Telcommunications Analysis

Topics: Financial services, Securities, Postpaid Pages: 14 (3513 words) Published: April 16, 2012
Telecommunications Sector
Results Season Takeaways
Phillip Securities Research Pte Ltd 1 March 2012

Report type: Update
Sector Overview The Telecommunications Sector under our coverage consists of SingTel, Starhub & M1. Starhub (STH) and M1 are pure plays to the Singapore market, while SingTel (ST) has exposure to the Asia-Pacific region through its regional mobile associates.  No major earnings surprise  Launch of iPhone 4S lifted revenue in the quarter  PayTV ARPU improved for Starhub  100k fibre broadband subscribers or 8% of total wired broadband  Continue to prefer SingTel over Starhub & M1 Earnings Surprise? There were no major surprises in this quarter’s results. However, Starhub’s results were marginally above expectations due to one off items that flattered EBITDA by c.S$10mn and stronger than expected postpaid mobile ARPU. Even after stripping out the effects of one off gains, the results would still have beaten our estimates. Due to boosters from the launch from iPhone 4S in the quarter, M1 reported relatively strong equipment sales with its unique fair value accounting policy. SingTel’s Group level profits were negatively impacted by lower contributions from its regional mobile associates. SingTel’s focus in Singapore seems to be on growing its subscriber base. Mobile  SingTel gained postpaid market share  M1’s postpaid ARPU trended south due to early recognition of sales  Handset sales flattered revenue in the quarter  Better data pricing is the key to better profitability PayTV  SingTel continued to increase its subscriber base, while Starhub’s subscriber base was stable  ARPU: Starhub improved, SingTel stable Broadband  100k residential fibre broadband subscribers (8% of total residential wired broadband)  SingTel: c.55k, M1: c.22k, Starhub: undisclosed  Fibre take up rate still slow due to capacity constraints  Capacity at OpenNet to improve in March 2012 Recommendation We continue to prefer SingTel for its cheaper valuation over its local peers. Starhub’s operational performance had been strong, but we opine that valuations are fair. M1 is expected to be the biggest beneficiary from the rollout of NGNBN, but we believe that the lack of a strong PayTV franchise could be negative in the long run. MICA (P) 012/01/2012 Ref. No.: SG2012_0059

Tele com m unications Se ctor Com pany Rating

Price (S$) M1 Reduce 2.46 Starhub Neutral 2.90 SingTel Accumulate 3.13 Source: Bloomberg, PSR Analyst Derrick Heng +65 6531 1221

TP (S$) 2.36 2.90 3.31

Ups ide M.Cap. (%) (US$'m n) -4.1% 1,791 0.0% 3,977 5.8% 39,939

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Telecommunications Sector Singapore Equities Research 1 March 2012 Mobile Over the past 2yrs, SingTel gained postpaid, but lost prepaid market share to Starhub & M1. M1’s postpaid ARPU continued to slide on early recognition of its service revenue. We believe that as smartphone’s share of mobile subscriber base across the industry stabilize, ARPU uplift arising from improved product mix to higher value smartphone plans are unlikely. Better monetizing of the high mobile data usage would be the key to improved profitability and revenue growth in the future. SingTel continued to dominate more than half of the mobile service revenue share in Singapore due to stronger mobile ARPU. The key driver of sales came from stronger handset sales, following the launch of iPhone 4S in the quarter. Fig.1. Postpaid Market Share by subscriber (%) 100% 80% 46.3% 46.0% 45.8% 45.7% 45.9% 46.5% 46.9% 47.2% 47.6% 60% 40% 26.5% 26.5% 26.6% 26.5% 26.6% 26.6% 26.3% 26.1% 26.0% 20% 0% 4QCY09 1QCY10 2QCY10 3QCY10 4QCY10 1QCY11 2QCY11 3QCY11 4QCY11

Fig.4. 4QCY11 Mobile Revenue share (%)

Starhub, 312.2 , 33% SingTel, 491.3 , 52%

M1 , 146.9 , 15% Source: Companies, PSR

Fig.5. Equipment Sales drove strong 4Q revenue
300 250 200 150 100 50 0 79 36 29




Source: Companies, PSR est. 113

86 66 67 30

75 64 18

85 75...
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