• Key takeaways from Investor Day 2018
• Clear strategy to compete in core markets
• Digital and enterprise to drive growth ahead

Consumer Singapore: Differentiating on Service Quality

Singtel’s core markets (Australia and Singapore) continue to face competitive pressures in the consumer segment with the impending entry of TPG in both markets. That said, Singtel has a clear strategy to maintain its competitiveness in each market. For Singapore, Singtel will continue to differentiate itself by:

1. investing to maintain superior network quality,
2. ensuring better customer experience,
3. offering higher value services, and
4. offering innovative offerings such as handset leasing plans (to entice the growing SIM-only market) as well as exclusive handset deals (to attract post-paid customers).

Singtel is also digitalizing its operations to lower costs and improve customer experience. For example, automating certain transactions such as sales and query handling through online/mobile app platforms allows Singtel to reduce customer service headcount and improve speed of customer service.

Consumer Australia: Differentiating With Exclusive Content

For Optus in Australia, management expects the initial competition from TPG to be less impactful given that TPG will launch with data-only mobile plans for the start. That said, having seen a strong FY18 (adding 384k customers to its subscriber base), Optus will continue to focus on four key pillars:

1. lead in customer experience,
2. lead in mobile networks,
3. differentiate with premium content offering (e.g. EPL, National Geographic, etc.), and
4. improve business productivity.

In addition, holding the most 5G spectrum relative to its competitors, Optus intends to leverage on this advantage and launch 5G services in 2019, ahead of its peers.

Unchanged FV at S$4.10

Across both countries, Singtel/Optus do not intend to compete on pricing, but will let their MVNOs target the price-sensitive consumers. We believe Singtel’s guidance for dividends to be maintained at 17.5 S-cents for FY19 and FY20 signals a stable cash flow outlook despite the competitive pressures.

Management targets to keep traditional carriage revenues flat over five years as voice-to-data substitution continues, but aims to grow digital and enterprise revenues as a proportion of consolidated revenues from 24% in FY18 to 50% by FY23. We maintain our fair value estimate of S$4.10 on Singtel.

Source: OCBC Research - 20 Jun 2018