Singapore Telco

Kim Eng on 7 Mar 2012

Following the latest results season, we have downgraded our calls for M1 and SingTel, with margin challenges being the key pivot. Margins are likely to face downward pressure from the introduction of new handsets and mobile devices, with M1 the most vulnerable as it usually competes mainly on monthly tariffs and device subsidies. Apple, in particular, has been a bugbear given its regular launches of new phones. iPhone 4S, for instance, was launched in October last year and M1’s margins promptly took a beating in that quarter. This year, Apple is expected to introduce the iPad 3 (or rumoured to be renamed iPad HD) tonight, with Singapore availability possibly within 45 days, while iPhone 5 may come along in the third quarter, a year after the 4S. In the case of SingTel, its margins may take a further beating as it attempts to restructure its organisation to better face the data onslaught against its core voice business. However, StarHub stood out for its relative margin resilience; its mobile ARPU had in fact shown very encouraging growth. We expect this trend to continue, supported by the attractiveness of its hubbing proposition and restraint in going down the premium path to acquire customers.

SingTel (ST SP, $3.11)
Key levels
Resistance 2: $3.50
Resistance 1: $3.30
Support 1: $2.80
Support 2: $2.45
The stock has been moving sideways between $3.30 and $2.80. The overall trend is rather directionless in the weekly chart as defined by the 100- and 200-day EMA. A break of either the immediate support or resistance is needed to confirm that the stock is back into a directional trend.

StarHub (STH SP, $2.93)
Key levels
Resistance 2: $3.15
Resistance 1: $2.95
Support 1: $2.70
Support 2: $2.50
The stock has so far swung between $2.95 and $2.70 in a rather tight range. Candlesticks are trying hard to advance above the $2.95/3.00 level and a break above this area could mean more buying ahead. The $2.70 support level should attract buyers if the price pulls back. Momentum is still positive with RSI staying above the neutral level.

M1 (M1 SP, $2.48)
Key levels
Resistance 2: $2.90
Resistance 1: $2.70
Support 1: $2.30
Support 2: $2.00
The stock is falling from its peak of $2.70 (52-week high), signalling a brief pause of the bullish trend. Candlesticks are holding well above the key moving averages, suggesting the positive momentum is still intact. Watch the $2.30 (100-day EMA) support level as breaching below it would signal a possible trend reversal.

Singtel

OCBC on 6 Mar 2012

SingTel will be adopting a new organisation structure from 1 Apr 2012. Instead of geographical segments, SingTel will divide its business into three segments – Group Consumer, Group Digital Life and Group ICT. Separately, SingTel announced that it will wholly acquire US-based Amobee Inc. for US$321m cash. We understand that revenue contributions, amounting to just US$30m/year, are relatively insignificant, but SingTel is confident that it can leverage its existing 400m customer base to quickly scale up the business. In addition, SingTel intends to finance the deal with internal resources, which should just bump up its FY12F net gearing to 22.5% from 18.7% as of end-FY11. SingTel is intent on reinventing its core carriage business and create new growth platforms in the digital services space. However, management stressed that it will remain financially prudent by striking a balance between achieving growth and creating value for shareholders. SingTel also reiterates its policy of a 55-70% dividend payout ratio. We continue to like SingTel for its defensive earnings, hence we maintain our BUY rating and S$3.69 fair value.

Three main business groups
SingTel will be adopting a new organisation structure from 1 Apr 2012, where it will divide its business into three segments – Group Consumer, Group Digital Life and Group ICT. Headed by Paul O’Sullivan, Group Consumer aims to be the leading provider of next generation communication, infotainment and technology services. Group Digital Life, headed by Allen Lew, seeks to become a leading player in the digital ecosystem, complementing the group’s consumer offerings with state-of-the-art digital services through bundles and add-ons. Lastly, Group ICT, which Allen Lew will temporarily be the covering CEO, brings together all enterprise-related business units and focuses on providing Infocomm Technology solutions to the group’s enterprise customers.

