’ from ‘cautious,’ citing the removal of uncertainty over the pricing of third-generation spectrum with the conclusion of the auction, as well as stability in the region’s tariff wars.

The proceeds from the auction exceed the 350 billion rupees Finance Minister Pranab Mukherjee projected in his budget, and may help the government meet a target of shrinking the budget deficit by more than one percentage point of gross domestic product, the sharpest cut in 19 years.

On May 11, India’s telecommunications regulator said prices for 3G spectrum established through the auction should be used as a base to charge for second-generation airwaves.

The recommendation threatens to raise costs for mobile-phone companies.

The lack of clarity on regulations ‘gets worse by the day,’ Mark James, an analyst with Liberum Capital Ltd, said from London before the auction ended. — Bloomberg

Concerns in Indonesia

• Telkomsel may be the loser in the competition for data, in our view

In the past two quarters, 70% of revenue growth in Indonesia wireless was from data. We believe this is not a temporary trend and Telkomsel may be the loser in the competition to grow data revenue. We believe the consumer perception that Telkomsel has the best quality wireless network in Indonesia is at risk. Please refer to today’s UBS report, Indonesia Telecommunication Sector: The rise of data by UBS Indonesia telecom analyst Sebastian Tobing for further details.

• Negative for SingTel, in our view

SingTel is the 35% shareholder of Telkomsel and 17% of our sum-of-the-parts based price target for SingTel comes from Telkomsel. We believe the market views Telkomsel as one of the growth drivers for SingTel.

• Bharti in India also facing difficulties

Bharti, SingTel’s other large overseas associate and potential growth driver, also faces difficulties in the near term. The difficulties are: competition, 3G licence fee and regulatory challenges. We believe the concerns at Bharti and Telkomsel will be an overhang for SingTel shares.

• Valuation: lower price target to S$3.15; retain Neutral rating

Reflecting our lower earnings estimates for Telkomsel, we lower our SingTel EPS forecasts for FY2011/12/13 from S$0.266/0.286/0.316 to S$0.255/0.274/0.301. Our price target, based on a sum-of-the-parts model, is lowered from S$3.22 to S$3.15.