SINGAPORE (Jan 10): Tight competition within Singapore’s Telecommunications sector should persist in 2018, with the new entrants joining the fray, according to RHB.
Hence, the research house is maintaining its “neutral” recommendation on the telecommunications sector.
The local telcos will be looking to defend their market share ahead of the entry of TPG Telecom and two other mobile virtual network operators (MVNO).
One of the MNVO is MyRepublic (MR), which lost out in its bid for 4G license to TPG in Dec 2016. In 1Q18, MR is expected to commercialise its mobile service.
The other MNVO is likely to go live by end-1Q18 and targets the foreign worker segment.
In a Wednesday report, RHB says, “The two new MVNOs, we gather, are to be hosted by StarHub. They add to Circles.Life, the first MVNO to launch its service in May 2016 (riding on M1’s network) and Zero Mobile (MVNO of Singtel), which was unveiled in Dec 2017.”
Meanwhile, TPG is on track to meet the government’s deadline for nationwide coverage by end-2018.
RHB assumes that TPG will kickstart with a pure mobile service in 2H18.
“As with MR, we do not rule out a bundled offering (mobile plus broadband) by TPG eventually, leveraging on the next generation national broadband network (NGNBN),” says RHB.
Despite the persisting competitive intensity this year, Singtel remains to be RHB’s top “buy” pick due to its diversified exposure, fairly decent average FY18F-19F dividend yield of 5.3% and its strength in the enterprise segment.
Moreover, the industry’s mobile service revenue (MSR) from Singapore’s three big telcos – Singtel, Starhub and M1 – have fallen 1.5% y-o-y in 3Q17, making it the eighth successive quarter of decline, due to protracted usage and roaming revenue weakness.
Of the three operators, M1 outperformed its peers as its MSR increased 3.4% q-o-q in 3Q17, attributed to the increasing traction of Circles.Life, which has seen its market share creep up over the past four quarters, and data revenue uplift.
“We project industry MSR to ease a further 2-3% y-o-y in 2018, marking the third year of consecutive y-o-y decline,” says RHB.
SIM-only plans have been gaining popularity recently but the telcos have indicated that contract/bundled plans are still the most sought after, due to attractive re-contract offers and generous device subsidies.
“We expect the strong demand for the iPhone 8, 8 Plus and X to drive up handset subsidies over the next few quarters and compress the telco’s EBITDA margin,” says RHB.
Recently, mobile operators have re-introduced unlimited data plans, which were abolished five years ago.
RHB views this as a tactical move to lock-in subscribers ahead of new mobile entrants.
However, RHB expets the new MNVOs and TPG to focus on the low to mid-end market by offering attractive data bundles
“Unlike the incumbents, we think the new players would be less compelled to partake in aggressive handset subsidies but instead offer instalment plans for handsets or peddle mid-end phones at promotional rates,” says RHB.
As at 1.13pm, shares in Singtel are trading at $3.62.