Acquiring Amobee for US$321m
Separately, SingTel announced that it will wholly acquire US-based mobile advertising solutions provider Amobee Inc. for US$321m cash. SingTel believes that the mobile advertising market is “nascent” and has “significant potential” for mobile operators, and acquisition will allow SingTel to capture the mobile advertising growth in both developed and emerging markets. While revenue contributions of just US$30m/year are relatively insignificant, SingTel is confident that it can leverage on its existing 400m customer base to quickly scale up the business. SingTel intends to finance the deal with internal resources

Maintain BUY with S$3.69 fair value
However, management stressed that it will remain financially prudent by striking a balance between achieving growth and creating value for shareholders. SingTel also reiterates its policy of a 55-70% dividend payout ratio. We continue to like SingTel for its defensive earnings, hence we maintain our BUY rating and S$3.69 fair value.

Singtel

Kim Eng on 6 Mar 2012

Downgrade to Sell. SingTel’s organisational restructuring is broad in scope while the acquisition of US-based solutions provider Amobee is far-reaching in its potential implications for the future. While we have no arguments with these developments in the longer term, we expect further downward pressure on the already-challenged margins in the short term. While SingTel can afford the US$321m price tag for Amobee, the ability to improve dividends could come under question. We believe the group is poised to make more acquisitions after Amobee as it embarks on its Digital L!fe strategy. Downgrade to Sell with a target price of $2.80, based on 11x FY Mar13F PER.

Announces major organisational restructuring, acquisition. SingTel has announced an organisational restructuring that cuts across all business segments and geographies, away from a traditional country-centric model. In addition, it has staked its claim on the mobile advertising market via a US$321m acquisition of Amobee. The worldwide mobile advertising market is estimated by Gartner to double from last year to US$6.8b this year.

Bold, necessary but slow off the mark. We have mixed emotions about SingTel’s restructuring. In our view, it is a bold move as it illustrates how serious the group is in addressing threats to its business, and also necessary as its space has been encroached upon by non-traditional rivals. However, as in any restructuring, operating costs could spike in the short term and this could further affect margins that are already under pressure. In addition, implementation is a concern.

Further acquisitions may cap dividend upside. The valuation SingTel is paying for Amobee does not seem out-of-line with acquisitions of similar companies by others. However, it is still a big chunk of change. The acquisition cost represents 27% of the telco’s cash holdings as at end-3QFY Mar12. While it will probably not affect the group’s dividend, it may cap upside beyond the 55-70% payout range and could dash hopes for further capital management.

Singapore Telcos

OCBC on 2 Mar 2012


Both M1 and StarHub put in pretty decent showing in their 4QCY results recently, mostly meeting our forecasts, although SingTel slightly disappointed due to its volatile Associates contribution. Going forward, all the three telcos expect their Singapore operations to remain stable or show modest growth, buoyed by continued customer additions and increasing mobile data usage. But with more smartphone users likely to use data-based means to communicate, we expect EBITDA margins to remain flat or even trend slightly lower. Nevertheless, thanks to their strong cashflow-generative businesses, the telcos have kept their dividend payout guidance, thus keeping their yields attractive. The telco shares have largely underperformed the broader market and were mostly flat YTD, whereas the STI has surged some 12.6%. But with markets likely to remain volatile, we believe that the telcos’ defensive earnings and attractive yields offer a safe harbour for the less risk-adverse investors. Maintain OVERWEIGHT.

Decent 4CY11 showing from M1, StarHub
Both M1 and StarHub put in pretty decent showing in their 4QCY results recently, mostly meeting our forecasts, although SingTel slightly disappointed due to its volatile Associates contribution. StarHub declared a quarterly dividend of S$0.05/share, while M1 declared a final dividend of S$0.079/share.

Review of Singapore mobile operations
For the post-paid mobile market, there was no change to status quo – SingTel continues to dominate with a ~47% share, followed by StarHub with ~28% and M1 ~26%. Overall, the post-paid subscriber base here grew by some 62k QoQ to 4029k in the quarter, with the bulk coming from SingTel (+44k). And due to limited availability of handsets during the iPhone 4S launch, we note that all the three telcos saw increased monthly churn, with the highest over at M1 (1.4%). Both SingTel and StarHub recorded modest improvements in monthly ARPUs while M1 saw a slight decline. Meanwhile, comments from all the three telcos suggest that a revamp of the generous data package currently for smartphones is likely when they launch LTE later this year.

