Singapore Telcos - RHB Invest 2020-04-30: 5G Spectrum Provisionally Awarded

Singapore Telcos - RHB Investment Research | SGinvestors.io SINGTEL (SGX:Z74) STARHUB LTD (SGX:CC3)

Singapore Telcos - 5G Spectrum Provisionally Awarded

  • The Infocomm Media Development Authority (IMDA) has provisionally awarded the 5G spectrum to SingTel (SGX:Z74) and the JV consortium (JVCo) comprising of StarHub (SGX:CC3) and M1. See announcement. We see only incremental contributions from 5G in 2021, on progressive network expansion and device adoption.
  • Sector valuation, at 9x prospective FY20 EV/EBITDA, is at a slight discount to the historical mean, albeit supported by decent dividend yields of over 5%. SingTel remains our preferred pick.
  • Maintain sector NEUTRAL.

Provisional 5G spectrum awarded to Singtel and StarHub-M1 consortium.

  • This follows the earlier call for proposal (CFP)/beauty contest which closed on 17 Feb. The outcome is largely expected, with TPG Telecom (TPG) possibly losing out on the network evaluation criteria (75% weightage). The successful recipients will be assigned 100MHz each of the mid-band (3.5GHz) spectrum and 800MHz of the mmwave band (26- 28GHz).
  • See 
  • The final award, expected by June, is pending regulatory processes – including the selection of spectrum lots, as well as the confirmation of technical and legal matters. Network deployments should commence in 2H20.

Commercial rollout in Jan 2021.

  • Both SingTel and the StarHub-M1 JVCo are required to roll out a standalone (SA) 5G network from the outset, on 3.5GHz to achieve 50% outdoor coverage by end-2022 – with nationwide coverage attained by 2025 (five years). This compares with the 18-month nationwide coverage requirement for a new operator on the previous 4G spectrum allocated in 2017. With a SA network, telcos will be able to offer full-fledged 5G services including network slicing, ultra-reliable low latency communications and machine-type communications.

Mandatory wholesale access.

  • As part of the spectrum assignment, successful bidders would have to provide wholesale access to other mobile network operators (MNO) and mobile virtual network operators (MVNO) which would facilitate competition at the retail level.

5G will focus initially on enterprises.

  • We see the initial demand for 5G to be largely in the enterprise space where trials of multiple use cases across various industry verticals are already at an advanced stage. The consumer/mass market is likely to see a more gradual pick-up in 5G adoption given the lack of a critical mass of applications coupled with the already high fiber penetration in the country.
  • The 5G device eco-system continues to evolve rapidly with over 280 devices announced by mid-April, of which 95 are commercially available, according to the Global Mobile Suppliers Association (GSA). The largest device support is on the 3.5GHz band (70% of announced devices) with the mmwave spectrum supported by about a third of announced devices.

Capex likely to be progressive.

  • While the telcos have yet to officially guide on 5G capex, we see a more pragmatic approach on spending with the industry mindful of ROIs, 4G investments and monetisation, and the risks from COVID-19 where a more prudent capital allocation strategy is being mooted. The sharing of active 5G infrastructure by the StarHub-M1 JVCo would also lead to significant capex savings, estimated at up to 30%.
  • See 
  • Key risks are competition, lower-than-expected dividends and higher-than-expected capex.

Singapore Research RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-04-30
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