Category: SingTel
SingTel – OCBC
Regional growth story likely intact
Slightly more upbeat outlook. SingTel – after posting an upbeat set of 2QFY10 results recently – has modestly upgraded its guidance for FY10 ending Mar 2010. For Singapore, SingTel expects its EBITDA to grow at low single-digit level (vs. stable previously), likely aided by the continued growth in data services and strong take up of the new Apple iPhone 3GS; but EBITDA margin to decline to around 36-38% from 40% previously. It has maintained other guidance; capex to be below S$800m. For Australia, SingTel expects the operating revenue and EBITDA to grow at low singledigit levels; capex of around A$1.1b; and free cashflow to remain stable. For its associates, SingTel expects both Bharti and Telkomsel (its two largest contributors) earnings to grow in local terms, although it notes that ordinary dividend will be lower.
Game-changer in Pay TV arena. Another noteworthy development would be SingTel’s Pay TV segment – it managed to secure the coveted EPL (English Premier League) 2010-2012 season broadcast rights as well as exclusive sports content from ESPN and STAR Sports (from mid-2010). While we think that it may be a loss leader for SingTel, the added sports content should give its fledging Pay TV business a good boost and also aid its transformation from a plain vanilla telco to a multi-media solutions provider. We believe that having good content may be the key to competing effectively when the NBN rolls out from mid-2010.
NBN may also bring added competition. However, the NBN will also bring additional competition, especially to the corporate realm where it currently has a clear dominance. But we understand that SingTel already has plans in place to retain its existing customers or increase its “stickiness” by offering more comprehensive end-to-end services. We can also expect its recent acquisition of SCS (Singapore Computer Systems) to give it an added edge in the fixed network services segment.
Maintain BUY and S$3.51 fair value. Besides potentially riding on the faster recovery of its regional associates, we believe that SingTel’s growth proposition via acquisitions remains intact – management remains keen to make strategic acquisitions in not only pure carriers but also other segments to boost its service offerings. On the dividend front, we continue to expect SingTel to pay out between 45% and 60% of its recurring earnings as dividend this year. Maintain BUY with a SOTP-based fair value of S$3.51.
TELCO – OCBC
Value plays with attractive yields
Entering into new era with NBN. Singapore will start rolling out the Next Generation National Broadband Network (NBN) from 2010 onwards as part of its NI2015 Master Plan. SingTel and StarHub will have big roles to play – the former as the NetCo (in charge of rolling out the fiber connections) and the latter as the OpCo (responsible for designing, building and operating the active infrastructure). The broadband connectivity will then be packaged and resold by RSPs – with MobileOne (M1) likely to be one of them – to end users. As such, we expect to see some shakeup in the fixed broadband and network services segments.
Big shakeup in Pay TV arena. Another area of big changes will be in the Pay TV arena, especially in the sports segment. SingTel has recently won the exclusive broadcast rights for the English Premier League for the 2010-2012 seasons; it has also scored a coup by luring ESPN STAR Sports (ESS) from StarHub from mid-2010. But StarHub has responded with two free sports channels of its own and may have cards up its sleeve to combat subscriber defection. And with the NBN and its higher bandwidth capacity, we can expect the content-on-demand market to hot up as well.
Status quo for mobile segment. As for the telcos’ mainstay business, we pretty much expect things to remain status quo. Both M1 and StarHub have recently obtained the “rights” to distribute the Apple iPhone 3GS, breaking SingTel’s near 2-year monopoly on the much-craved smartphone. However, it is unlikely that M1 and StarHub would use the phone to gain market share but probably more to reduce their monthly churns. As such, we do not expect any debilitating price wars. And with the global economy slowly starting to recover, we may also see a modest rebound in core earnings.
Value plays with attractive yields. Stock markets around the world have recovered strongly since hitting multi-year lows in Mar 2009. But with the economies still lagging somewhat behind, significantly higher valuations may be harder to come by in 2010. Instead, investors may be keen to look for value i.e. at laggards with strong fundamentals, and the telcos fit the bill. We see their attractive dividends (mainly M1 and StarHub) as another plus point. We also believe that the rollout of the NBN from mid-2010 will bring new opportunities for all the three telcos. As such, we maintain our OVERWEIGHT rating on the sector.
