SingTel – BT
SingTel ups the ante with new gaming service
It plans to win more fibre-optic broadband customers
SINGAPORE Telecommunications (SingTel) is stepping up its game in a bid to snag more fibre-optic broadband customers with the launch of a new service that allows consumers to play the latest Playstation and Xbox titles without ever buying these gaming consoles.
As previously reported by BT, the operator’s new offering is delivered to subscribers via the Next-Generation NBN (National Broadband Network), an ultra high-speed Internet highway that is set to reach all households by the end of next year.
SingTel has partnered with Israel and UK-based Playcast Media Systems to introduce the new Internet-based offering, which ranks among the first batch of services to take advantage of the massive bandwidth boost that comes with fibre-optic broadband access.
By paying a monthly fee of $9.99 or a single-day charge of $1.99, subscribers can access a library of console games from major publishers including Capcom, Disney and THQ.
Among the 24 flag bearers are games such as Street Fighter 4 and Toy Story 3. Up to three new titles will be added each month, SingTel said.
Consumers can try the company’s new ‘ESC’ service for free until the end of the month.
From May, customers can also choose to have it bundled with SingTel’s basic 50 Mbps (megabits per second) fibre-optic package for $66.90.
According to SingTel Singapore CEO Allen Lew, the new offering requires broadband speeds of at least 10Mbps.
This means consumers who are on older ADSL (asymmetric digital subscriber line) and cable broadband packages will also be able to subscribe to the service.
However, the gaming experience will be better for those on higher-speed fibre-optic plans, he told reporters in a briefing yesterday.
Subscribers will be able to play the games on their television sets through SingTel’s set-top box. By downloading a small piece of software, they can also be accessed through laptops and desktop computers.
In an interview with BT last month, SingTel’s executive vice-president of its consumer group Yuen Kuan Moon claimed an early lead in the nascent fibre-optic broadband market. He said SingTel’s market share in this emerging segment is estimated to be around 50 per cent.
Last Friday, rival M1 revealed it has nearly one-third of the 16,000-strong customer base for fibre-optic Internet packages in Singapore.
M1 – CIMB
A smooth tone for 1Q
• In line; maintain NEUTRAL. When annualised, M1’s 1Q11 result was in line with ours at 3% below and also consensus at 3% ahead of theirs. As expected, no dividends were declared. The key features of 1Q were i) lower revenue due to seasonality and weaker handset sales and ii) margin recovery. We lower our FY11-FY13 forecasts by 0.3-0.6% as we factor in the additional cost of the recent 1800 MHz spectrum which lowers our interest income. Our DCF-based (WACC: 8.5%) target price falls to S$2.63 from S$2.65 because of this. We maintain NEUTRAL as M1 lacks catalysts but this is balanced by it benefitting from soaring inbound visitors and having the most upside from NGNBN. It remains our top Singapore telco pick.
• Revenue declined. Revenue declined by a slim 2% qoq on the back of lower postpaid revenue and handset sales. Postpaid revenue decline due to seasonality where there were shorter days and less calls were made. Handset sales reduced by 2% qoq as the volumes sold were lower due in part to seasonality and also because some of the iPhone 4 related craze had partially dissipated.
• Margins recovered. As expected, EBITDA margins recovered, climbing by 1.1% pts qoq as it was lifted by i) lower handset costs due to lower volumes sold, ii) lower leased circuit costs as M1 cut over more traffic onto its own backhaul and iii) lower marketing cost due in part to seasonality. M1 is expected to retain the 42-43% service EBITDA margins for FY11 (42.2% in 1Q) despite potentially incurring more NGNBN-related costs in 2H11 as most of those costs are variable in nature and M1 will not spend too heavily on either opex/capex.
• Fibre still not meaningful. The fixed network revenue (mostly from NGNBN) contributed about 3% of revenue in 1Q11. M1 expects the fibre subscriber base to grow as coverage widens and will also be more aggressive in marketing as this occurs. M1 estimates that it has about one-third of the fibre market which currently totals about 16K as reported by the press. Most of the fibre customers are from the residential segment and most of the subscriber base are opting to sign on for the lower speed plans as opposed to the higher speed plans.
M1 – DBSV
Trading at ~8 yield
• Net profit of S$42.5m beat our S$40m forecast due to lower depreciation charge
• FY11F/12F profit raised by 4% each after adjusting for lower depreciation; cost saving is non-cash items, but dividends are tied to earnings
• M1 is trading at projected 7.7% yield (bi-annual payment) versus 7.1% for StarHub (quarterly)
Unexciting mobile ARPU trend. A slight concern is the mild drop in adjusted postpaid ARPU to S$56.1 from S$58.8 in 4Q10 and S$59.6 in 3Q10. This may be due to seasonality and fair value accounting. Additional data-revenue seems to be lower than expected and M1 could be overstating handset revenue at the cost of future service revenue. A key positive was lower depreciation and amortization expense, which stood at S$25m versus S$30m in 4Q10 and S$28m in 1Q10, as some assets were fully depreciated.
