Category: SingTel
SingTel – BT
SingTel may keep 25% stake in Bharti-MTN
SINGAPORE Telecommunications (SingTel) could maintain a 25 per cent stake in the combined entity created as a result of a potential merger between India’s Bharti Airtel and South Africa’s MTN, Morgan Stanley said in a report yesterday.
‘We do not expect the Bharti-MTN transaction to have material dilutive impact to SingTel’s EPS (earnings per share),’ analysts at the US investment bank said.
‘Indeed, if the Bharti-MTN transaction goes through and SingTel increases its stake in the new entity using debt (which is very likely), we see room for slight EPS enhancement.’
SingTel, South-east Asia’s biggest phone firm, owns about 30.4 per cent stake in Bharti Airtel, India’s leading mobile operator.
SingTel has said in the past it will remain a significant shareholder after any deal, though some analysts have expressed concerns that its stake in the combined entity could fall below 20 per cent.
Bharti Airtel’s planned tie-up with MTN faces scrutiny from regulators and politicians. It said on Tuesday that the deal would comply with the laws in both countries and any required waivers would be sought when appropriate.
Bharti Airtel’s statement came shortly after the Indian market regulator amended takeover regulations by bringing depositary receipt holders with voting rights on par with shareholders.
Morgan Stanley said the latest change in takeover regulations in India creates uncertainties about the deal, but if the transaction goes through, it expects SingTel could borrow to increase its stake in the combined entity.
SingTel could enhance its earnings-per-share compound annual growth rate by 200-300 basis points assuming a 25 per cent stake in the new entity, the research report said. — Reuters
SingTel – BT
Telstra break-up long overdue, says Optus
Telstra has been accused of charging unfair fees
In a bid to curb Telstra Corp’s long-standing dominance, the Australian government plans to force the once state-owned monopoly to split up its retail and wholesale businesses, a move which rival Optus describes as being ‘long overdue’.
Under the draft legislation unveiled yesterday, Telstra will be barred from buying new licences for wireless broadband services if it does not fall in line, according to Australia’s Communications Minister Stephen Conroy.
If enforced, the curb would cut Telstra out of a fast-growing market segment that could eclipse the size of Australia’s fixed-line Internet segment.
With high-speed broadband connectivity being confined mainly to the cities, wireless Internet technology is widely seen as the key to linking up the rest of the country.
‘The government’s strategy on separation is to make Telstra an offer it cannot refuse. Separate yourself, or have separation done for you,’ according to technology research firm Ovum.
Telstra, which has long opposed a break-up, deemed the government proposal as ‘unnecessary’ and said it was disappointed with the result, a view not shared by Singapore Telecommunications’ Australian unit Optus.
‘The Federal Government today made an important step in reforming the telecommunications sector. It is now up to the parliament, Telstra and the rest of the industry to ensure this long overdue reform becomes a reality,’ Optus CEO Paul O’Sullivan said in a statement.
The new government legislation comes amid growing calls for a Telstra split in some government quarters, as well as among the country’s competition regulator and other local telecommunications players.
With its ownership of extensive telecommunications infrastructure, Telstra has constantly been accused of charging unfair fees and delaying access to its network nodes.
Mr Conroy was previously quoted as saying that Telstra’s current structure is a ‘complete joke’ that is stalling the country’s plans to build a pervasive, high- speed broadband network.
Telstra was barred from taking part in the tender for this project last year. However, other bidders also returned empty handed as authorities eventually decided to take on the task themselves.
To comply with the proposed government mandate, Telstra may have to divest its fixed-line business or move some services to the new government network. The key is to make Telstra ‘structurally separate’, Mr Conroy said.
‘The measures in this legislation will finally correct the mistakes of the past. The government will require the functional separation of Telstra unless it decides to voluntarily structurally separate,’ he said in a Reuters report
‘However, separation takes time to accomplish, because separation requires IT systems to be redesigned or even duplicated. While the government will seek agreement by year’s end, a separation process might take two years to fully execute,’ Ovum cautioned.
In Singapore, a similar requirement has been applied to the ongoing Next- Gen NBN (National Broadband Network) project.
Under the Singapore model, the company in charge of building the new network will need to be ‘structurally separate’ from the firm that is managing the fibre-optic broadband highway.
The Singapore authorities believe the separation clause will curb unfair practices and spark competition in the market for providing high-speed Internet services.
TELCOs – OCBC
Positive 2QCY09 Scorecard; Maintain Overweight
2QCY09 results resilient as expected. All the three telcos – MobileOne (M1), SingTel and StarHub – reported a pretty resilient set of results recently. Both M1 and SingTel earnings were slightly ahead of our forecast; StarHub’s earnings were in-line. Overall, their earnings demonstrated the resilience of the telcos.