TELCO – AmFraser
Mobile broadband bumps numbers up
Investment Highlights
• IDA statistics show aggregate residential and corporate broadband subscribers grew a strong 9% QoQ in 3Q09 to 1.6 million. But fixed broadband (BB) subscribers – predominantly xDSL and cable modem subscribers – grew a slower 3% QoQ to 1.1 million. The fixed BB market share continued to fall from 77% at end 2008 to 66%.
• Mobile broadband provided boost, surging 26% QoQ to 560,000 subscribers. Voracious appetite for Internet access over mobile networks via smartphones and laptops, remain unabated. Via laptop access alone, M1 reported a 9% QoQ rise in mobile data users to 149,000. Including those accessing via smartphones, M1’s base is 35% higher at 201,000, after net adds of nearly 8,000/month in 3Q09. SingTel added a much stronger 27,000/month by this broader measure to 306,000 subscribers, attributed largely to its launch of the new iPhone 3G S. StarHub does not disclose its mobile data user base, but revealed a 36% QoQ surge in mobile data traffic to 2.2 million gigabytes in 3Q09.
• StarHub continues to take fixed broadband market share from SingTel. StarHub’s cable modem platform enjoyed net adds of 7,500/month in 3Q09, far exceeding net add of 1,100 for xDSL users on SingTel’s platform. That said, much of StarHub’s net adds were due to its free 1Mbps offering bundled with its HubStation service (a value-added cable TV set-top box). As StarHub reported 392,000 paying broadband subscribers, its free 1Mbps service accounted for net adds of 6,500/month. Overall, cable modem BB had a market share of 52%, with xDSL having 48%. StarHub’s paying cable modem base had a share of 36%.
• Legacy broadband approaching saturation. While IDA reports household broadband penetration at 129%, this figure is being bumped up by double counting from the inclusion of mobile broadband. We estimate household broadband penetration at closer to 80%, stripped of mobile BB. Even so, this represents a saturated market for broadband. On paid BB services, take-up has been hovering at an unexciting 1% QoQ growth in recent quarters. We project StarHub reporting 6% YoY growth in paying broadband subscribers to 397,000 for FY09, and SingTel to report 2% YoY growth to 510,000 for FY10 (YE March).
• Broadband ARPU to fall in run-up to NGNBN. After a 7% QoQ fall in 2Q09, StarHub continued to see a 2% QoQ fall in 3Q (to S$50/month) due to down-trading of broadband speeds. SingTel fared better at -1% QoQ fall in 3Q09 (to S$59.5/month) and flat for the previous quarter. In the run-up to the commercial launch of the Next Generation National Broadband Network (NGNBN) in 2Q10, we expect downward pressure on broadband ARPU to continue.
• Next growth phase from NGNBN from 2Q10. NBN’s network rollout by OpenNet (NetCo in which SingTel has 30%-stake) is scheduled for 60% completion by end 2009. After which, Nucleus Connect (StarHub’s 100%-owned OpCo) will start to wholesale fibre connectivity in 2Q10. As NBN provides broadband speeds starting from minimum 100Mbps, scalable up to 1 Gbps, Retail Service Providers (RSPs) will be tagging on advanced applications and services for a higher value proposition. M1, StarHub and SingTel will be participating as RSPs, among other entrants to broadband.
• New NBN opportunities have biggest impact on M1. We think incremental benefit will be felt most at M1, which is hitherto a mobile service provider while NBN opens up a new revenue stream. Whereas incremental benefit to StarHub and SingTel will be more marginal as they shift their legacy broadband base over to NBN.
• Reiterate BUY rating on M1 with fair value at S$2.20/share. Maintain HOLD ratings on StarHub and SingTel.
SingTel – BT
SingTel to conduct 4G trials in S’pore, region
SINGAPORE Telecom and its partners will begin a trial in the first half of next year to test a 4G mobile technology that can wirelessly deliver broadband content to and from mobile devices much faster than what is commonly available now.
The telco said yesterday that it is testing a technology known as Long Term Evolution (LTE), which promises top speeds of up to 340Mbps – zippy enough to deliver high-definition TV content to mobile device users. SingTel’s trial will cover Singapore, Australia, Indonesia and the Philippines. The telco will join hands with its Australian subsidiary Optus, as well as Indonesia’s Telkomsel and the Philippines’ Globe Telecom.
Six network vendors – Alcatel-Lucent, Ericsson, Huawei, NEC, Nokia Siemens Networks and ZTE – have also been invited to take part.
