StarHub – CIMB
Loosen up, please!
1Q12 core net profit beat our forecast by 4% on strong margin and low depreciation, but we consider it in line as margins may come under pressure from subsidies later this year. StarHub’s performance is 9% above consensus. It also declared a DPS of 5 cts, as expected.
Despite net debt/EBITDA falling to 0.49x from 0.65x qoq, StarHub has no plans to raise its 2012 DPS of 20 cts. We think it should loosen its dividend purse strings. We raise our DCF-based target price to reflect its lower net debt. StarHub remains an Outperform, with expectations of higher dividends being a key catalyst.
A commendable quarter
StarHub’s operational performance was broadly in line except that marketing expenses came in below expectations (Figure 1). This should normalise later in the year, especially when a new device is launched. Broadband ARPU rose for the first time (Figure 4) since its steady decline triggered by competition with SingTel. On the other hand, churns for fixed broadband and pay TV rose on customers not re-contracting after the promotions ended.
No capital management
Net debt/EBITDA fell to 0.5x, the lowest since mid-06 (Fig 3), driven partly by the regulator reimbursing S$44m (2.6cts/share) for reaching NGNBN rollout milestones. Despite the very low gearing, StarHub is maintaining its DPS of 20cts/year for FY12 and it has no plans for any capital management this year. Management acknowledges that gearing is very low but said its conservative stance hinges on competitive and economic uncertainties. We are disappointed by this and believe StarHub is overly conservative and should loosen up its dividend purse strings.
Competition to pick up
Management thinks that competition and subsidies may rise again with the launch of new devices (i.e. iPhone 5). It nevertheless expects subsidy/unit to trend down over time. StarHub noted that Android phones, which are cheaper now, make up 50% of sales with Apple making up the remaining 50% vs. 25%/75% Android/iPhone 6 months ago.
SMRT – TODAY
Circle Line to increase capacity by 60 per cent
The Circle Line's capacity will be ramped up by 60 per cent, with 24 more trains to be added progressively from 2015, said Transport Minister Lui Tuck Yew today.
Minister Lui was speaking at the groundbreaking ceremony for the Tuas West extension. The extension will see four stations added to the East-West Line, starting from Joo Koon: Gul Circle, Tuas Crescent, Tuas West Road and Tuas Link. There will also be a 26-hectare depot.
The Tuas West extension is expected to benefit more than 100,000 commuters daily. The four stations will be located close to offices and factories to help reduce travelling time by up to 35 minutes for many commuters.
Even as the rail network is being expanded, capacity will also be improved in the coming years, said Minister Lui.
Twenty-four trains will be added into the Circle Line's progressively from 2015, instead of the 16 previously announced. This will increase the Circle Line's capacity by 60 per cent.
During the ceremony, Minister Lui said the government and train operators will spare no effort in making the rail system more reliable.
The transport minister noted the concerns over serious trains disruptions in recent months. He said SMRT will put in place a more robust system to anticipate potential faults and vulnerabilities in the system.
On the recently-announced S$900 million plan to upgrade and renew ageing assets, Mr Lui said two main components will contribute to the costs. One is replacing the sleepers of the track, while the other is upgrading of the signalling system.
He said the Land Transport Authority (LTA) and SMRT are in the process of making sure that each party will pay a "fair share of the costs".
"Broadly speaking, I think the formulation is that infrastructural works should come under the government and the replacement of operating assets comes under the operator," Mr Lui said. "There is a formula on how to share the costs so what is happening now between LTA and SMRT is that they are going to through the details and making sure that each party is paying its fair share of the costs."
On whether the costs will eventually be passed on to commuters as higher fares, Mr Lui said fares are determined by the fare adjustment formula, which is being reviewed. He also said fares will not be adjusted this year while the review is underway. CHANNEL NEWSASIA
SMRT – TODAY
Circle Line to increase capacity by 60 per cent
The Circle Line's capacity will be ramped up by 60 per cent, with 24 more trains to be added progressively from 2015, said Transport Minister Lui Tuck Yew today.