Review of operations. On the mobile front, we note that consumer spending (ARPU) has rebounded despite the economic downturn – partly aided by the growth in mobile data usage. Acquisition costs have also started to trend up again for both M1 and StarHub; M1 has shown the sharpest increase but it has managed to bring its churn rate down. On the broadband front, new additions have stagnated and ARPUs for SingTel and StarHub have declined further. On the PayTV front, StarHub has managed to maintain both its subscriber base and ARPU; SingTel has recently announced that its mio TV subscription have exceeded 100,000.
Stable outlook for rest of 2009. Going forward, all the three telcos expect their Singapore operations to remain stable or show slight growth, with EBITDA margins remaining relatively steady; this as they strive to reduce costs to keep pace with the expected softening in operating revenue. But due to their strong cashflow-generative businesses, the telcos have largely kept their dividend payout guidance; M1 to pay at least 80% of underlying net profit; SingTel to pay 45-60% of underlying earnings; StarHub to pay S$0.18/share, or S$0.045/share per quarter.
BPL uncertainty looms but we are not perturbed. The broadcast rights of the 2010-2012 BPL (Barclays Premier League) would be up for grabs and StarHub’s PayTV business would be affected if it fails to secure the rights. However, we are not perturbed. Yes, SingTel may be looking to add more exclusive content but based on its current mio TV subscriber base, it may not be able to fully maximize the investment. But come 2012, SingTel would be in a better position to benefit as the NBN will fully come onstream.
Maintain Overweight. Although there has been a steady switch into highbeta stocks on hopes of a rapid recovery in both the economy and corporate earnings, we are not entirely convinced. And until we see more concrete signs of a rapid recovery, we would still advocate holding on to these defensive counters for their attractive dividend yields and as a means of diversification. Maintain OVERWEIGHT.
Telecom – AmFraser
Mobile subscribers grew 1.5% QoQ in 2Q09
• Monthly mobile subscriber net adds picked up to 33,000 in 2Q09, from 25,000 in 1Q09. This represented a 1.5% QoQ growth, and 5.7% YoY growth to 6.5 million subscribers. While the net adds are far off the heady levels seen before 3Q08 and the peak of 113,000 in 4Q07, the pick up (albeit small) is encouraging and marks a trough in 1Q09.
• Total mobile subscribers revised up to YoY growth of 6% in FY09 and 7% in FY10 to 6.7 million and 7.2 million, respectively. While the revision is a marginal 1% and 3% respectively, this marks improving sentiments in the macroeconomic environment in the recent three months. We consider the growth fairly healthy, in a market where penetration stands at 134.6% at June 2009. Prepaid accounted 49% of the market with 51% from postpaid at 2Q09.
• In 2Q09, M1 gained market share helped by strong growth in prepaid. M1’s overall market share inched up from 25.3% in 1Q to 25.6%. M1 added 14,000 monthly prepaid net adds in 2Q as they stepped up promotional offers in the heartlands areas via M1 retailers and chain stores, combined with hefty 50% discounts off IDD rates to several countries. At the same time, SingTel lost overall market share due to monthly net subscriber loss of 2,000 in prepaid, due to deregistrations of inactive SIM users.
• But SingTel gained market share in postpaid, with monthly net adds of 7,000, higher than M1’s 2,000 and StarHub’s 3,000. Interest for iPhone 3G (only sold by SingTel) helped, although postpaid net adds were off the peak of 15,000 in 3Q08 when iPhone 3G was first launched. We expect the stronger trend for SingTel to sustain as the new iPhone 3G S was launched in July. iPhone users also generate an ARPU that is 1.5X that of a normal postpaid subscriber.
• Fall in postpaid ARPU stemmed in 2Q, with improvement in call and data usage. Pospaid ARPU picked up most for StarHub at 3% QoQ, helped by non-voice contribution which rose from 29% of postpaid revenues in 1Q to 30.5%. In terms of data traffic, StarHub enjoyed a 60% surge to 1.6 million GB in 2Q from 1Q09.
• Helped by 3G migration, pure data usage plans revitalises saturated market. In terms of take up for pure data usage plans (including that for smartphones), M1 grew 13% QoQ to 178,000 while SingTel grew 29% QoQ to 226,000. These represented 20% and 15% of their respectively postpaid base (StarHub does not disclose this measure.) Four years after the launch of 3G services, Singapore operators have migrated 78% to 84% of their postpaid subscribers to the 3G networks. 3G subscribers totalled 2.7 million in 2Q09.
• 1H 2009 mobile service revenues held up well, boosted by QoQ pick up in 2Q revenue. In terms of total mobile service revenues (inclusive of IDD), StarHub saw a 1% YoY fall in 1H 2009, while M1’s was flat and SingTel’s rose an estimated 6%.
• Our preferred stock is M1 for 17% upside to fair value of S$2.03/share. For its pure play mobile operations, M1 enjoys EBITDA margins of 45% over the forecast period, and is a pure beneficiary of the next phase of growth in mobile broadband. At this juncture, StarHub and SingTel are trading close to their fair values of S$2.28/share and S$3.05/share respectively and we maintain HOLD ratings on these.