Stable 2012 outlook
Going forward, all the three telcos expect their Singapore operations to remain stable or show modest growth, buoyed by continued customer additions and increasing mobile data usage. But with more smartphone users likely to use data-based means to communicate, we expect EBITDA margins to remain flat or even trend slightly lower. Nevertheless, thanks to their strong cashflow-generative businesses, the telcos have kept their dividend payout guidance, thus keeping their yields attractive.

Maintain OVERWEIGHT
The telco shares have largely underperformed the broader market and were mostly flat YTD, whereas the STI has surged some 12.6%. But with markets likely to remain volatile, we believe that the telcos’ defensive earnings and attractive yields offer a safe harbour for the less risk-adverse investors. Maintain OVERWEIGHT. 

Singtel

Kim Eng on 17 Feb 2012

Downgrade to Hold. We expect SingTel’s EBITDA margin to remain under pressure for the next few quarters as the telco focuses on building its mobile customer base aggressively in Singapore. While it expects long-term benefits, the costs related to its build-up of mobile device content, as well as subscriber acquisition and retention, are expected to stay high, thus eating into margins.

3Q12 results below expectations. SingTel’s 3QFY Mar12 results fell short of expectations, reflecting higher acquisition and retention costs on a strong mix of smartphones and tablets in Singapore and weak associate contributions. However, we had expected this, following similar trends in M1’s results. The only question was the extent of the damage to margins, which was quite severe in 3QFY Mar12, down to 32.7% from 34.5% in the previous quarter and 35.9% a year ago.

Margin decline to continue. SingTel has seen its EBITDA margin decline for four quarters now. However, there is likely to be further downside in the short term. In particular, management mentioned that it will step up its level of aggression to acquire smartphone and fibre customers as NGNBN rollout progresses. In the long run, it hopes to reap the benefits of upselling customers on a wider range of services but the short-term impact on margins will be negative.

Older and wiser on BPL but... The better news is SingTel is unlikely to want to be perceived as Mister Moneybags again when bidding for the 2013-16 seasons of the BPL starting in March 2012. According to Mr Allen Lew, SingTel’s Singapore CEO, it will be “a bit wiser on this”. However, cross-carriage notwithstanding, management still views BPL as a key piece of content. Depending on the dynamics with the content owner, SingTel may not have a choice but to bid aggressively.

Lack of catalysts. While we do not expect any positive catalysts in the near future, we also do not anticipate any event that could pull the rug from below SingTel’s earnings, which should remain fairly resilient. We value SingTel at $2.95, or 13x FY Mar12 earnings, similar to the region’s integrated telcos as well as its own historical average PER.

Singtel

OCBC on 14 Feb 2012

SingTel posted a mildly disappointing set of 3QFY12 results, with net profit of S$902m, or around 23% of FY12 forecast, mainly due to weaker contribution from Associates (down 17.9% YoY and 13.1% QoQ). According to management, the weaker contribution from Associates was mainly due to unfavourable forex movements – in particular, the steep 15% depreciation of the INR against the SGD had impacted Bharti’s contribution. Otherwise, Associates actually recorded strong operating performance. Going forward, SingTel has reiterated its FY12 guidance, including its dividend policy of 55-70% of core profit, which came as no surprise. To reflect the latest results, we have raised our FY12 revenue forecast by 2.5%, but lowered our earnings estimate by 5.4%. While we are also lowering our FY13 earnings estimate by 8.2% to reflect higher content costs, our SOTP-based fair value remains unchanged at S$3.69, still supported by the higher Associates valuations. Maintain BUY.

