Singapore Telecommunications

UOBKayhian on 10 June 2014

Stable industry growth in post-paid subscribers. Industry growth in post-paid subscribers was stable at 6.2% in 2013 and 5.8% yoy in 1Q14. StarHub and SingTel achieved stronger growth in post-paid subscriber base at 9.7% and 5.9% respectively in 2013. The trend persisted in 1Q14 with StarHub and SingTel expanding their post-paid subscriber base by 10.4% and 5% yoy respectively.

But quality of new subscribers differs. The picture looks drastically different for post- paid ARPU. M1’s post-paid ARPU gained 2% yoy to S$62.30/month. However, SingTel’s and StarHub’s post-paid ARPU contracted by 2.9% and 3.8% yoy respectively to S$66/month and S$75/month. Both have more high-usage enterprise customers, who travel on a regular basis and chalk up more roaming revenue. However, this segment suffers more from cannibalisation as customers switch to using data and messaging applications when overseas.

Maintain OVERWEIGHT. We see growth and innovation within the mobile space. They include wearable gadgets, such as Google Glass and Samsung Galaxy Gear. In future, all electronic gadgets would be linked by machine-to-machine connections via "Internet of Things". The low level of gearing for all three telcos also provides potential upside from capital management over the longer term.