SingTel - UOB Kay Hian 2018-10-10: Harnessing The Cohesive Strength Of Regional Mobile Associates

SINGTEL (SGX:Z74) | SGinvestors.io SINGTEL SGX:Z74

SingTel - Harnessing The Cohesive Strength Of Regional Mobile Associates

  • Singtel is collaborating with Optus, Telkomsel, Bharti Airtel, AIS and Globe Telecom to build an eco-system of digital services, such as mobile payments, gaming and e-sports. These group-wide collaborations would build stronger rapport with mobile customers, especially the millennials.
  • Maintain BUY. Target price: S$3.94.


  • Singapore Telecommunications (Singtel) is collaborating with Optus and its regional mobile associates Telkomsel, Bharti Airtel, Advanced Info Service (AIS) and Globe Telecom to build an eco-system of digital services, such as mobile payments, gaming and e-sports.

Promoting cross-border mobile payments.

  • Singtel has launched its cross-border payment alliance, VIA, to build a region-wide payment network. Singtel, AIS and Kasikornbank would offer QR-code based mobile payments through mobile wallets, such as Singtel’s DASH or AIS’ GLOBAL Pay and Rabbit LINE Pay, across both Singapore and Thailand. VIA allows mobile subscribers to use their local wallets when travelling.
  • Customers can use Singtel DASH for payments at popular shopping malls in Bangkok, such as CentralWorld, Chatuchak Weekend Market, MBK Center and JJ Mall. There are 1.6m participating merchants, from top brands to small stores in Thailand. In Singapore, customers can pay for taxi rides with ComfortDelGro and purchases at KFC, Pizza Hut, Breadtalk and 7-Eleven. Singtel is offering a 10% cashback for DASH payments and S$5 for 1GB of data roaming in Thailand. AIS is offering Bt100 cashback to Rabbit LINE Pay users for purchases in Singapore. The service will provide convenience to ~1.5m visitors (based on 2017's travel figures) travelling between Singapore and Thailand.
  • The alliance will progressively be expanded to Telkomsel in Indonesia, Bharti Airtel in India and Globe Telecom in Philippines. The VIA alliance will drive adoption of mobile payments among Singtel Group’s >700m mobile subscribers.

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Developing eco-system for gaming and e-sports.

  • Singtel, Optus, Telkomsel, Airtel, AIS and Globe have signed a memorandum of understanding (MOU) to collaborate on growing the gaming and e-sports eco-system in Southeast Asia. The Singtel Group has more than 200m customers that play games on a regular basis. The six companies within the Singtel Group will scale up on e-sports and collaborate on content creation and distribution. They will develop new solutions and services for gamers.
  • Singtel had just held its inaugural PVP Esports Championship, a regional e-sports league, on 5-7 October. It is the organiser and owner of PVP Esports Championship and the content related to the event. 3,600 teams from Singapore, Australia, Indonesia, India, Thailand and Philippines competed in Dota 2 and Arena of Valor.


The whole is greater than the sum of its parts.

  • Singtel has stepped up efforts to extract revenue synergies from Optus and its regional mobile associates. Collaborations in mobile payments, gaming and e-sports also build stronger rapport with mobile customers, especially the millennials.
  • We view these initiatives positively because:
    • They build “sticky” customer relationships.
    • They are capex-light and do not involve expensive acquisitions.
    • They enhance cohesiveness and collaborations across Singtel, Optus, Telkomsel, Bharti Airtel, AIS and Globe Telecom, leveraging on economies of scale with more than 700m mobile subscribers across six countries.

Building a digital market place.

  • With the mobile payment platform in place, Singtel’s goal is to build a vibrant digital market place. Customers can purchase and download games and e-sports. In the future, the platform could be expanded to distribute financial services, such as insurance and micro loans.

Providing clarity and certainty to future dividends.

  • Barring unforeseen circumstances, management intends to maintain ordinary dividends at 17.5 S cents for the next two financial years and, thereafter, revert back to paying 60-75% of underlying net profit.


  • We maintain our existing earnings forecasts.


  • Maintain BUY. Our target price for Singtel is S$3.94 based on DCF (required rate of return: 6.25%, growth: 1.5%).


  • Singtel is the least affected by a fourth mobile operator in Singapore as overseas businesses accounts for about 70% of its bottom line.
  • Singtel is the largest and most liquid defensive stock listed on the Singapore Exchange and to trade at a premium.

Jonathan Koh CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2018-10-10
SGX Stock Analyst Report BUY Maintain BUY 3.940 Same 3.940