Mildly disappointing 3QFY12 results
SingTel posted its 3QFY12 results yesterday, with revenue up 2.7% YoY and 4.8% QoQ to S$4830m, underpinned by robust mobile performance in Singapore (SG) and Australia (AU). But net profit fell 9.6% YoY (+2.3% QoQ) to S$902m, mainly due to weaker contribution from Associates (down 17.9% YoY and 13.1% QoQ). Meanwhile underlying net profit was down 7.5% YoY but rose 1.1% QoQ to S$895m. For 9MFY12, revenue grew 4.6% to S$14045m, meeting 78% of FY12 estimate, while net profit fell 4.3% to S$2653m, or 68% of our full-year forecast.

Associates actually did well
According to management, the weaker contribution from Associates was mainly due to unfavourable forex movements – in particular, the steep 15% depreciation of the INR against the SGD had impacted Bharti’s contribution. Otherwise, Associates actually recorded strong operating performance; both Telkomsel and AIS delivered double-digit revenue growth and higher profits driven by sustained growth momentum in data; Bharti Africa also reported positive free cash flow for the first time in 3QFY12.

Maintains FY12 guidance
Going forward, SingTel has reiterated its FY12 guidance, which came as no surprise. Management is also upbeat about the NBN roll-out in SG, where it estimates that it has around 50% market share; intends to build up a content-rich eco-system to help drive fiber demand. Over in AU, Optus will be rolling out its LTE network and expects to offer a capital city service roll-out in 2H12. And as before, SingTel has also kept its dividend policy unchanged at 55-70% of underlying net profit.

Maintain BUY with S$3.69 fair value
To reflect the latest results, we have raised our FY12 revenue forecast by 2.5%, but lowered our earnings estimate by 5.4%. While we are also lowering our FY13 earnings estimate by 8.2% to reflect higher content costs, our SOTP-based fair value remains unchanged at S$3.69, still supported by the higher Associates valuations. Maintain BUY. 

Singapore Telecommunication Sector

Kim Eng on 27 Jan 2012

Fibre user numbers swell but not critical mass yet


Over 100,000 fibre users but not yet time to celebrate. Although the number of fibre users in Singapore has doubled from a year ago to 100,000 as at the end of last year, we believe local telcos still have a long way to go. They need to provide more compelling content and the installation bottleneck still needs to be permanently cleared. On the former, SingTel appears to be leading while M1 is lagging, while on the latter, we believe there will be more concrete actions by the regulator this year as this is a national-level project. We have Buy recommendations on StarHub and SingTel.


Not critical mass yet. According to media reports, the number of fibre- optic broadband users in Singapore has hit 100,000, more than double the figure in mid-last year when the data was first made available and a year since the new network was commercially launched. The number of monthly sign-ups has risen from 3,000 since a year ago to 13,000 by the end of last year. However, this is a far cry from Telekom Malaysia’s blistering sign-on pace of 18,500 a month in 3Q11, due to the smaller market size in Singapore and relative lack of compelling content that is needed to convince users to upgrade.


In need of better content. The vast majority of subscribers currently is reported to be residential, likely early adopters with a need for faster speeds or those drawn by the attractive pricing dangled by telcos. However, we understand the telcos are working on more content that would appeal to the mainstream market. SingTel currently offers online services such as video-on-demand (Video Store app on Samsung Smart TVs) and subscription-based online gaming (ESC, pronounced ESCape), while M1 is reported to be contemplating doing the same.


Good news is installation bottleneck cannot last. At present, the official installer OpenNet is contracted to fulfil 2,400 orders weekly (9,600 monthly). With 13,000 sign-ups monthly, there is obviously a bottleneck, resulting in a current waiting time of 2-3 weeks. While OpenNet has said it will temporarily increase the number of slots during telco promotions to cope with the extra demand, historically the problem has not been alleviated. Given that this is a national-level project, we believe the bottleneck impasse will not be allowed to persist, as the government is likely to step in to resolve matters.


Don’t take things at face value. At this point, StarHub would appear to have the most to lose if all telcos focus on content to lure subscribers, a move that could hollow out its Pay TV subscriber base. However, we believe the group will be able to hold its own given its already very broad base of content. Besides, it is operating its own active network as well as providing retail access and content as a Retail Service Provider, which offers key cost and content advantages. Content-wise, SingTel looks the best-positioned, while M1 has been talking up the content card for a while but still needs to play catch-up. 