Steady progress in non-mobile business. New fixed business revenue was S$7m, up 9% QoQ and 19% YoY. M1 estimates it has one third of the ~16K customers that are using the National Broadband Network. It believes competition among international bandwidth providers ensured leasing was a viable option for its fixed line business.
DCF-based TP remains S$2.60 (WACC 8.4%, terminal growth 0%). M1 projects S$100m capex in 2011, excluding S$22m paid recently for spectrum, which would be used for 4G-LTE rollout. Although its official dividend policy is 80% minimum payout, we project M1 to maintain 100% payout like in 2010, given its solid free cash flow and below 1x net debt to FY11F EBITDA.
M1 – DBSV
Trading at ~8 yield
• Net profit of S$42.5m beat our S$40m forecast due to lower depreciation charge
• FY11F/12F profit raised by 4% each after adjusting for lower depreciation; cost saving is non-cash items, but dividends are tied to earnings
• M1 is trading at projected 7.7% yield (bi-annual payment) versus 7.1% for StarHub (quarterly)
Unexciting mobile ARPU trend. A slight concern is the mild drop in adjusted postpaid ARPU to S$56.1 from S$58.8 in 4Q10 and S$59.6 in 3Q10. This may be due to seasonality and fair value accounting. Additional data-revenue seems to be lower than expected and M1 could be overstating handset revenue at the cost of future service revenue. A key positive was lower depreciation and amortization expense, which stood at S$25m versus S$30m in 4Q10 and S$28m in 1Q10, as some assets were fully depreciated.
Steady progress in non-mobile business. New fixed business revenue was S$7m, up 9% QoQ and 19% YoY. M1 estimates it has one third of the ~16K customers that are using the National Broadband Network. It believes competition among international bandwidth providers ensured leasing was a viable option for its fixed line business.
DCF-based TP remains S$2.60 (WACC 8.4%, terminal growth 0%). M1 projects S$100m capex in 2011, excluding S$22m paid recently for spectrum, which would be used for 4G-LTE rollout. Although its official dividend policy is 80% minimum payout, we project M1 to maintain 100% payout like in 2010, given its solid free cash flow and below 1x net debt to FY11F EBITDA.
M1 – BT
M1 profit up 8.2% to $42.5m in Q1
M1’s first-quarter net profit climbed 8.2 per cent to $42.5 million, from $39.3 million last year, as the burden of heavy handset subsidies starts to ease this year.
Earnings per share for the three months ended March 31 came in at 4.7 cents, up from 4.4 cents last year.
First-quarter revenue grew 3.5 per cent to $257.6 million, from $249 million in 2010 due to a combination of higher mobile subscription and handset sales, as well as increased contribution from M1’s broadband business. Revenue from mobile services – which accounts for nearly two-thirds of the firm’s sales – edged up 1.3 per cent to $145.3 million in Q1.
Both postpaid and prepaid segments turned in a better scorecard, with revenue growing 1.3 per cent and 1.8 per cent year-on-year as M1 added 23,000 more mobile customers during the period.
The latest additions took its cellular subscriber base to 1.934 million, an increase of 7.7 per cent from 2010.
Last year, all three local telcos were hit by the smartphone wave as consumers flocked towards so-called smartphones such as the Apple iPhone.
While the gadget fever resulted in higher customer numbers, their bottom lines had to take a short-term hit as these phones came with higher upfront subsidies. However, the bane is now easing with M1’s operating expenses growing a moderate 2.3 per cent in the first quarter to $204.8 million.
In 2010, the firm’s operating expenses climbed a staggering 30.5 per cent largely due to heavy smartphone subsidies.
Revenue from its international calls was almost flat in Q1 at $32.3 million but M1’s broadband diversification continues to pay off with its fixed services revenue climbing 19.2 per cent to $7 million.
‘For 2011, we see exciting opportunities in the fixed segment, driven by enhanced experience on the new fibre network and progressive expansion of its coverage,’ M1 chief executive Karen Kooi said in a statement yesterday. ‘Growth in the mobile segment will be driven by increased adoption of tablets and other mobile broadband devices.’
Looking ahead to the full year, Ms Kooi expects to see an improvement to M1’s bottom line if operating conditions remain stable.
The counter closed two cents lower at $2.41 yesterday.