Telco shares fall amid bids for 4th player

-2.5% Singtel shares dip 10 cents to $3.87.
-2.5% Singtel shares dip 10 cents to $3.87. PHOTOS: SINGTEL, BLOOMBERG, M1
-4.4% StarHub shares slip 16 cents to $3.47.
-4.4% StarHub shares slip 16 cents to $3.47. PHOTOS: SINGTEL, BLOOMBERG, M1
 -5.6% M1 shares drop 15 cents to $2.51.
-5.6% M1 shares drop 15 cents to $2.51.PHOTOS: SINGTEL, BLOOMBERG, M1

Analysts say M1 likely to be most affected by new telco; Singtel to feel least impact

Shares of the local telcos dived yesterday on news that three firms have submitted expressions of interest to enter the market as a fourth provider.

M1 recorded the biggest drop, shedding 5.6 per cent or 15 cents to $2.51, while StarHub slipped 4.4 per cent or 16 cents to $3.47.

Singtel dipped 2.5 per cent or 10 cents to $3.87.

Credit Suisse, which has an underperform call on M1 and StarHub as they are more exposed to the mobile market, said: "With three companies showing interest, we believe the probability of having a new mobile entrant is very high (if not certain). We have been factoring in (the) new mobile entrant in our forecasts and valuations and we continue to maintain our cautious view on the sector."

M1 is the most vulnerable to losing market share, followed by StarHub and Singtel, it added.

The Infocomm Development Authority (IDA) said on Thursday that fibre broadband services provider MyRepublic, airYotta and Australian telco TPG Telecom have submitted expressions of interest.

The industry had expected OMGTel, owned partly by local wireless systems specialist Consistel, to make a bid but it did not submit an application. The newly formed airYotta is led by Mr Michael DeNoma, OMGTel's former chief executive. Mr Philip Heah, OMGTel's former vice-president for networks and infrastructure, is airYotta's chief technology officer.

IDA will announce the winning bid by mid-October, which will allow the firm to participate in the upcoming spectrum auction.

Credit Suisse believes MyRepublic and TPG Telecom each have a good chance of qualifying for the spectrum auction.

The fourth telco, which is expected to begin operations by the second half of next year, is estimated to have a 4.5 per cent subscriber market share and 2.5 per cent revenue market share by 2020.

OCBC Investment Research maintained a hold call on Singtel, StarHub and M1, saying Singtel will be the least impacted among the three incumbents because of its diversified revenue base.

"Impact on StarHub will be partly mitigated by its enterprise business and TV bundling options, while M1 will likely be most impacted, given the lack of such business segments," it said.

Credit Suisse noted that the mobile sector has seen some pricing actions - including the introduction of SIM-only plans, data add-on plans and StarHub's new SurfHub plans - over the past 12 to 15 months, since talk of the fourth telco gained momentum.

It said: "Of all the price actions, we are apprehensive of the data add-on plans as we believe they limit the data-monetisation potential.

"We expect more aggressive price promotions over the next 18 to 24 months as the potential new entrant launches services here."

A version of this article appeared in the print edition of The Straits Times on September 03, 2016, with the headline 'Telco shares fall amid bids for 4th player'. Print Edition | Subscribe