Minister Lui was speaking at the groundbreaking ceremony for the Tuas West extension. The extension will see four stations added to the East-West Line, starting from Joo Koon: Gul Circle, Tuas Crescent, Tuas West Road and Tuas Link. There will also be a 26-hectare depot.
The Tuas West extension is expected to benefit more than 100,000 commuters daily. The four stations will be located close to offices and factories to help reduce travelling time by up to 35 minutes for many commuters.
Even as the rail network is being expanded, capacity will also be improved in the coming years, said Minister Lui.
Twenty-four trains will be added into the Circle Line's progressively from 2015, instead of the 16 previously announced. This will increase the Circle Line's capacity by 60 per cent.
During the ceremony, Minister Lui said the government and train operators will spare no effort in making the rail system more reliable.
The transport minister noted the concerns over serious trains disruptions in recent months. He said SMRT will put in place a more robust system to anticipate potential faults and vulnerabilities in the system.
On the recently-announced S$900 million plan to upgrade and renew ageing assets, Mr Lui said two main components will contribute to the costs. One is replacing the sleepers of the track, while the other is upgrading of the signalling system.
He said the Land Transport Authority (LTA) and SMRT are in the process of making sure that each party will pay a "fair share of the costs".
"Broadly speaking, I think the formulation is that infrastructural works should come under the government and the replacement of operating assets comes under the operator," Mr Lui said. "There is a formula on how to share the costs so what is happening now between LTA and SMRT is that they are going to through the details and making sure that each party is paying its fair share of the costs."
On whether the costs will eventually be passed on to commuters as higher fares, Mr Lui said fares are determined by the fare adjustment formula, which is being reviewed. He also said fares will not be adjusted this year while the review is underway. CHANNEL NEWSASIA
SingTel – BT
India's telcos blast high spectrum price
Mobile operators demand 80% cut in it, saying extra costs threaten survival of some players
INDIA'S top mobile operators launched a broadside against the sector regulator on Thursday, pressuring the government to reject proposals they say will add billions of dollars to their costs and threaten the survival of some players.
In a rare show of unity, chief executives of Bharti Airtel, Vodafone's Indian unit and Idea Cellular, the country's top three carriers by revenue, lambasted the regulator's proposals for a costly spectrum auction at a joint news conference in New Delhi.
"We believe that they ring the death knell for the Indian telecommunications industry, and also lead to prolonged disputes and litigation," said Sanjay Kapoor, CEO of Bharti's India and South Asia operations.
The once-booming sector has been beset by turmoil after a scandal over the below-market price sale of telecoms permits in a 2008 state grant process, which a state auditor said could have cost as much as US$34 billion in lost revenue.
India's Supreme Court has ordered cancellation of all the permits granted in the tainted sale and asked the government to redistribute airwaves through an open auction. It would be the last chance for eight carriers including Idea and Telenor's India unit to win back their lost permits.
The sector regulator last week proposed an auction starting price that is nearly 10 times higher than that of 2008 and suggested auctioning just one-fifth of the available bandwidth, which means slots for just one or two carriers per zone.
The industry has slammed the regulator's proposals and is lobbying hard before the government finalises the rules. On Wednesday, the global CEOs of Vodafone and Norway's Telenor, along with Indian tycoons Sunil Mittal of Bharti Airtel and Kumar Mangalam Birla of Idea, met several key ministers and government officials, voicing their concerns about the proposals.
India's captains of industry, usually a reticent lot, have become increasingly vocal, in some cases over policy paralysis and in the case of telecoms, over proposed regulations.
Earlier this year, Prime Minister Manmohan Singh pledged help for the embattled power sector after several business leaders including tycoons Ratan Tata and Anil Ambani jointly met him seeking faster coal and gas development for the industry.
In addition to the high price, the regulator's proposal for several slots risks driving up bid prices, as was the case in an auction of 3G airwaves in 2010.
