(NEUTRAL, S$3.12, TP S$3.13)
At SingTel’s 2011 RMID, discussions centered on the robust data potential as voice revenue slows. We see the strongest data themes at SingTel Spore and Optus (under their respective NGNs) but offering the highest growth potential at Bharti and Telkomsel, going by their industry-centric developments. Disappointingly, there was no update on Telkomsel’s stake and a lack of insight on capital management. The takeaways from the event do not alter our view and forecast on the stock. Maintain NEUTRAL rating and SOP FV of SGD3.13.
Data and more. At SingTel’s 2011 RMID, the senior managements of 6 subsidiaries and associates – Singtel Singapore, Optus, AIS, Telkomsel, Bharti and Globe - addressed analysts in parallel breakout sessions. The event’s overriding themes were on data, specifically: (i) the trend towards new converged services on the NBN in Singapore and Optus (ii) the use of 3G networks to drive data uptake in the under-penetrated markets of Indonesia and India (Telkomsel/Bharti); and (iii) emerging data play with new network investments in nascent 3G markets (Thailand/Philippines). Group-wide trials on LTE have been successful, with Optus rolling out its LTE network in 2Q12.
Harnessing the digital lifestyle. SingTel showcased its NGN services/applications across multiple platforms and cloud services on the sidelines of the event, which made a good impression on us. We believe that concerns of its competitors taking a chunk of its lucrative enterprise customers under the NGN are overdone as the group appears to have preempted competition well via the up-selling of services and more competitive pricing to migrate customers.
Competition moving in the right direction in India/Indonesia. The rising tariff/price points and inflationary risks underscore our view of declining competitive intensity in the mobile sector in India. Bharti expects regulatory risks to dissipate, with a more liberal stance adopted from the change in the country’s regulatory framework. Telkomsel’s comments on steady competition alongside good operational improvements (new sales distribution structure in place and stronger billing platform) sets the stage for a stronger 2012, in our view although there are still concerns over the group’s high capex (IDR15trn guided for FY12). Globe’s USD790m 5-year network modernization will result in mid-term earnings pressure but should give rise to significant opex and capex savings in the longer term.
Keeping mum on Telkomsel and capital management. Disappointingly, there were no updates on the company’s stake in Telkomsel. SingTel said it will continue to maintain financial headroom for a potential increase in its stakes in other associates, in-market consolidation and acquisition of vertical assets.
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