4QCY18 saw StarHub and M1’s results coming in within our expectations, while that of Singtel’s was slightly under. Across all 3 telcos, postpaid mobile Average Revenue per User (ARPU) fell 4%-12% YoY, while StarHub guided for a larger-than-expected FY19 DPS cut. On the 5G front, the government has recently announced its intention for a roll out in 2020, but large capex equirements seems to weigh on the minds of local telcos. The mobile postpaid scene continues to see more competitive offerings ahead of TPG’s commercial launch, which would serve to further erode ARPU. Looking at the yield spread of the telcos, it is evident that the yield spread for StarHub against Singtel has compressed significantly, with the latter committing to its 17.5 S-cents DPS for FY19 and FY20, despite the group’s participation in Bharti Airtel’s rights issuance. All considered, we continue to favor Singtel and NetLink NBN Trust.
Recently in Parliament, Minister for Communications and Information, Mr. S Iswaran, noted that the government intends to roll out 5G in 2020, with a public consultation to be held shortly so as to shape the regulatory framework and spectrum allocation. 5G would indeed allow telcos to provide new offerings especially to enterprise customers, but we believe that incumbents are proceeding cautiously, given the capex requirements. Moving forward, we believe incumbents would be looking to share 5G infrastructure, as it would likely be untenable for all 4 MNOs to build out their own.
Dividend Yield Across 3 Telco's
Peer Valuation Comparisons