"One thing is very clear: If you create artificial scarcity then the price is not a real market-discovered price. And that is exactly what has already happened in the 3G auction," said Marten Pieters, CEO of Vodafone India.
"At the most one new player will survive," said Rajiv Bawa, chief representative officer for Telenor in India, referring to the affected companies, including his own that must win back licences to continue operations.
The operators have demanded an 80 per cent cut in the proposed price and said such a high spectrum price could bump up tariffs by up to 30 per cent.
Bharti and Vodafone also oppose a move to refarm, or substitute, their more-efficient 900 MHz spectrum bands with relatively inferior-quality 1,800 MHz band before their licences come up for renewal starting in 2014.
This would mean the operators would have to buy new bandwidth and spend on networks as replacement spectrum will need more mobile masts and new equipment. Vodafone estimates it would have to spend nearly US$2 billion on a new network if New Delhi goes ahead with the refarming. – Reuters
SingTel – BT
India's telcos blast high spectrum price
Mobile operators demand 80% cut in it, saying extra costs threaten survival of some players
INDIA'S top mobile operators launched a broadside against the sector regulator on Thursday, pressuring the government to reject proposals they say will add billions of dollars to their costs and threaten the survival of some players.
In a rare show of unity, chief executives of Bharti Airtel, Vodafone's Indian unit and Idea Cellular, the country's top three carriers by revenue, lambasted the regulator's proposals for a costly spectrum auction at a joint news conference in New Delhi.
"We believe that they ring the death knell for the Indian telecommunications industry, and also lead to prolonged disputes and litigation," said Sanjay Kapoor, CEO of Bharti's India and South Asia operations.
The once-booming sector has been beset by turmoil after a scandal over the below-market price sale of telecoms permits in a 2008 state grant process, which a state auditor said could have cost as much as US$34 billion in lost revenue.
India's Supreme Court has ordered cancellation of all the permits granted in the tainted sale and asked the government to redistribute airwaves through an open auction. It would be the last chance for eight carriers including Idea and Telenor's India unit to win back their lost permits.
The sector regulator last week proposed an auction starting price that is nearly 10 times higher than that of 2008 and suggested auctioning just one-fifth of the available bandwidth, which means slots for just one or two carriers per zone.
The industry has slammed the regulator's proposals and is lobbying hard before the government finalises the rules. On Wednesday, the global CEOs of Vodafone and Norway's Telenor, along with Indian tycoons Sunil Mittal of Bharti Airtel and Kumar Mangalam Birla of Idea, met several key ministers and government officials, voicing their concerns about the proposals.
India's captains of industry, usually a reticent lot, have become increasingly vocal, in some cases over policy paralysis and in the case of telecoms, over proposed regulations.
Earlier this year, Prime Minister Manmohan Singh pledged help for the embattled power sector after several business leaders including tycoons Ratan Tata and Anil Ambani jointly met him seeking faster coal and gas development for the industry.
In addition to the high price, the regulator's proposal for several slots risks driving up bid prices, as was the case in an auction of 3G airwaves in 2010.
"One thing is very clear: If you create artificial scarcity then the price is not a real market-discovered price. And that is exactly what has already happened in the 3G auction," said Marten Pieters, CEO of Vodafone India.
"At the most one new player will survive," said Rajiv Bawa, chief representative officer for Telenor in India, referring to the affected companies, including his own that must win back licences to continue operations.
The operators have demanded an 80 per cent cut in the proposed price and said such a high spectrum price could bump up tariffs by up to 30 per cent.
Bharti and Vodafone also oppose a move to refarm, or substitute, their more-efficient 900 MHz spectrum bands with relatively inferior-quality 1,800 MHz band before their licences come up for renewal starting in 2014.
This would mean the operators would have to buy new bandwidth and spend on networks as replacement spectrum will need more mobile masts and new equipment. Vodafone estimates it would have to spend nearly US$2 billion on a new network if New Delhi goes ahead with the refarming. – Reuters