SingTel – BT
SingTel’s regional mobile base climbs to 293m in Q1
A STRONG performance in two big overseas markets helped lift Singapore Telecom’s regional mobile subscriber base to 293 million in the first quarter, up 17 per cent from a year ago.
For the three months ended March 31, Indian associate Bharti registered a subscriber tally of 127.6 million – 33.7 million more than a year back. On a sequential basis, Bharti gained some 8.8 million mobile customers, SingTel said yesterday.
Telkomsel was the other star performer. The Indonesian operator’s mobile subscriber base grew 14 per cent or 9.8 million from last year to 82 million.
Thailand’s AIS and PBTL in Bangladesh saw smaller year-on-year increments of 1.9 million and 35,000 customers respectively.
SingTel’s Australian subsidiary Optus added some 710,000 mobile users from 2009 to lift its base to 8.5 million. Sequentially, Optus registered its best quarter in five years, adding 254,000 mobile subscribers, thanks to aggressive smart phone and wireless broadband promotions.
On the home front, SingTel’s mobile customer tally in Singapore grew 140,000 year on year to 3.1 million. The local subscriber base was lower compared with the previous quarter due to the deactivation of some prepaid segment accounts, but SingTel said that this had no impact on revenue.
SingTel’s other two overseas associates – Globe in the Philippines and Warid in Pakistan – lost subscribers in Q1. Their mobile customer bases fell 1.85 million and 1.1 million respectively year-on-year to 23.9 million and 16.3 million.
TELCOs – BT
iPhone still leads in Singapore: AdMob
iPhone OS is also the leading OS in Australia and HK
THE iPhone still leads the pack of smartphones in Singapore, according to a recent report on the growth and usage of mobile Internet by AdMob, one of the world’s largest and fastest growing mobile advertising companies.
According to the report, handsets running the iPhone OS (operating system) have been some of the most sought after mobile devices in Singapore since October 2009, with an increase of almost 200 per cent in unique devices.
As at March 2010, the iPhone OS accounted for 89 per cent of smartphone traffic in Singapore, forming a significant proportion of marketshare.
The iPhone OS is also the leading OS in Australia (88 per cent) and Hong Kong (78 per cent), based on March 2010 traffic share.
Singapore also had the highest traffic from smartphone devices at 84 per cent of the first quarter of this year, rising 7 per cent from Q4 2009, despite traffic from smartphone devices in South-east Asia decreasing by 2 per cent to 38 per cent. Vietnam showed the weakest traffic from smartphone devices at 20 per cent, declining 2 per cent.
This quarterly South-east Asian mobile metrics report released by the company tracks the growth of mobile devices and usage, as well as manufacturer share trends, smartphone operating systems share and other devices in South-east Asia, Australia, and India in the first quarter of 2010. It then aggregates the data collected to provide insight on major trends in the mobile ecosystem.
For the first quarter this year, ‘there has been tremendous growth in the mobile Internet market regionally, with different reasons driving each market’, Jeff Merkel, AdMob’s vice-president and managing director of Asia-Pacific and Latin America, told BizIT. While smartphone devices, in particular iPhones, are strong drivers for the Singapore, Hong Kong and Australian markets, the Nokia platform remains dominant in India and Indonesia.
Commenting on Singapore’s outlook for the rest of the year, Mr Merkel said that ‘growth prospects are positive despite its limited population’, citing ‘improved data plans and rich and interesting mobile content’ as key drivers.
Mr Merkel also said that HP’s (Hewlett Packard) recent move to acquire Palm, a provider of smartphones powered by the Palm webOS mobile operating system, will prove ‘challenging in this competitive market.’
Nonetheless, he noted that Palm has an ‘interesting user interface, and it would be interesting to see how it can be made use of.’
According to the report, the Nokia N70 is the most popular smartphone device in countries such as the Philippines and India. It uses the Symbian OS, which is the most popular operating system in the region and accounted for 62 per cent of smartphone traffic in the first quarter this year, despite a traffic share drop of 4 per cent.
