TELCOs – OCBC
Little impact from Telecom Code Revision
Revisions to Telecom Competition Code. The Infocomm Development Authority of Singapore (IDA) has made several revisions to the Telecom Competition Code (TCC) with effect from 21 Jan 2011. One of the key changes is a clause that prohibits telecom licensees from “cross-terminating” a consumer’s service agreement for a breach of another service agreement from an affiliated operator; this means that the telco cannot exert undue pressure on consumers to make payment of disputed charges by threatening to terminate other services (unless offered under the same service agreement). Another key addition is that telcos will no longer be allowed to charge consumers after a free trial service has ended unless they obtained express agreement from the consumer. Other changes to TCC aim to further promote competition, which include the ability for the IDA to apply a prohibition against abuse of dominant position to any licensees that it finds to have significant market power although the regulator has yet to classify them as Dominant Licensees.
More protection for consumers. Overall, these revisions are more to safeguard the country’s growing pool of mobile and broadband users. As of Oct 2010, IDA data shows that Singapore has around 7.2m mobile subscribers and boosts of a mobile penetration rate of 142.1%; the nation also has around 7.5m broadband users with a penetration rate of 183.5%. However, we believe that these revisions are unlikely to have a huge impact on the daily operations of the three telcos. For one, telcos have pointed out to the IDA during the two-year feedback process that they only terminate services as a last resort after they have exhausted all other measures to recover their monies. We think that the outlawing of the automatic “opt in” for services after the free trial has ended may result in some operational changes for the telcos; but we believe that offering a free trial is still one of the best ways for telcos to showcase their value-added services and gain new subscribers.
Maintain NEUTRAL. Separately, we note that SingTel has upped its game with its plan to start video game rental service using the new NBN network; as we articulated before, we think that telcos need value-added services to stand out from the crowd. But as it is still early days for the NBN market, given the still-low adoption rate, we do not believe that there will be a significant catalyst for SingTel and the other telcos in the near term. Maintain NEUTRAL.
TELCOs – OCBC
Little impact from Telecom Code Revision
Revisions to Telecom Competition Code. The Infocomm Development Authority of Singapore (IDA) has made several revisions to the Telecom Competition Code (TCC) with effect from 21 Jan 2011. One of the key changes is a clause that prohibits telecom licensees from “cross-terminating” a consumer’s service agreement for a breach of another service agreement from an affiliated operator; this means that the telco cannot exert undue pressure on consumers to make payment of disputed charges by threatening to terminate other services (unless offered under the same service agreement). Another key addition is that telcos will no longer be allowed to charge consumers after a free trial service has ended unless they obtained express agreement from the consumer. Other changes to TCC aim to further promote competition, which include the ability for the IDA to apply a prohibition against abuse of dominant position to any licensees that it finds to have significant market power although the regulator has yet to classify them as Dominant Licensees.
More protection for consumers. Overall, these revisions are more to safeguard the country’s growing pool of mobile and broadband users. As of Oct 2010, IDA data shows that Singapore has around 7.2m mobile subscribers and boosts of a mobile penetration rate of 142.1%; the nation also has around 7.5m broadband users with a penetration rate of 183.5%. However, we believe that these revisions are unlikely to have a huge impact on the daily operations of the three telcos. For one, telcos have pointed out to the IDA during the two-year feedback process that they only terminate services as a last resort after they have exhausted all other measures to recover their monies. We think that the outlawing of the automatic “opt in” for services after the free trial has ended may result in some operational changes for the telcos; but we believe that offering a free trial is still one of the best ways for telcos to showcase their value-added services and gain new subscribers.
Maintain NEUTRAL. Separately, we note that SingTel has upped its game with its plan to start video game rental service using the new NBN network; as we articulated before, we think that telcos need value-added services to stand out from the crowd. But as it is still early days for the NBN market, given the still-low adoption rate, we do not believe that there will be a significant catalyst for SingTel and the other telcos in the near term. Maintain NEUTRAL.
TELCOs – DBSV
Three divergent trends
• Voice, a major two-thirds slice of the mobile business, is rising for M1 but declining for StarHub.
• Non-mobile business offers opportunities for M1 but poses challenges for StarHub.
• M1 may pay more dividends on top of its regular dividend while StarHub’s commitment to regular dividends could be under pressure.
• M1 is our top sector pick. Longer term, we like SingTel for Bharti’s recovery and potential for capital management with 4Q11F results.
Voice minutes declined at StarHub but rose at M1. Despite a much higher data contribution, StarHub’s 9M10 postpaid ARPU was up 1% yoy vs M1’s 5% yoy increase. This can be attributed to more than 16% decline in voice-minutes for StarHub over the last 7 quarters. Clearly, people are spending more time surfing the web than talking over the phone, impacting players with higher voiceminutes. Previously, most StarHub customers subscribed to highend plans with more voice minutes, but are substituting voice with data now. M1’s users, on the other hand, used lower voice minutes in the past and are now upgrading to high-end plans with data in lieu of higher smartphone subsidies. M1’s launch of per second billing in 2009 may have contributed to rising voiceminutes. SingTel’s voice-minutes have been stable.
Non-mobile business is likely to be up for M1 but down for StarHub. We project StarHub’s non-mobile EBITDA (40% of group EBITDA in 2010) to decline by 5%/3% in FY11F/12F due to the entry of new players in the broadband segment and more competition from SingTel, which is aiming to add >80K pay TV subscribers p.a. over the next 3 years. For M1, we project nonmobile EBITDA (2% of group EBITDA in 2010) to grow by 50%/25% in FY11F/12F on the back of its growing SME broadband business via the National Broadband Network.
