Going into 2013, with the global economic outlook still looking somewhat shaky, we believe that investors may continue to favour stable yield plays for recurring income in their portfolios. We think that the telecommunication stocks will continue to be good candidates as their defensive earnings and strong ability to generate free cashflow should continue to sustain their relatively attractive dividend yields. As such, we maintain our OVERWEIGHT rating for the sector. Among the three telcos, we have a slightly preference for M1 (BUY, FV: S$2.89).
Modest ARPU uplift likely
While the Singapore mobile services market has hit penetration rates of nearly 150%, the proliferation of smartphones and tablets should continue to drive growth, especially for mobile data usage. And with the faster-than-expected switch from 3G to 4G, we are also likely to see a gradual and modest uplift in ARPU (average revenue per user) in 2013.
NBN roll-out completed
With Singapore’s Next Generation National Broadband Network (NBN) having achieved 95% island-wide coverage, we expect fiber subscriptions to continue at a healthy clip. The number of fiber subscribers hit >220k at end-Sep and could continue to grow by 10k per quarter as ADSL users make the switch. However, the take-up among corporate subscribers could be slower, given that most of the large corporates are already on fiber plans.
BPL may not matter too much
Lastly, for Pay TV, we expect little change in terms of content and competition. While incumbent SingTel has secured the 2013-2015 Barclays Premier League (BPL) rights on a non-exclusive basis (which means that it is not required to share the content with its rivals), StarHub could still put in a bid. However, we do not believe that StarHub would want to over-pay for BPL rights and we do not think that its Pay TV business would be too badly affected if it does not secure BPL rights again.
Maintain OVERWEIGHT
Going into 2013, with the global economic outlook still looking somewhat shaky, we believe that investors may continue to favour stable yield plays for recurring income in their portfolios. We think that the telecommunication stocks will continue to be good candidates as their defensive earnings and strong ability to generate free cashflow should continue to sustain their relatively attractive dividend yields. As such, we maintain our OVERWEIGHT rating for the sector. Among the three telcos, we have a slightly preference for M1 (BUY, FV: S$2.89).
While the Singapore mobile services market has hit penetration rates of nearly 150%, the proliferation of smartphones and tablets should continue to drive growth, especially for mobile data usage. And with the faster-than-expected switch from 3G to 4G, we are also likely to see a gradual and modest uplift in ARPU (average revenue per user) in 2013.
NBN roll-out completed
With Singapore’s Next Generation National Broadband Network (NBN) having achieved 95% island-wide coverage, we expect fiber subscriptions to continue at a healthy clip. The number of fiber subscribers hit >220k at end-Sep and could continue to grow by 10k per quarter as ADSL users make the switch. However, the take-up among corporate subscribers could be slower, given that most of the large corporates are already on fiber plans.
BPL may not matter too much
Lastly, for Pay TV, we expect little change in terms of content and competition. While incumbent SingTel has secured the 2013-2015 Barclays Premier League (BPL) rights on a non-exclusive basis (which means that it is not required to share the content with its rivals), StarHub could still put in a bid. However, we do not believe that StarHub would want to over-pay for BPL rights and we do not think that its Pay TV business would be too badly affected if it does not secure BPL rights again.
Maintain OVERWEIGHT
Going into 2013, with the global economic outlook still looking somewhat shaky, we believe that investors may continue to favour stable yield plays for recurring income in their portfolios. We think that the telecommunication stocks will continue to be good candidates as their defensive earnings and strong ability to generate free cashflow should continue to sustain their relatively attractive dividend yields. As such, we maintain our OVERWEIGHT rating for the sector. Among the three telcos, we have a slightly preference for M1 (BUY, FV: S$2.89).
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