SINGAPORE (June 18): CGS-CIMB Securities is maintaining its “add” call on Singtel with a target price of $3.90. Singtel is also the research house’s preferred Singapore telco pick.
This came on the back of the group hosting its annual Investor Day on June 13.
During the event, the group highlighted that Telkomsel plans to reduce data quota by betweenn 1GB and 3GB for new SIM cards and raise the price of reloads by 5-10% from early July. It has already started removing channel incentives for starter pack sales.
In a Thursday report, analyst Foong Choong Chen says, “While it is still difficult to predict competition, Telkomsel thinks that there is now good consensus among industry players that prices should rise.”
Meanwhile, Group Digital Life (GDL) plans to launch an initial public offering (IPO) or undertake some other form of exit for its digital marketing arm, Amobee, in the next two to three years after it has demonstrated consistent growth/profitability and that it is a leading global adtech player.
Since 2012, Singtel has invested about $1.2 billion (including operating losses) in Amobee.
GDL also expects EBITDA for HOOQ to breakeven in three years when its revenue reaches about US$80 million ($108 million).
Singtel’s Group Enterprise is embarking on cost transformation for its traditional core business, which includes offshoring, lowering cost of local access, product simplification, more self-serve and more.
The group is also looking for more M&A opportunities in its cyber security division as it believes that there is massive opportunity for consolidation since the biggest player only owns 5% share of the whole US$85 billion market due to talent shortage in the industry.
See: Singtel acquires remaining shares in cybersecurity firm Trustwave
In India, the group’s Bharti Airtel believes that there is opportunity to gain from potential market share displacement in the next 12-18 months due to the Idea-Vodafone merger, leveraging on its superior network and strong execution.
Bharti also plans to sell a 20-25% stake of its African business in an IPO early next year in London. Valuation could range between 5x and 8x of EBITDA and proceeds will be used to deleverage Bharti's balance sheet.
According to Optus, the group’s subsidiary in Australia, Telstra has become more price aggressive in recent months. Apart from leveraging on exclusive premium content, Optus will maintain its prices about 15-20% lower than Telstra’s to gain market share.
“Optus will buffer this with a major cost transformation programme, alluding that recent cost cuts were just the tip of the iceberg,” says Foong.
In Singapore, Singtel reckons that TPG’s will launch by year-end, meeting its first phase rollout obligation.
Compared to incumbent's street coverage of more than 99% and strong in-building coverage, Singtel says subs will surely notice the network quality difference upon TPG’s service launch.
On top of that, more mobile virtual network operators (MVNOs) are likely to enter the market by the end of this year, crowding out TPG.
“Singtel believes the market cannot support four operators and will eventually consolidate,” says Foong.
Earlier in March, the group announced that it will be launching cross-border mobile payment capabilities with Advanced Info Services (AIS) in mid-2018 between Singapore and Thailand. The group will then progressively expand the service to its other regional associates.
See: Singtel announces plans to launch cross-border mobile payment capabilities in mid-2018
AIS believes the pre-to-postpaid migration trend in Thailand will continue for the next few years, rising from 19% of its mobile subs base to 25% eventually, based on comparing GDP/capita to post-paid adoption in other markets in the region.
In The Philippines, Globe Telecom says that mandatory national roaming to accommodate a new player is difficult, as it has no excess capacity to wholesale.
It has offered to open access/sell its 8k towers but says that whoever buys the towers will have to upgrade them first to accommodate more tenancies.
However, its offer does not include fibre lease, while foreign shareholding limits also continue to dissuade potential new entrants.
As at 11.30am, shares in Singtel are trading 1 cent lower at $3.18 or 1.73 times FY19 book with a dividend yield of 5.43%.