Capital management potential at M1. M1 pays out only 80% of its earnings in dividends compared to StarHub’s effective payout of over 130% for FY10F. In our view, M1 could raise its regular payout ratio to over 90% or announce a 6%-9% yield in capital management on top of its regular 6% yield. We rule out capital management at StarHub and remain skeptical about the sustainability of its 20 cents DPS. In the longer term, we like SingTel for Bharti’s recovery and potential for capital management with 4Q11F results. A strong Singapore dollar, diluting overseas contribution is the key concern for SingTel in the near term.
TELCOs – DBSV
Three divergent trends
• Voice, a major two-thirds slice of the mobile business, is rising for M1 but declining for StarHub.
• Non-mobile business offers opportunities for M1 but poses challenges for StarHub.
• M1 may pay more dividends on top of its regular dividend while StarHub’s commitment to regular dividends could be under pressure.
• M1 is our top sector pick. Longer term, we like SingTel for Bharti’s recovery and potential for capital management with 4Q11F results.
Voice minutes declined at StarHub but rose at M1. Despite a much higher data contribution, StarHub’s 9M10 postpaid ARPU was up 1% yoy vs M1’s 5% yoy increase. This can be attributed to more than 16% decline in voice-minutes for StarHub over the last 7 quarters. Clearly, people are spending more time surfing the web than talking over the phone, impacting players with higher voiceminutes. Previously, most StarHub customers subscribed to highend plans with more voice minutes, but are substituting voice with data now. M1’s users, on the other hand, used lower voice minutes in the past and are now upgrading to high-end plans with data in lieu of higher smartphone subsidies. M1’s launch of per second billing in 2009 may have contributed to rising voiceminutes. SingTel’s voice-minutes have been stable.
Non-mobile business is likely to be up for M1 but down for StarHub. We project StarHub’s non-mobile EBITDA (40% of group EBITDA in 2010) to decline by 5%/3% in FY11F/12F due to the entry of new players in the broadband segment and more competition from SingTel, which is aiming to add >80K pay TV subscribers p.a. over the next 3 years. For M1, we project nonmobile EBITDA (2% of group EBITDA in 2010) to grow by 50%/25% in FY11F/12F on the back of its growing SME broadband business via the National Broadband Network.
Capital management potential at M1. M1 pays out only 80% of its earnings in dividends compared to StarHub’s effective payout of over 130% for FY10F. In our view, M1 could raise its regular payout ratio to over 90% or announce a 6%-9% yield in capital management on top of its regular 6% yield. We rule out capital management at StarHub and remain skeptical about the sustainability of its 20 cents DPS. In the longer term, we like SingTel for Bharti’s recovery and potential for capital management with 4Q11F results. A strong Singapore dollar, diluting overseas contribution is the key concern for SingTel in the near term.
SingTel – BT
SingTel steps up its game to make consumers see ‘light’
Telco to start video-game rental service using fibre-optic network
Besides watching Web-based TV, Singapore Telecommunications (SingTel) plans to have consumers playing the latest Xbox and PlayStation titles too right out of its latest set-top box.
This quarter, Singapore’s largest operator will introduce a new video-game rental service in a bid to jumpstart ultra high-speed broadband adoption.
Instead of relying on physical discs, these games will actually be delivered to subscribers over the country’s latest fibre-optic Internet network.
Subscribers can browse and play games through their set-top boxes with a monthly subscription, much like how they access pay-TV services today.
While this concept is not new, the minting of Singapore’s new fibre-optic broadband superhighway gives companies such as SingTel the ability to go beyond offering the simple puzzle games of today to realistic, graphics-intensive shooters and racing titles that are usually confined to dedicated gaming consoles.
‘We’re talking about your Tour of Duty and FIFA 2011-type games,’ said Allen Lew, CEO of SingTel Singapore.
Fibre-optic technology relies on light-transmitting cables to deliver a massive increase in Internet speeds. Singapore’s new network, the Next Generation Nationwide Broadband Network (Next-Gen NBN), became partly operational in September last year and is expected to be rolled out islandwide by end 2012.
The bandwidth boost gives SingTel the ability to sell gaming in the same way IT giants such as Google and Salesforce.com use cloud-computing technologies to market their products and services.
‘As long as they (customers) have a fibre connection, they can play these games,’ Mr Lew told BT in a recent interview. ‘We’ve talked about cloud services for businesses. Now this is a true cloud service for the consumer.’
The operator is currently one of five companies that are offering fibre-optic broadband access today.
Besides usual rivals StarHub and M1, two new contenders – SuperInternet and LGA Telecom – also threw their hats into the ring when the Next-Gen NBN opened for business earlier last year.
SingTel owns most of the broadband infrastructure that is used by consumers and businesses today. However, the arrival of a new network also brings with it a new government regime where the fibre-optic infrastructure is neutrally operated and available to all companies on the same terms and conditions.
With broadband access set to become the lowest common denominator, SingTel is turning to add-on services such as gaming to try and stand out from the crowd.
This comes on top of a recently launched video search engine that allows consumers to create their own TV channels by collating video clips from sites such as YouTube. SingTel’s soon-to-be-launched gaming foray will be offered through the same set-top box that is used for the video service.
Besides gaming, other consumer services that are set to make their debut in 2011 include a ‘business class’ mobile broadband service that gives subscribers priority access to its network, Mr Lew said.
There will also be more record label tie-ups for Amped, SingTel’s free music service, as well as more pay-television packages that bundle the Barclays Premier League with other ‘clearly differentiated’ content such as its Malay programmes, he revealed.