Dec 19, 2016

Cory : Singtel


Realistically speaking I agree with Singtel that there is no need for 4th Telco in SG. The reason is pretty straight forward. Neither M1 nor Starhub are credible competitors to Singtel. So what makes us think an addition of 4th or even 5th will helps bring competition to the table ?

If Singtel want to gobble up the whole SG market, they actually can if we truly believe in free market logic. Singtel wouldn't unless they prepare to face the wreath of the regulator and residence. Their strategy will be such as to secure just enough market share while the rest fight among themselves for the remainder. And that's what will happen when the 4th comes in. Which is why the scenario is so bad for M1 and Starhub.

The market will then reach a new equilibrium, and rates will then slowly returns to norm. They can do a 5th or 6th ... it doesn't really matter to Singtel being a regional wide telco.

The above Logic make sense till TPG comes in later into the game. Having a strong FCF in the Australia Market, this pose a serious challenge to Singtel domination in Singapore. I can sense the Singtel CEO no longer smiling as she may have to battle TPG in both fronts. Nevertheless Singtel is still a huge force to reckon with considering TPG FCF could also be significantly dented if Optus do something.

One thing for sure, the journey is not going to be fun for M1 and Starhub.


Cory
20161219

9 comments:

  1. Hi Cory

    I think like you said, after news subsided, market is going to return back to equilibrium. I think the impact will be felt by Starhub and M1 but I think they are overblown (share price impact has taken in a lot). Plus, they might also grow in other areas too now with this competitor coming in, which gives them leeway to push into other areas.

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    1. Thanks B. True, I don't have the Math with me on how much impact will there be. I suspect there is certain level of critical mass of customers to support the fixed cost.

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  2. singtel will fight for 50% of mobile market regardless how many Telcos in Singapore. they will lower prices until the other telcos call for truce. the other 3 telcos will have to fight for 50% market share among themselves. TPG must be nut case by coming to Singapore thinking can make money.

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    1. Agreed. Unless TPG is prepared to burn alot of cash.

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  3. Most of Singtel's profits came from overseas so it is also not as dependent as the other two Telcos. Given extra research, its net income has dropped over the last 10 years ,which is not a sign defensive investors would buy on ; it is not even beating inflation. If one is looking for growth stocks, telecommunications is not the answer unless TPG get listed. I think Singtel is more for stability.

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    1. It will be interesting to see where are they after 2 years.

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  4. (V): This is what I feel, TPG may be a real force to be reckon with. I initially thought the fourth telco was crazy to come in to Singapore too, with such a small market. But after I read a profile on TPG founder, I think he might have thought of it strategically before bidding so high to be the fourth telco. Go read up about the founder of TPG if you haven't.

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    1. Agreed. TPG is a giant itself with strong FCF. Which is why I believe Singtel CEO is no longer smiling.

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  5. With all the results out today. Looks like my estimate is right. Singtel stays much ahead of the game from local M1 and Starhub.

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