Singapore Telcos - Maybank Kim Eng 2019-09-06: Aggressive Passive Move?

SINGTEL (SGX:Z74) STARHUB LTD (SGX:CC3) NETLINK NBN TRUST (SGX:CJLU)

Singapore Telcos - Aggressive Passive Move?

MVNO Circles.Life has launched a SGD5 monthly plan with 2GB wireless data. Although this appears aggressive, price per GB is actually higher than its other plan and those of several competitors.
On balance, we think the sachet pricing of the new plan may affect the prepaid market but is not likely to trigger additional churn or revenue risk to the postpaid market. The risk is price undercutting by another player on a similar plan.
Our NEUTRAL sector outlook is maintained with NETLINK NBN TRUST (SGX:CJLU) and STARHUB LTD (SGX:CC3) as BUYs.

Excluding its previous Zero plan that provided 1GB per month at no cost, Circles’ new SGD5 monthly SIM-only plan is the lowest-denomination plan available in the market. Its closest equivalent is new MVNO RedOne’s SGD8 plan. With its rollout, Circles.Life new offers twice the amount of data at a 38% lower monthly fee.

On a per GB basis, the new plan is actually more expensive than those of several of its MNO and MVNO competitors. Furthermore, Circles’ Zero plan is at least temporarily unavailable. From this vantage point, we view it as non-disruptive to mainstream postpaid plans and pricing. This is as long as competitors do not overreact to its latest move.
This type of sachet pricing is prevalent in developing markets for budget rather than value-sensitive market segments. For example, the Philippines has a PHP50 or SGD1.33 prepaid load offering for 1GB, valid only for three days.

Given its pricing and market segment target, we doubt that the plan will threaten mainstream postpaid wireless revenue that accounts for the bulk of industry revenue. Rather, we think it could affect the prepaid wireless segment where budget-conscious users typically converge.
We estimate prepaid revenue in the recent Jun 2019 quarter at 16%/20% of STARHUB (SGX:CC3)/ SINGTEL (SGX:Z74)’s wireless revenue and 6%/2% of their total.

Luis Hilado Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-09-06

SGX Stock Analyst Report HOLD MAINTAIN HOLD 3.440 SAME 3.440

BUY MAINTAIN BUY 2.000 SAME 2.000

BUY MAINTAIN BUY 0.940 SAME 0.940