Key Takeaways From 9MFY14 Results Conference Call 
SingTel‟s  results  conference  call  was  hosted  by  its  senior  management  team, comprising of Group CEO  Chua Sock Koong, Group CFO Jeann Low, CEO of group consumer  (GC)  Paul O‟ Sullivan, CEO of group enterprise  (GE)  Bill Chang and CEO of  group  digital  life  (GDL),  Allen  Lew.  There  were  no  surprises,  with  questions centred mainly on its digital business, competitive position and Optus‟ outlook.

Singapore
Continues to gain market share in mobile and IPTV
SingTel  gained  further market  share  in  mobile  and  IPTV,  thanks  to  the  aggressive bundling of its services under the mio-Home and mio-Plans. Its share of the IPTV and broadband  market  is,  however,  likely  to  be  pressured  by  the  cross  carriage  of  the Barclays Premier League (BPL) on StarHub and  the  heavy competition  in the fixed broadband  space.  SingTel‟s  share  of  mobile  revenue  inched  higher  to  52.6%  in 3QFY14 from 52.3% in 2QFY14 while that of IPTV  widened to 44% from 43.8% over the same period.

Tiered data subscribers now 53% of its postpaid base 
Mobile  revenue  ticked  up  2%  q-o-q  and  5.2%  y-o-y  in  3QFY13  due  to:  i) a  higher proportion of subscribers on tiered data plans, ii) seasonally higher roaming revenue,and iii) increased data usage.  This is above the industry‟s  1.8% q-o-q and 3% y-o-y revenue growth, given  SingTel‟s larger subscriber base and higher roaming revenue mix  vs its peers.  While the number of postpaid  subscribers on tiered 4G data plans spiked up to 53% in 3QFY14  from 37% in the preceding quarter (excluding data only SIMs), postpaid ARPU fell 1% q-o-q and 4% y-o-y. Management attributed this to the dilution from low-ARPU data-only SIMs.

Not devaluing its premium position on fibre
SingTel said it intends to maintain its premium position in the fibre market and will not compete on price.  Like  StarHub, it  will  continue to actively push for migration  from asymmetric  digital  subscriber line  (ADSL)  to  fibre  and  for  the  take-up of  triple  play services  to  boost  ARPU.  We  believe  a  price  war  would  be  counter  intuitive  and unproductive as this would make it more difficult to monetise data, with telcos already aggressively bundling services.  SingTel‟s  stance on pricing  should be well-received by StarHub as the latter has been closely monitoring its rival‟s  next move, coming on the  heels  of  MyRepublic  (an  internet  service  provider)‟s  1Gbps  fibre  plan  which  is being offered at SGD49.90/month  for a limited period.  Compared to the standalone fibre  service offered by  MyRepublic,  SingTel‟s  and StarHub‟s fibre  plans are offered alongside mobile, voice and IPTV services which may be bundled.

Australia
Optus set to excel
Having  executed  a  massive  transformation  plan  to  rebrand  its  services,  which included  the  overhaul of  its distribution  channels  over the past 12-18 months, Optus appears    confident of gaining revenue and EBITDA share  in the ensuing quarters.  It has started to see the benefits of the initiatives filtering  through  via the improvement in  the  net  promoter  score  (NPS),  a  metric  used  to  track  customer  experience  and brand  perception,  and lower subscriber churn.  The  notable measures undertaken  in the  past  quarter  include:  i)  the  conversion  of  120  franchised  stores  into  companyowned retail stores, ii) the U900 3G migration  expanded in building coverage to 94% of the population via the upgrade of 4400 sites nationwide,  and iii) the expansion of 4G metro coverage.  We think revenue recovery will take time given that the mobile market in Australia is still  reeling  from  lower  device/removal  of  subsidies  and  the  fall  in  interconnection rates amid a shrinking subscriber base.

Others 
SGD500m investments in GDL to date
SingTel has  spent  SGD500m of the SGD2bn set aside for investments in adjacent industries.  Management emphasised the need to ramp up  customer engagement in driving revenue growth to maximise operating leverage. For that, it continues to adopt a longer term view on the start-up businesses.

Forecast & Guidance
SingTel has  recalibrated  its guidance  to take into account  the  currency trends  YTD, the greater visibility on capex and the latest business outlook.

Risks
The  key  risks  to  our  forecasts  are:  i)  a  stronger  SGD,  ii)  rising  competition  in  key markets, and iii) higher-than-expected subscriber acquisition costs.

Valuation & Recommendation 
Maintain  NEUTRAL.  Our  SOP-based  FV  is  lowered  to  SGD3.55  (from  SGD3.70), after incorporating the market valuations of  the group‟s  listed OpCos,  including our recent  downward  revision  in  our  fair  value  for  ADVANC  (ADVANC  TB,  BUY,  FV: THB248), as well as adjusting for the latest net debt level. SingTel  remains  a  NEUTRAL  due  to  the  lack  of  rerating  catalysts  and  the competitive/structural  headwinds  in  Singapore  and  Australia.  Our  Top  Pick  for  the Singapore telecoms sector remains M1 (BUY, FV: SGD3.65)

Financial Exhibits

SWOT Analysis

Company Profile
SingTel is the largest telecommunications operator in the  Asia Pacific region with class-leading mobile assets in Singapore, Australia, India, Indonesia, Thailand and Philippines, amongst others

Recommendation Chart

Source: OSK