StarHub (STH SP, Buy, TP $3.27) – StarHub is the second- largest telco and dominant Pay TV operator in Singapore. It operates integrated fixed and mobile telecom services, as well as Internet-related services, mobile solutions and global managed network solutions.


SingTel (ST SP, Buy, TP $3.51) – SingTel is the largest telecommunication group in Singapore, involved in fixed line, mobile, data and television services. Its wholly-owned subsidiary Optus is the second-largest telco in Australia. SingTel has diverse investments in India, Bangladesh, Sri Lanka, Indonesia, the Philippines, Thailand and Pakistan.


M1 (M1 SP, Hold, TP $2.35) – M1 is the smallest telco in Singapore, involved in mobile voice, mobile broadband and fixed broadband via a reselling agreement with StarHub. It also operates high speed fixed broadband, fixed voice and other services on the Next Generation Nationwide Broadband Network (NGNBN). 

Singapore Telcos

Kim Eng on 9 Jan 2012

The writing is on the wall. SingTel’s new Prestige 75 mobile data plan currently allows users to download 10GB of LTE data and 50GB of 3G data. But once LTE coverage reaches peak levels next year, new users will only get 10GB of LTE quota. We believe this will also be the new reality for 3G data plans, as all the telcos intend to review their existing 3G packages to cut the generous data caps, remove the unlimited option altogether and introduce more usage-based plans in future.

Driven by necessity. With the popularity of smartphones has come more and more ways to communicate. For the most part, they are free. This has eroded the need to pay for expensive voice calls or SMS. As a result, while voice revenues have been relatively stable so far, they may come under greater pressure in future, following Malaysia where voice revenues have been on the decline for more than a year.

Data growth strong but no way to monetise. While strong data growth will offset the loss of voice revenue, telcos have not been able to monetise this growth mainly because of the generous data caps. Margins have trended down over the past few years as data margins are generally lower than voice or SMS margins. Having said that, it seems margins have started to stabilise lately as competition eases.

What’s next for telcos? In the past, telcos could not properly price data as long as unlimited plans existed. We believe they can adapt some of the techniques they now use to optimise yield from voice and SMS, such as customer segmentation, tiered access and overage charges. Singapore telcos can also take a cue from Malaysia, where data caps are much lower and plans are more revenue-focused.

Margin pressure from data can be offset by volume growth. We are optimistic that telcos can better monetise their data investments in future, although our sensitivity analysis suggests that a 5ppt substitution in voice revenue will result in a 1ppt drop in EBITDA margin. However, the actual impact will vary depending on revenue composition and data traffic growth. In general, we believe M1 has the best scope to benefit given its lower earnings base, followed by StarHub and SingTel.

Our top picks are StarHub and M1. StarHub is the best-placed among the three Singapore telcos to sustain earnings in a year of economic slowdown due to its stable domestic businesses. SingTel’s aggression in Pay TV, its biggest headache, also appears to be becoming more rational. M1 was held back by the slow NGNBN pace last year, but this should dissipate this year and sign-ups by consumers should accelerate. There is also scope for capital management by both telcos.

Our top picks are in the following order:

StarHub (Buy, TP $3.27, FY12F dividend yield 6.9%) – We believe StarHub is the best-placed among the three Singapore telcos to sustain earnings in a year of economic slowdown due to its large and stable  domestic businesses. SingTel’s aggression in Pay TV, its biggest headache, also appears to be becoming more rational. In addition, we see scope for additional capital management in 2H12 if the economic headwinds start to die down.

M1 (Buy, TP $2.95, FY12F dividend yield 6.4%) – The stock did not perform as well as StarHub last year as the Next Generation Nationwide Broadband Network (NGNBN) did not manage to get much traction. However, we reckon structural issues that had prevented faster expansion of coverage last year, such as difficulties encountered by contractors in gaining building access to install the wiring, should be solved this year, and sign-ups by consumers should rise as the telcos make their pricing plans more attractive and the benefits of having a fibre connection at home becomes more apparent. There is also scope for capital management measures.