In a statement, SingTel said that the trial will help the parties involved ‘better understand LTE and determine the best approach and strategy for its adoption in their respective local markets’. It will also lay the groundwork to establish a ‘regionally compatible’ LTE network.
‘LTE will open doors to new and more powerful mobile solutions that will transform the way our customers across the region live, work and play,’ said Lim Chuan Poh, SingTel’s CEO International Group. There is no indication when SingTel might roll out commercial LTE services. ‘We will make a decision on the launch date after the trials,’ a SingTel spokesman told BT.
‘The time frame for the launch of commercial LTE services is dependent on the availability of spectrum slots and LTE mobile devices,’ he noted.
LTE has been coined a fourth-generation – or 4G – wireless technology and is expected to succeed the popular High Speed Packet Access (HSPA) technology.
Demand for mobile broadband services has soared in recent years, sparked by the proliferation of Internet-savvy smartphones such as Apple’s iPhone. This demand has fanned interest in upcoming mobile broadband technologies such as LTE.
According to market research firm IDC, there will be 43.6 million HSPA connections by year-end in the Asia-Pacific region excluding Japan. Juniper Research said that the market for LTE services will exceed US$70 billion globally by 2014.
SingTel currently offers mobile broadband plans with download speeds of up to 7.2Mbps, but said that its HSPA network is capable of supporting 21Mbps. StarHub and MobileOne both have plans with download speeds of up to 21Mbps.
SingTel, StarHub – BT
SingTel officially rejects StarHub offer
IT looks like the ugly spat between SingTel and StarHub over whose hardware to use may have come to an end, with Singapore’s No 1 telco officially rejecting StarHub’s offer to host its pay-TV content after it received a formal proposal from the green camp last week.
‘The feature functionality of our platform is superior to theirs, and our users will get a much better experience when they view our channels,’ said SingTel’s chief executive Allen Lew yesterday.
‘At the end of the day, we are a pay-TV operator. For pay-TV operators, there is a very strong differentiation we can create from the quality of the content, the quality of the infrastructure and the features that we have. So three of these things working together help us build up value in our TV system.’
In addition, SingTel has already invested in its own pay-TV infrastructure, he said.
When contacted, StarHub confirmed that it was notified of SingTel’s decision yesterday.
‘We have heard from many customers who are concerned about linking multiple boxes to their TV sets, and are therefore disappointed with SingTel’s decision as our proposal was aligned with public interest and consumers’ wishes,’ said a StarHub spokesman.
‘While we support a universal set-top box solution that would be operator agnostic, like mobile number portability and unlocked SIM cards, it now appears that a single set-top box option for consumers will not happen through just commercial negotiation.’
The formal decline likely puts an end to the saga which began soon after SingTel outbid StarHub to score the sought-after broadcast rights for the next three seasons of the English Premier League (EPL).
Besides winning the coveted rights, SingTel also convinced ESPN Star Sports to migrate from cable to its mio TV platform.
What followed was a flood of complaints from viewers about having to deal with multiple set tops to view entertainment and sports content starting next year.
This culminated in an offer to SingTel from Star- Hub’s chief executive Terry Clontz to host SingTel’s content on its network, and to allow SingTel to carry its exclusive content like HBO on the mioTV platform.
Last week, SingTel said that StarHub’s older set-top boxes might need to be upgraded if viewers want to make the most of the upcoming NGNBN (Next-Generation National Broadband Network), a new fibre-optic network capability that will be rolled out nationwide from next year.
StarHub refuted the remark, saying it ‘completely disagrees with any claims about technological reasons’ for not accepting its proposal. It added that it was untrue that customers with older set-top boxes would have to get them upgraded next year.
Yesterday, SingTel and ESPN STAR Sports launched their 24/7 sports news channel, ESPNEWS, on the mio TV platform.
Touted as the ‘sports news channel specially dedicated to Asian sports fans’, ESPNEWS will deliver content from local, regional and international sporting events by providing a continuous update of news, latest team or player standings, rankings and statistics from the top professional leagues around the world, SingTel and ESPN STAR Sports said in a joint statement.
Currently launched with an English voice-over, the channel will also be available in Cantonese and Malay once the network is launched in Hong Kong and Malaysia, said ESPN STAR Sports managing director Manu Sawhney.