The iPhone OS came in second at 33 per cent of Q1 2010 smartphone traffic, up from 30 per cent in Q4. Jointly, Symbian and iPhone OS account for a 95 per cent share, down one per cent from the last quarter of 2009.
According to the report, manufacturers in South-east Asia, not including Nokia, Apple and SonyEricsson, accounted for 26 per cent of traffic, an increase from 21 per cent last quarter. LG and Motorola, both at one per cent each, gained significant traffic share.
Despite leading the manufacturer share, Nokia showed a loss of market share from 52 per cent to 47 per cent, while Apple had 15 per cent and SonyEricsson had 11 per cent of the traffic share based on Q1 2010 traffic. This data is extrapolated from AdMob’s mobile ad network and only looks at smartphone share.
TELCOs – CIMB
2010 World Cup rights secured
Injury time goal
Maintain UNDERWEIGHT. We maintain our UNDERWEIGHT position on the sector following confirmation that SingTel and StarHub have secured the 2010 football World Cup broadcast rights. If the media is correct on the cost of the rights, we doubt that SingTel and StarHub will be able to recover their costs, especially given the short time to secure advertisers as well as the high costs of subscription, which may deter takeup. This news reinforces our negative view on the sector. We remain concerned about the rise in content costs, pressure on broadband ARPUs and escalating subsidies. Our top pick remains M1 (TRADING BUY) for its capital-management potential and benefits from a levelling playing field thanks to NGNBN.
The news
StarHub and SingTel have announced that they have both won the rights to the 2010 football World Cup. Instead of a joint bid, FIFA has awarded both parties individual non-exclusive broadcast rights. This means that both will pay FIFA separate sums rather than a lump sum. The rights would enable them to offer all 64 matches on their own networks. Subscribers who sign up before 1 Jun will be charged S$66 (early bird discounts) while those who sign up after 1 Jun must pay S$88. Businesses such as pubs and restaurants reportedly have to pay S$2,888-4,888 to show the tournament on their premises. While no details of the winning prices have been announced, it is believed that both operators have to fork out a total of S$21m for the rights, about 50% less than FIFA’s initial demand.
Comments
Not a surprise. We were not surprised by this development as the press had already speculated on this outcome. The main sticking point had been cost, which is thought to have fallen to S$21m from the S$40m that FIFA originally demanded.
Can they break even? With only 30 days to the tournament, we believe their opportunities to exploit any advertising revenue will be limited. Instead, telcos will have to rely more on subscription fees and to a smaller extent, mobile data from news and goal highlights to cover costs. Indeed, SingTel’s chief of content and media services, Edward Ying, said, “The objective is to break even. Whether we break even depends on subscriptions.”
The S$66 charge for early birds and S$88 for normal subscriptions are nowhere near the S$127 that we think StarHub and SingTel would need to charge their subscribers, in our scenario analysis, excluding any income from advertising and business subscriptions. This assumes that a generous 60% of households would sign up, above the “less than 50% of subscribers” that StarHub had said had signed up for its sports package. (An informal poll in our Singapore office indicated that six colleagues would sign up while seven would give it a miss.)
Moreover, even those prices may deter take-up as subscribers are now charged about 4.4x higher for early birds and 3.5x for normal vs. the 2006 World Cup rights. On top of that, the charges in Singapore will be among the highest in the region as Indonesia and Thailand intend to offer all 64 matches for free. The rights cost S$28.70 in Malaysia and S$52 in Hong Kong.
Small negative for both operators. As with StarHub’s experience in 2002 and 2006, we believe the high cost of rights will prevent both operators from achieving their breakeven objective. Therefore, we are negative on the news. While it may have secured goodwill for their customers, it comes at a cost to the operators’ bottom lines.
