Singapore Telcos

UOBKayhian on 10 Sept 2013

Singapore Telecommunications- Growth from monetising data.

Monetising data with tiered data plans. Singapore telcos have restructured the pricing of data usage to enhance their ability to monetize data usage. We performed simulations to ascertain the impact of migration
to tiered data plans and planned increase in excess charges for data. Our study indicates that post-paid ARPU for Singapore telcos would increase by an average of 1.5% in 2013, 4.5% in 2014 and 6.9% in 2015.

M1 and StarHub are key beneficiaries as mobile accounted for 78.3% and 56% of service revenue respectively in 2Q13. We have increased our earnings forecasts for M1 by 4% for 2014 and by 12.8% for 2015. Similarly, we have raised our earnings forecasts for StarHub by 0.8% for 2014 and by 5.1% for 2015.

Maintain OVERWEIGHT. Migration to tiered data plans and growth in usage of data will strengthen growth prospects for the telecommunications sector. Re-iterate our BUY recommendations for M1 and StarHub. We have increased our target prices for M1 by 10.3% to S$3.95 and for StarHub by 2.6% to S$4.72. Maintain HOLD for SingTel but would accumulate the stock at S$3.18. We believe there is upside to our target prices for Singapore telcos as we conservatively assumed a terminal growth rate of 1.0%.