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OVERWEI GHT

( m a i n t a i n )

A na lys t s

Carey Wong (Lead) +65 6531 9808

[email protected]

Eric Teo +65 6531 9806

[email protected]

R el a t i v e t o t a l r e t u r n 1 m 3 m 1 2 m

Sector (%) 10 15 -6

STI-adjusted (%) 8 7 -7

P r ice per f o rmance char t

424

495

565

636

707

778

Mar -11 Jun-11 Aug-11 Nov-11 Feb-12

1800

2120

2440

2760

3080

3400

FST REH FSST I

Sector Index Level Mar ket I ndex Level

`

Sources: Bloomberg, OIR estimates

S tock coverage ra t i ngs

BBRG Ticker Pr iceFair

V a lueRat ing

M1 SP Equity 2.46 2.81 BUY

ST SP Equity 3.13 3.69 BUY

STH SP Equity 2.90 3.10 BUY

Decen t 4CY11 show ing f rom M1, Sta rHub

Both M1 and StarHub both met our forecasts at the recent 4QCY11

results, although SingTel slightly disappointed due to its volatile

Associates contribution. StarHub declared a quarterly dividend of

S$0.05/share, while M1 declared a final dividend of S$0.079/share.

Rev iew o f S ingapore m ob i l e opera t i ons

SingTel continues to dominate with a ~47% post-paid market share,

followed by StarHub with ~28% and M1 ~26%. Overall, the post-paid

subscriber base grew by 62k QoQ to 4029k, with the bulk coming

from SingTel (+44k). And due to limited availability of iPhone 4S

handsets, we note that all the three telcos saw increased monthly

churn, with M1 having highest (1.4%). Both SingTel and StarHub

recorded modest improvements in monthly ARPUs while M1 saw a

slight decline. Meanwhile, comments from all the three telcos suggest

that a revamp of the generous data package currently forsmartphones is likely when they launch LTE later this year.

Stab le 2012 ou t l ook

Going forward, all the three telcos expect their Singapore operations

to remain stable or show modest growth, buoyed by continued

customer additions and increasing mobile data usage. But with more

smartphone users likely to use data-based means to communicate, we

expect EBITDA margins to remain flat or even trend slightly lower.

Nevertheless, the telcos have kept their dividend payout guidance,

thus keeping their yields attractive.

Maint ain OVERWEI GHT

The telco shares have underperformed the broader market YTD,

whereas the STI has surged some 12.6%. But with markets likely to

remain volatile, we believe that the telcos defensive earnings and

attractive yields offer a safe harbour for the less risk-adverse

investors. Maintain OVERWEI GHT.

4QCY11 REVI EW - OVERWEI GHT Mobi le bus iness s t i l l res i l ien t

Stab le 2012 ou t look

Defens ive ea rn ings , a t t rac t i ve y ie lds

TELECOM | OVERW EI GHT2 Mar 2012

Sector Update

Asia Pacific Equity ResearchSingapore | TelecomSector

MITA No. 016/06/2011Please refer to important disclosures at the back of this document.


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OCBC Investment ResearchSingapore Equities

2

Exhibit 1: Summary of 4QFY11 Results

Dec 11 Quarter (S$ m) M1 SingTel* StarHub

Operating Revenue 317.1 1314 612.6

EBITDA 74 484 185.3

Net Profit 37.6 333 92.6

Service EBITDA Margin 39.20% 36.80% 33.10%

*SingTels revenue only shows Singapore telco business only

Source: Companies, OIR

Exhibit 2: Post-paid Mobile Market Share Dynamics


Exhibit 3: Monthly Churn Rates



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3

Exhibit 4: Post-paid ARPU Trends


Exhibit 5: Broadband Growth and ARPU Trends



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4

Exhibit 8: Recommendation

Price Our Rating Fair Value Div Yield

M1 S$2.40 BUY S$2.81 6.00%

SingTel S$3.16 BUY S$3.69 5.20%

StarHub S$2.86 BUY S$3.10 7.00%

Source: OIR

Exhibit 6: Pay TV Growth and ARPU Trends


Exhibit 7: Updated Guidance after 4QCY11 Results

Company Latest Guidance

M1 Maintains stable performance

Capex at S$110-130m

Dividend payout of at least 80% of net profit

SingTel SG operating revenue to grow at low single digits

SG EBITDA stable (achieved 35.2% in FY11)

Dividend payout of 55-70% of underlying net profit

StarHub Expects low single-digit revenue growth

Capex of


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Important disclosures

SHAREHOLDING DECLARATION:

The analyst/analysts who wrote this report hold shares in Singapore Telecoms.

DISCLAIMER FOR RESEARCH REPORT

This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed inwhole or in part to any other person without our written consent. This report should not be construed as an offer or solicitation forthe subscription, purchase or sale of the securities mentioned herein. Whilst we have taken all reasonable care to ensure that theinformation contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy orcompleteness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained inthis report is subject to change without notice. We have not given any consideration to and we have not made any investigation ofthe investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, nowarranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result ofthe recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from afinancial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives,financial situation or particular needs, before making a commitment to invest in the securities. OCBC Investment Research Pte Ltd,OCBC Securities Pte Ltd and their respective connected and associated corporations together with their respective directors andofficers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking andother investment or securities related services for the corporations whose securities are mentioned in this report as well as otherparties generally.

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RATINGS AND RECOMMENDATIONS:

- OCBC Investment Researchs (OIR) technical comments and recommendations are short-term and trading oriented.

- OIRs fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon.- As a guide, OIRs BUY rating indicates a total return in excess of 10% given the current price; a HOLD trading indicates totalreturns within +/-10% range; a SELL rating indicates total returns less than -10%.- For companies with less than S$150m market capitalization, OIRs BUY rating indicates a total return in excess of 30%; a HOLDtrading indicates total returns within a +/-30% range; a SELL rating indicates total returns less than -30%.

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Carmen LeeHead of Research

For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd

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