SingTel

[Drizzt]

Hi Drizzt, i agree with lower voice data earning. What i am questioning is profitability wise, result seems to go opposite for maybe other reasons.

Just for discussion purposes on my deductions.


Firstly, Data plan is alot more expensive than Voice plan. 3-4 times easily.

And as the population get more attached to such devices and "new fronters" of data offerings, cheaper unlimited data plan feature will be the future. Assuming double the voice plan pricing for all, is still a significant jump in earnings to Telcos.

This maybe the beginning of higher profitability currently seen in the current Q results which show better earning in More Mature Market like Singapore and Australia ?
Whereas Emerging Marketing sees lesser profit due to more voice plan competition there at cheap plan.

Secondly, Singtel has much bigger muscle to play with external sources to fund if needed. But I doubt Singtel will flex it.
Neither Gov will allow sole player. In a "competitive" oligopoly structure, there is base line dividents to meet and nobody needs to rock it.

Starhub already showup their hand by giving out huge divident. I think this means alot to Singtel and M1.


I can be drastically wrong but I think chances are we are going to see an Evolution of Growth to Telcos to many segments of our society.
There will be tighter integration and Productivity to our lifestyles that most cannot do without infuture.

hi corydorus,

i think we can learn from past implementation of 2.5G and 3G local telcos have experience in making mass adoption successful. IDA have also make license auction beneficial.

The cost of network equipment to set up 3G or LTE is probably much lower than the older technologies. What likely means is that CAPEx might be reduced. But lets not kid ourselves here. In the future all the pipes from the 3 telcos will look the same and everyone might need to fulfill quality of service which might translate to more or better cell stations = more capex. Singtel is in a good position because they have a better financial position as per market cap.

one caveat is that it is dangerous to assume that in emerging markets 3G will take off. most likely they are still very far off from that. I have no doubts that Singtel or its partners should be very careful not to deploy these too early.

Singtel's plan is really to stabilitse and be competitive in these emerging markets. grab at least the top 3 telco in each region and create synergies. That way they will let the cash generating nature of the business take over, thereby increasing cashflow.

As shareholders, we get the most benefit here when they improve their ROE or ROIC really, not additional emerging market investments.

Mobile Data is very exciting and this is really the wave that really pushes computing to a whole different level.

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Thanks Drizzt for the great analysis.

I remember attending one of the FID roadshows by Singtel some months back where some insti investors questioned about Singtel's EM expansion strategy.

Her (Sock Koong's) answer was simple. Singtel's plan was not to plant a flag in every country. Their strategy was clear - if there were opportunities for good profits to be made, they will be there. But the management is equally comfortable not expanding further if there are no further opportunities down the road. The management would then i) focus on the existing EM ventures and enhance the situation in the respective regions and would also ii) be happy to return money to shareholders.

But as you say, they have the ability to pay dividends (as good as Starhub given similar FCF yield), just that they do not want to, in order to save up for these potential expansions. But with these acquisition targets few and far between these days, I suspect they just might be increasing payout more than what the Street is expecting next quarter.

Caveat Emptor.

Vested.

first post btw. been a speculator through the WallStraits, afralug and now Valuebuddies days.. till now.. Cheers to good value investing!

hi chimpy thanks for making this your first post. i really like the direction of discussion here, no malice and just discussion and arguments for the sake of making everything as transparent as possible.

the key for them to raising payouts is really when they see their emerging markets cashflow and current cashflow increasing. for the past years they have excess FCF so its safe. in fact, out of the 3 of them, this 4.9% yield looks the safest (but damn its the lowest)

they might not raise it if the AIS 600 mil needs to be paid up.

I suspect these ex army managers mandate sometimes. All these GLC or TLC seem bent on putting their flag all over the place. Does ROE actually improves? i havent really see if it adds value.

I think its just an answer to appease that investor, they just set out to acquire but that might not be a wrong strategy. buy these assets and get kick start straight away.

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For all interested investors i did a lengthy piece comparing the 3 telcos and the likely future direction of telco industry based on Morgan Stanley's report. it can be found here >> A Guide to Dividend Investing in Singapore Telecom Stocks

one interesting thing is that over the weekend The Edge interviewed Aberdeen Asset Management and most people know that they lean closer to being value investors. Their core holding includes Singtel and China Mobile, 2 telco leaders in their home country.