SingTel (Buy, TP $3.51, FY Mar13F dividend yield 5.6%) – Earnings diversification is SingTel’s top selling point, as its dividend yield is not as high as either StarHub or M1. While risks exist in the form of the constantly depreciating Indian rupee, greater competition in Australia and potential Telkomsel corporate restructuring, they have to be balanced against receding competition in India and Singapore, as well as a turnaround in Africa.

Telcos top picks in two outlook reports as volatility persists

From Businesstimes on 9 Jan 2012

Telcos top picks in two outlook reports as volatility persists

M1, SingTel, DBS, Frasers Centrepoint Trust have emerged as key 'buy' calls

WITH global uncertainties carrying over from 2011 into the new year, telecommunications stocks have once again come up as top picks in two market outlook and strategy reports.

M1, SingTel, DBS, and Frasers Centrepoint Trust, in particular, have emerged as key 'buy' calls from both UOB Kay Hian Research and OCBC Bank's Wealth Panel, in separate reports released on Friday.

Forecasting a 2012 Straits Times Index (STI) price to earnings (PE) ratio of 12.1x, UOB Kay Hian said the index's valuation is 'undemanding' - at a 26 per cent discount to its long-term PE mean of 16.3x (since 1993).
'Nevertheless, we think the discount may remain elevated in the near term, given the uncertain prospects for 2012 corporate earnings and lingering concerns over the euro debt crisis,' said UOB Kay Hian.

The research house said investors should opt for a balance of sustainable high-yield stocks, selective retail Reits, and 'undervalued laggards with specific stock catalysts'.

Apart from the telcos, UOB Kay Hian's key 'buys' included CapitaLand and Ezion, while City Developments and NOL sat in its key 'sells' list. It also recently upgraded Wing Tai and Ho Bee to 'buys' due to their deep value after sharp share price corrections in December last year.

Meanwhile, OCBC Investment Research head Carmen Lee warned that even though share prices appear to have discounted weaker earnings expectations, 'they may not have been fully priced in the worst case scenario'.
Said Ms Lee: 'If the outlook deteriorates significantly, earnings estimates will need to be shaved further.'

With volatility persisting and investor confidence remaining fragile, the OCBC Wealth Panel said that it prefers quality and safer assets, and high dividend yielding defensive stocks.

Telecommunications aside, the OCBC team said that they continue to favour the healthcare and oil and gas sectors in 2012. Its picks for the year include Raffles Medical, Keppel Corp, Sembcorp Marine, Biosensors, and Golden Agri-Resources.

Singtel

DBS Vickers Securities, 21 Dec

SINGTEL will launch its 4G (Long Term Evolution - LTE)-based mobile broadband service today for both consumers and businesses in selected districts. 4G plans will initially be limited to dongle-based users as there is a lack of LTE-enabled smartphones in the market.

Typical download speeds would be 3.4-12 Mbps, which is 3-4 times faster than 3G. More importantly, SingTel is offering lower data-cap in LTE plans to monetise data usage.

First-stage pricing: The new 4G plan will bundle 10 GB of LTE data along with existing 50 GB of 3G data for an additional $10 on top of $59.90.

Second-stage pricing: Upon the LTE roll-out reaching 80 per cent of users by end-2012, 50 GB 3G data cap will shrink for new subscribers of the plan and for existing subscribers on contract expiry.

Third-stage pricing: When LTE roll-out reaches 95 per cent by Q1 2013, 3G data cap may be dropped altogether, leaving new subscribers with 10 GB of LTE data.

Telcos are rectifying their mistake of offering too generous data caps in the past. Telco are offering users with incentives of higher speeds and better quality of service (priority pass from SingTel) to encourage more data usage at higher price. SingTel revealed that 11 per cent of users account for 60 per cent of data traffic and there is a need to charge these users for using the network.