Valuation and recommendation
Maintain UNDERWEIGHT. We remain apprehensive over the rise in content costs in the short to medium term, pressure on broadband ARPUs, and escalating subsidies. Our top pick remains M1 (Trading Buy) as it has the most capacity for capital management, the biggest upside from NGNBN and should be the main beneficiary of content-carry regulations.
TELCOs – OCBC
Minimal World Cup Boost
Full 64-match broadcast. Both SingTel and StarHub have managed to secure the broadcast rights for all 64 matches of the month-long 2010 World Cup event in South Africa; this was done via two separate non-exclusive contracts after their earlier joint bids were repeatedly rejected by FIFA. SingTel will broadcast all 64 matches on its mio TV and mobile, with complimentary viewing on the Internet. Likewise, StarHub will also broadcast all the matches live across all three of its platforms – cable TV, Internet and mobile.
Pricing may be the sticking point for home viewers. The two telcos did not reveal how much they paid for the rights, but we believe that it is probably several times higher than the US$5m that StarHub reportedly paid for the 2006 World Cup event. Looking at the current packages, which cost (pre-GST) a minimum of S$66 before 31 May and S$88 thereafter, we note these are around four times more expensive than the packages of S$15 and S$25 that StarHub charged in 2006. A reason for the higher pricing could be due to the likely smaller advertising revenue given that the telcos only managed to secure the rights with a month or so to go before the event kicks off. We also note that the packages are higher than our back-of-the-envelope calculation of around S$40.
Likely good response from businesses. A dip in the takeup from home viewers could see, conversely, a better response from the business segment, as F&B establishments are likely to use the “live” telecasts to attract viewers who will not be subscribing for the event. As the pricing for businesses ranges from S$2888 (for the first TV set under 50 inches) to S$4888 (for the first TV set above 50 inches), a business customer is worth at least 44 to 55 home customers. Assuming that the telcos paid a total of S$20m for the rights and that the average subscription price is S$70/subscriber, the telcos would probably need to sell 280k packages to break even – we think that this is achievable.
Maintain OVERWEIGHT. In any case, we expect to see higher content costs for both SingTel and StarHub in the third quarter, which may depress margins; but we have already worked this into our estimates. Instead, we continue to like the telcos for their defensive earnings and high dividend yields, especially in the increasingly volatile market. Maintain OVERWEIGHT.
SMRT – DB
DB Access Asia Conference 2010 Highlights
Outlook – revenue growth across all divisions, albeit higher costs. Fare revenue likely to increase due to commencement of CCL stage 1 and 2 on 10 April, aided by higher MRT and bus ridership. However, mgmt expects higher staff cost from the increase in headcount and the impact of the cessation of job credits (received S$35m in jobs credit in FY10). We believe this could lead to higher start-up costs to operate CCL as more stages come on stream, and the lag in revenue could limit SMRT’s medium-term profitability.
Update on its overseas ventures. SMRT projects earnings for its 49% stake in Shenzhen Zona to at least more than double from RMB24.1m in CY2008 to RMB48.2m in CY2010 and CY2011. Mgmt expects Shenzhen Zona’s revenues to increase via ramp-up of its bus services to cater to the Bao An district in Shenzhen. Mgmt intends to use Shenzhen Zona as a platform to bid for additional bus and new rail contracts across China. SMRT is also looking to bid for rail contracts in the Gold Coast (Australia) and Honolulu (Hawaii).
New fare gates system could help to boost engineering revenue this year. Management is also working to move upstream by working on the provision of fare gates for DTL and overseas sales. This is being carried out by SMRT’s engineering division and acts as an additional revenue stream. SMRT believes that the global demand for fare gates system to be worth S $54bn and expects the revenue contribution from its fare gates system sales to be recognized in FY11E.
Timing of the award of Downtown Line (DTL). SMRT expects the award of DTL to be announced in a year, as the first stage of DTL commences in 2013. Mgmt expects the DTL tenure to be shorter, at 10-15 years vs the 30-year licences today, as LTA wants to encourage greater contestability. Maintain Hold.