Managing EBITDA in the face of topline pressure. Optus has set its sights on cost management to sustain its EBITDA on the back of the pressure on revenue. It believes price competition in the market is stabilizing. The downward revision in its FY13 revenue guidance follows that of the (i) the contraction in industry mobile growth, (ii) weaker equipment sales due to the pullback in subsidy, and (iii) the impact of lower termination rates. Based on the revised outlook, it would appear that Optus' revenue may soften further in 2HFY13 from the 4% decline exhibited YTD. We expect overall mobile EBITDA margin to come under pressure in the December quarter from the full impact of the iPhone5, which will contribute to higher subscriber acquisition and A&P costs.

Capital management after 2013. Singtel said it would look to manage its capital in FY14, in line with its plan to revisit this once in every three years. Despite its healthy balance sheet with net debt/EBITDA of 1.1x, we do not expect Singtel to dish out any special dividends in the medium-term as the group seeks to grow new businesses.

Gestation period for digital life. We expect Sing EBITDA margin to be dampened by losses in Amobee, the mobile advertising start-up it acquired in April, and investments into new adjacent industries to strengthen its Digital Life business. Management was unable to provide guidance on when it expects Amobee to turn around but highlighted that the latter's performance has so far trended within expectations.

Hanging up on Warid. Singtel is finally putting up its 30% stake in loss-making Warid for sale, classifying its investment as 'asset held for sale'. We are little surprised by this move and wonder why it has taken this long as Warid has been bleeding since it was acquired in 2007. The group has ceased equity accounting the telco from 2QFY13 (SGD18m share of loss in 1QFY13). Management said the carrying value of Warid is approximately SGD38m (cumulative translation loss of SGD366m). Singtel has invested some SGD1.18bn in Warid to date.

Source: OSK