Singapore Telecom Sector - DBS Research 2021-06-09: 3 Reasons For Sector Consolidation

Singapore Telecom Sector - DBS Research | SGinvestors.io SINGTEL (SGX:Z74) STARHUB LTD (SGX:CC3) NETLINK NBN TRUST (SGX:CJLU)

Singapore Telecom Sector - 3 Reasons For Sector Consolidation

  • We consider three reasons for potential consolidation in mobile sector in 2022 or earlier.
  • Mobile service revenue is likely to improve in 2H21F after a disappointing 1Q21.
  • Prefer SingTel (SGX:Z74) for annual earnings growth of 13% over FY21-23F and 3.6% yield.
  • Upgrade StarHub (SGX:CC3) to BUY for 4.7% yield coupled with earnings recovery and sector consolidation in 2022.



3 key reasons for mobile sector consolidation in 2022 or earlier.

  • Mr David Teoh, founder of TPG Telecom has resigned from TPG Australia in March 2021 and is likely to focus on TPG Singapore in our view, where he holds ~37% stake.
  • With 5G services projected to have 58% market share in 2025, TPG’s 4G network might become less relevant in 2-3 years
  • M1 (owned by Keppel Corp (SGX:BN4) and SPH (SGX:T39)) is divesting its network assets to a Special Purpose Vehicle (SPV), which could potentially buy more network assets in our view.


Mobile service revenue is likely to recover in second half of 2021 after a disappointing 1Q2021.

  • Sequential weakness in 1Q2021 was due to continued weakness in business travel, tourism, and intense competition. We expect sequential recovery in the second half of 2021 and further recovery in 2022. Mobile service revenue in Singapore could decline by another 5% in 2021 (after a 23% decline in 2020) and register 6% growth in 2022, led by recovery in roaming, prepaid revenue, and growth of premium 5G services.


Prefer SingTel for offering annual earnings growth of 13% over FY21-23F with 3.6% yield.

  • SingTel’s underlying earnings to benefit from a stabilising core business (4% decline in FY22F core EBITDA after 16% decline in FY21), and ~S$300m rise in post-tax earnings contribution from Bharti (vs S$13m rise in FY21).
  • Potential value unlocking from partial divestment of infrastructure assets is a key catalyst.
  • See SingTel's Share Price, SingTel's Target Price.

Key risks.

  • A key risk to our SingTel call would be 6-7 months delay in potential tariff hike by Bharti to Jan-March 2022 quarter, causing SingTel to register only 12% earnings growth in FY22F (vs our base-case of 18% growth).
  • A key risk to our StarHub call will be TPG securing fresh funding despite its bleak prospects, delaying sector consolidation.
  • See the PDF report by DBS Research for complete analysis.





Sachin MITTAL DBS Group Research | https://www.dbsvickers.com/ 2021-06-09
SGX Stock Analyst Report BUY MAINTAIN BUY 3.01 UP 2.930
BUY UPGRADE HOLD 1.38 UP 1.210
HOLD MAINTAIN HOLD 1.020 SAME 1.020



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