All three players are limiting data caps gradually. StarHub has one 3G plan with 30 GB cap, while other plans are unlimited plans. M1, however, has plans with 5GB, 12 GB and 50 GB caps. M1 launched 4G in June 2011 for business use only while StarHub will launch LTE in 2H12.

We prefer SingTel and StarHub to M1 as the National Broadband Network is progressing slower than expected. While the weakening of the Indian Rupee in the last six months (about 15 per cent) may impact SingTel's earnings adversely by 3-4 per cent, regional associates in India and Indonesia are in good shape.
BUY

Singtel

From Business times 21 Dec 2011

SingTel launches 4G plan and battleship in data war

Shift in pricing strategy will help telco charge heavy data users in ways that current plans don't allow

By JOYCE HOOI

(SINGAPORE) The days of virtually unlimited mobile data usage are numbered. SingTel will be launching Singapore's first fourth-generation (4G) - or Long Term Evolution (LTE) - mobile broadband service for both consumers and businesses tomorrow, as the first of a three-part pricing strategy.

For now, network coverage will be mainly in the Central Business District - alongside pockets of coverage in Bukit Panjang, Boon Lay, Bedok and Changi. It will expand to 80 per cent of mobile data users by end-2012 and to 95 per cent by the first quarter of 2013.The new 4G plan - known as Broadband on Mobile Prestige 75 - heralds a shift in pricing strategy that will help SingTel gain revenue on heavy data usage in ways that it has not been able to with current 3G price plans.
The new 4G plan will bundle 10 gigabytes (GB) of LTE data along with 50GB of 3G data for $69.90 a month. It is only for dongle modems, not smartphones or tablets.
This is essentially SingTel's priciest 3G plan - the Premium 21 with a priority pass - with LTE data and speed thrown in for an additional $10. Existing users of Premium 21 will be able to upgrade to this plan for $10 a month,
When a user of the new plan uses 3G services in areas not covered by the LTE network, he will experience typical download ranges of 1.7-4.8 megabits per second (Mbps).
In comparison, the LTE service that kicks in when the user is within range of the LTE network offers typical download speeds that are about three times faster of 3.4-12 Mbps.
While the Prestige 75 has a theoretical download speed of up to 75 Mbps, the typical download speed range better reflects what a consumer experiences under actual loaded network conditions.
When subscribers use up their 10GB LTE data allocation in areas covered by the LTE network, they do not switch to the 3G network and consume their 3G data quota.
Instead, they will be charged for additional LTE data usage at $0.512 per megabyte (MB), the same rate levied for current 3G plans. This is capped at $94.16 per month.
This pricing structure will change by the end of next year when LTE coverage hits 80 per cent of users. Then, the 50GB 3G data quota will shrink for new subscribers of this plan.
When coverage reaches 95 per cent of its users in 2013, the divide between 3G and LTE will be made explicit - the price plan will most likely drop the 3G component altogether, leaving new subscribers with a 10GB quota of LTE data, as opposed to a combined data quota of 60GB (3G and LTE) for people who had subscribed during the first leg of the new plan.
This will have significant implications for SingTel's long-ranging plans to monetise data usage. Currently, the data cap for all of its 3G plans stands at 50GB.
The pool of people paying for additional data is tiny. Less than 1 per cent of dongle and tablet users consume more than 50GB a month, according to data that SingTel released yesterday. In fact, 89 per cent of them use less than 10GB of data.
The price plan set-up is not much different for its rival, StarHub's. It has one 3G plan with a 30GB cap and three other costlier plans with no data limit. M1, however, has plans with 5GB, 12GB and 50GB caps.
Yuen Kuan Moon, executive vice-president of SingTel's digital consumer group, likened 3G consumer habits to a 'buffet-style consuming behaviour' in which consumers pay a flat fee in return for consuming almost all they can.
Consequently, the telco has found itself in a situation where 11 per cent of its subscribers account for 60 per cent of data traffic, even as marginal revenue has not kept up with increasing data usage.
'Many operators in the world have looked at repricing 3G because the way data has been used and offered in the market encourages a very weird sort of usage behaviour. This has affected the entire quality of the network,' said Mr Yuen.
With users of the LTE network, at least, SingTel will eventually be able to make heavy users of data pay for what they consume beyond the 10GB point, as opposed to the 50GB point which forms its current cap.
Even some of the 89 per cent of users who consume less than 10GB of data might find themselves venturing into paying-per-MB territory, as higher speeds tend to encourage more data usage.
The same principles will apply to LTE price plans for smartphones and tablets when they are eventually launched, SingTel said.
StarHub said yesterday that it will likely launch its LTE services in the second half of 2012, 'given the device roadmaps of most device manufacturers'.
When it does, the accompanying price plans are bound to be different in a similar vein. StarHub previously told BT that it 'will look at how we price LTE subscription plans closely so as to help us monetise mobile data. Hence, it will be different from the current 3G/HSPA+ mobile data pricing plans'.
M1 was the first to offer any form of LTE service in June, limited to its enterprise customers. It had previously said: 'Nationwide LTE network is currently being rolled out and will be launched in the second half of 2012.'

