Business

RHB sticks to 'neutral' take on teleco sector

Analysts at RHB have stuck to their "neutral" take on the telecommunications sector in light of the competition poised to heat up in an already crowded market.

They also forecast a third straight year of shrinking mobile service revenue, which is expected to fall year on year by 2 per cent to 3 per cent this year.

The FTSE Straits Times Telecommunication Index has lagged behind the broader market over the past two years, and the RHB research team cited this "significant underperformance" in maintaining its rating in its report out last Wednesday.

RHB remains neutral on all three listed telco counters, although Singtel is still at the top of the pack, with a target price of $4.10, "given its more diversified exposure" and its relative strength in the enterprise business.

MOBILE SEGMENT

The big squeeze is on turnover in the mobile segment, where the arrival of new industry players is expected to hurt average revenue per user as well as profit margins.

These entrants, the RHB report said, will likely focus on the low-end and mid-tier market segments by offering attractive data bundles.

TPG Telecom is expected to start with a pure mobile play in the second half of the year but could also eventually bundle mobile services with fixed broadband in line with its history in Australia.

The RHB research team suggested that fibre broadband company MyRepublic - which has made no secret of its mobile virtual network operator ambitions - might also come up with bundled mobile and broadband services to "give its bigger rivals a run for their money".

These new players will join Circles.Life, which hopped onto M1's network in 2016, and Zero Mobile, a Singtel client that launched here last month.

- THE STRAITS TIMES

BUSINESS & FINANCE