MyRepublic to offer generous plans and more competition
Homegrown firm MyRepublic to start providing mobile services in October
Mobile subscribers here will be glad to know that they will soon have more options for their monthly plans.
Internet service provider MyRepublic, a homegrown firm known for its speedy broadband offers, announced last week that it will start providing mobile services in highly-connected Singapore by October.
MyRepublic chief executive officer Malcolm Rodrigues also put an end to rumours that it will be buying over M1 and declared its intentions to gear up for an initial public offer by the end of next year.
This latest shake-up to the local telco scene will probably affect the share prices of the three Singapore Exchange (SGX)-listed incumbents - Singtel, StarHub and M1.
MyRepublic shared that it will offer generous mobile data and leverage on its existing fibre broadband customer base of 70,000 to secure new mobile customers. It also aims to garner 5 per cent to 6 per cent of the mobile market share.
Calling itself an Internet platform company, it will also launch TV services in the region, which is currently also offered by Singtel and StarHub.
Additional competition aside, investors of the three telcos have also been jolted by the news of them buying and selling assets in the past month.
M1 is the smallest of the trio by market capitalisation, and Singtel and StarHub are constituents of the Straits Times Index.
It all began last year, when local regulator Infocomm Media Development Authority (IMDA) enticed bidders with discounted rates for 4G airwaves - at a reserve price of $35 million - in hopes that a new entrant will bring innovation to the market and spur the existing telcos to innovate.
Last September, right after IMDA's announcement that it had received three formal expressions of interest, investors took action.
The Straits Times reported the next day that the stocks of M1 recorded the biggest drop, shedding 5.6 per cent - or 15 cents - to $2.51.
StarHub slipped 4.4 per cent - or 16 cents - to $3.47, and Singtel dipped 2.5 per cent - or 10 cents - to $3.87.
Last December, Australian telecommunications firm TPG won the rights to launch Singapore's newest telco in 13 years with its aggressive $105 million bid, and the stocks of the three local telcos tumbled again.
Singtel shares were least affected, paring 0.8 per cent to $3.73, but StarHub slid 3.1 per cent to $2.81, and M1 sank 3.47 per cent to $1.95.
MyRepublic's announcement last week caused a blip on these stocks the next day.
On July 7, Singtel was one of the most active stocks of the day, and it had a 0.52 per cent decline.
M1 fell 0.47 per cent, and StarHub saw a 0.74 per cent dip.
Analysts expect more impact.
OCBC analyst Eugene Chua said in a note on July 7: "In our view, the impending entry of MyRepublic will further intensify competition within the industry even before TPG's launch of their services and put an even greater pressure on average revenue per user in a saturated market."
He maintained a neutral rating for the telecom sector pending further details.
Telco stocks in Singapore, which arguably belong to the defensive category, might no longer be as resilient - SGX statistics showed that the sector was the only one to register a year-on-year drop, with a 9.2 per cent fall.
POSITIVE
In the year-to-date, results were more positive, with a 3 per cent total return.
Nonetheless, it is still the second poorest performer, tying with the energy sector. The healthcare sector was the worst performer, which saw a 2 per cent decline.
Analysts pointed out that an additional competitor will affect some telcos more than others, especially in Singapore, which has a mobile penetration rate of around 150 per cent.
Singtel, the biggest local telco, would probably be the least affected as its exposure to the Singapore market is smaller. It owns Optus, the second largest telecommunications company in Australia and has stakes in various telco firms in Indonesia, India and Thailand.
A Credit Suisse report last September noted that M1 is likely to be most impacted, as 90 per cent of its service revenue comes from the mobile segment.
StarHub will also be affected by the rising competition in the mobile sector, as about 56 per cent of its service revenue comes from the mobile market.
"However, compared to M1, StarHub is better placed given its better bundling proposition and its much stronger footing in fixed-network services," wrote Mr Varun Ahuja.
"That said, we think StarHub's bundling proposition is likely to lose sheen in the medium to longer term with the emergence of IPTV boxes and over-the-top services."
The telcos are doing their best to deal with the impending competition.
For example, M1 and StarHub signed a memorandum of understanding to study potential further collaboration in mobile infrastructure sharing in January, which will allow both firms to roll out more cost effective next-generation networks to meet the fast growing demand of mobile data services, according to a press release.
Happenings at the three telcos
SINGTEL
On Tuesday, Singtel's broadband subsidiary NetLink Trust priced its initial public offering at 81 cents a unit, making the $2.3 billion offer the biggest here in six years.
NetLink owns and operates the passive infrastructure for Singapore's next-generation national broadband network.
After this divestment, Singtel will hold less than a 25 per cent stake in NetLink.
M1
Before MyRepublic's declaration that it would not be buying M1, speculation was also rife about takeover plans at the telco.
It included talks of a possible merger with StarHub, which was later quashed.
Stocks of M1 initially gained 7.88 per cent after M1's three biggest shareholders said they were undertaking a strategic review of their stakes in the telco.
STARHUB
StarHub announced last week that it has reached an agreement to acquire the remaining 49 per cent stake in Accel Systems & Technologies in two phases.
Following the completion of the two phases, Accel will be a wholly-owned subsidiary of StarHub.
Mr Tan Tong Hai, chief executive officer of StarHub, said: "Accel's cyber security solutions complement our network-based capabilities, making us well-placed to compete in major government and commercial cyber security tenders."
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