SINGTEL (SGX:Z74)
STARHUB LTD (SGX:CC3)
NETLINK NBN TRUST (SGX:CJLU)
Singapore Telcos - Latest 5G Iteration ~ More Cooks?
Looking tougher…
- The Communications Minister has unveiled the latest on 5G licensing, with two more localised-area 5G licenses to be issued on top of two nationwide licenses.
- Higher competition risks could dampen the business case scenarios being run by interested parties. It could also potentially raise investors’ risk perception on upcoming and undisclosed 5G capex by SingTel (SGX:Z74) and StarHub (SGX:CC3) etc.
- Remain NEUTRAL as we await whether a 4-player 5G match-up would materialise in 2020.
- NetLink Trust (SGX:CJLU) and StarHub remain our key BUYs.
…unless
- With potential 4-way competition in industrial areas, higher investment risks will be factored in by would-be MNO bidders. It may also dampen interest in the localised licenses. That may lead to just 2-3, not four, players participating in such areas.
- However, given that the fourth MNO license taken up in 2016 when there was over 150% SIM penetration surprised the market, we cannot rule out multiplayer risk. Meanwhile, nationwide coverage of 50% by end-2022 could theoretically be ideal if the two nationwide licensees can cooperate on coverage to:
- avoid duplication; and
- enable local 5G roaming to bring the nation closer to 100% coverage faster than two parties targeting the same areas.
Whether consumer or investor, a 5G case does not seem palatable today
- In our recent wireless survey, 75% of our respondents were not willing to pay higher monthly bills for 5G vs 4G. See report: Singapore Telcos - Our Survey Says Loyalty Remains.
- 5G rollout would still be needed for operators to remain competitive locally and for Singapore globally but the appetite of investors for waiting out returns on 5G capex creates an overhang in the sector. This is despite an already-significant de-rating due to 4G price competition.
- Minimising costs and speeding up national rollout through cooperation may be the win-win the consumer and financial markets would want.
If it’s basic service, then regulate it as such?
- In our view, the consumer’s increasing treatment of wireless data as a basic service - similar to water, transport and power - begs the question of whether a regulated-returns framework should be the long-term path. This is already the thinking behind the structure for residential fibre broadband that created NetLink Trust.
Luis Hilado
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2019-10-17
SGX Stock
Analyst Report
3.440
SAME
3.440
2.000
SAME
2.000
1.030
SAME
1.030
