StarHub has no intention of buying M1: Report

In a report yesterday, Maybank Kim Eng Research maintained its “sell” call on StarHub, pointing to “structurally poorer margins”.
In a report yesterday, Maybank Kim Eng Research maintained its “sell” call on StarHub, pointing to “structurally poorer margins”. ST PHOTO: JONATHAN CHOO

The management of StarHub has "no intention" to acquire M1 or merge with its rival, although the decision ultimately lies with its biggest shareholder, ST Telemedia, according to a Maybank Kim Eng Research report.

This comes as M1's three biggest shareholders said that they are undertaking a strategic review of their stakes in the telco.

Together, Malaysia-listed Axiata Group, Keppel Telecommunications & Transportation and Singapore Press Holdings own 60 per cent of M1.

The report, out yesterday, said that StarHub's management "was clear in stating that they have no intention to acquire or merge with M1 presently, but they did say that its key shareholder, ST Telemedia, which owns 56 per cent of StarHub, will ultimately decide".

ST Telemedia is wholly owned by Singapore investment firm Temasek Holdings.

The report added that StarHub's management "believes it can achieve the same goals through collaboration. It also cautioned that the regulator will not permit spectrum hoarding even if it allows another telco to buy M1".

It noted that StarHub's management prefers to collaborate with M1. StarHub has already started to explore capex reduction through network sharing with M1, which could start to see cost savings within the next two years.

"Telcos invest in infrastructure to create barriers of entry, but if there is no need to duplicate certain parts of it, then there is scope for cost savings," said Maybank Kim Eng Research, noting that M1 and StarHub use the same network equipment suppliers, Huawei and Nokia.

The brokerage maintained its "sell" call on StarHub, with a price target of $2.49, as it pointed to "structurally poorer margins".

StarHub shares finished one cent or 0.3 per cent lower at $2.88 yesterday, after the report was released, while M1 shares closed one cent or 0.5 per cent lower at $2.13.

Speculation over a possible takeover of M1 has been rife since as early as last year, as the Singapore telco market opens up to more competition.

A version of this article appeared in the print edition of The Straits Times on April 01, 2017, with the headline 'StarHub has no intention of buying M1: Report'. Print Edition | Subscribe