Singtel

Kim Eng Research 19 Dec
Indian headwinds. SingTel is facing growing headwinds from India as the rupee has fallen by 19% YTD, making it the worst-performing Asian currency this year. Also causing some uncertainty are potential changes to government regulations surrounding additional spectrum fees, as well as the removal of domestic roaming fees and halving of mobile termination rates. While associate Bharti Airtel’s growth prospects appear to be reviving at last, we still prefer StarHub to SingTel given the latter’s rising risk profile.
Free-falling Indian rupee. The Indian rupee has tumbled by 19% YTD and fell further to an all-time low of Rs41.43 against the S$ last week. SingTel’s 32.2%-owned Bharti has accounted for 28% of associate contributions YTD, and will contribute an estimated 16% of FY Mar12F pretax profit. As the rupee is currently below our assumption of Rs39 for FY Mar12, we cut our full-year earnings forecast for SingTel by 3%.

Uncertainty over new telecom policies. Potential changes to government regulations surrounding additional spectrum fees, as well as the removal of domestic roaming fees and halving of mobile termination rates, are also causing uncertainty at this time. Bharti believes things will only clear up early next year. But there may also be M&A opportunities as the government is encouraging consolidation of 54.1 the market, where new 2G players are bleeding heavily.

On the bright side, domestic growth prospects should revive. Our Indian telecom analyst expects earnings growth of 6% in FY Mar12 and 44% in FY Mar13 for Bharti, led by 3G operations breaking even and strong growth in Africa. As at 2QFYMar12, Bharti’s core market margins have also begun to expand again on rising tariffs. However, if the new telecom policies fail to play out well, he expects FY Mar13 EPS to be cut by 22%, reducing full-year growth for Bharti to 16%.

Prefer StarHub. We maintain our Buy call on SingTel as it still offers a relatively safe refuge for investors looking to park funds away from current stock market volatility. On balance, however, we prefer StarHub given SingTel’s rising risk profile. 

Singtel

DMG & PARTNERS RESEARCH, Dec 7 AT SingTel's 2011 Regional Mobile Investor Day (RMID), the senior managements of six subsidiaries and associates - SingTel Singapore, Optus, AIS, Telkomsel, Bharti and Globe - addressed analysts in parallel breakout sessions. The event's overriding themes were on data, specifically: i) the trend towards new converged services on the National Broadband Network (NBN) in Singapore and Optus ii) the use of 3G networks to drive data uptake in the under-penetrated markets of Indonesia and India (Telkomsel/Bharti); and iii) emerging data play with new network investments in nascent 3G markets (Thailand/Philippines). Group-wide trials on Long-Term Evolution (LTE) have been successful, with Optus rolling out its LTE network in 2Q12. SingTel showcased its Next Generation Network (NGN) services/applications across multiple platforms and cloud services on the sidelines of the event. We believe that concerns of its competitors taking a chunk of its lucrative enterprise customers under the NGN are overdone as the group appears to have pre-empted competition well via the up-selling of services and more competitive pricing to migrate customers. NEUTRAL