Local telcos kept at 'neutral' by Maybank; prefers NetLink Trust

Local telcos kept at 'neutral' by Maybank; prefers NetLink Trust

Samantha Chiew
31/12/18, 11:29 am

SINGAPORE (Dec 31): Maybank Kim Eng is keeping a “neutral” rating on the local telco sector as the new year is shaping up to be a trying one for the wireless sector with the upcoming launch of TPG, which teases with unlimited data plans, while StarHub and Circles.Life are aggressively launching SIM-only plans.

TPG’s delayed commercial launch has provided a reprieve for the industry, but only temporarily.

Nonetheless, the research house prefers the residential fibre backbone monopoly, NetLink NBN Trust in the Singapore telco space. It has a “buy” call on NetLink NBN Trust with a target price of 93 cents.

TPG announced it will be providing free wireless unlimited data and voice SIM-only plans for its first 20,000 pre-registered subscribers.

However, only the first 2GB of data per day will be offered at 4G speeds, and the rest of the data will be capped at 1MBps. The plan also includes 20 local SMS messages and 20 minutes of outgoing calls to local fixed lines each month.

In a Monday report, analyst Luis Hilado says, “With network traffic marginal at the onset, we expect TPG’s initial speeds to be favourable but coverage to remain inferior to the incumbents’. In our view, its threat is not direct but rather through domino effects it may have or already has on incumbents’ pricing plans.”

In a likely attempt to pre-empt TPG’s launch, StarHub and Circles.Life this month launched more aggressive, no-contract SIM-only promotions. These plans allow users to have a significantly higher wireless data usage ceilings.

Meanwhile, Singtel and M1 have yet to match or undercut the new promotions. And the analyst is awaiting for potential reactions to evaluate the wireless revenue assumptions.

“We currently forecast a gradual 2% wireless-revenue erosion for the incumbents over FY18-20E. We assume TPG will take its 5% revenue market share by FY20E,” says Hilado.

On the other hand, the Info-communications Media Development Authority of Singapore (IMDA) has yet to decide on or provide a time table for M1’s proposed general offer by Konnectivity. Changes in M1’s strategies and priorities would also affect the industry.

M1’s incoming CEO has also yet to unveil his priorities.

See: Local telcos may see a positive surprise in 2019: DBS

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