With two out of three telcos seeing their share prices falling over 20% in the past year, investors might be attracted to invest into the market.

But hold your horses, the current price might not have priced in the impact of TPG fully – the 20% dip is only the result of the anticipation.

The actual impact can only be known when TPG enters the market and after the release of their promotion package. Only then, we can estimate the impact on the three existing local telcos.

To hedge against the threat of a new entrant in the retail segment, the three telcos are now moving into the enterprise and government segment.

The government’s SmartNation initiatives and enterprises need to increase efficiency have driven the demand in this segment. It may provide the three telcos a buffer against the disruption in retail segment.

As there is no precedent for a fourth telco in Singapore, analysts from Maybank Kim Eng Research (MBKE) used discounted cashflow to measure the impact of TPG to the telcos.

MBKE believes that Singtel will have lesser risk exposure in comparison to its peers due to their geographic diversification.


Aside from the entry of TPG that is impacting its mobile segment, NetFlix and content piracy have been affecting its pay TV business.

Starhub’s mobile and its pay TV segment is expected to see a three-year compounded annual decline rate of 2.0% and 7.0% respectively.

Leveraging on its track record in managing data network, Starhub is increasing its share in local businesses and tender projects from the SmartNation initiatives.

It will act as a cushion as the growth projection stands at 10% three-year compounded annual growth rate.

Despite the continued pressure on its stock price, analysts from Maybank Kim Eng Research believe that the impact of a new entrant has yet to be fully priced in.

They gave Starhub Limited (SGX: CC3) a “Sell” call with a target price of $2.17, noting that it’s still trading at a 25% premium (20.7x FY18E) to its 10-year average P/E of 16.4x.


Though M1’s management has been pushing for a transition to fixed broadband and enterprise solutions, the process will definitely be painful, even with a healthy balance sheet.

MBKE expects profits of M1’s enterprise and broadband services to see a strong three-year CAGR growth of 13% as the management focuses on the segments.

However, in response to the incoming threat of TPG, M1 is likely to use the release of new phones such as iPhone 8 and iPhone X to defend its market share.

That would mean they will try to accelerate the recontracts of its existing customers. However, they can only achieve this through elevating its subsidies and depressing its profits for the next two years.

Coupled with the SmartNation project by the government, they are expected to have a significant impact on earnings and outlook of M1.

Analysts from Maybank Kim Eng Research gave M1 Limited (SGX: B2F) a “Sell” call with a target price of $1.59 despite a forward dividend yield of 3.4%.


Singapore Telecommunications (Singtel) will be the least impacted of the 3 companies due to its geographical diversification. Nevertheless, competitions will still be intense in Singapore, Australia and India.

In the near term, the expected special dividend from the spinoff of Netlink Trust will provide some support. A key determining point of the strength of Singtel will lie on the development of its various businesses.

With increasing competition in Singapore and Australia, Singtel is expected to increase its handphone subsidies to defend its territories.

Gunning for Singtel share in enterprise solutions, Starhub and M1 are making moves in this segment.

With the increased demand in the local IT sector and SmartNation initiatives, the pie might be big enough for all players in this segment rather than taking Singtel’s share.

Analysts from Maybank Kim Eng Research feel that Singapore Telecommunications Limited (SGX: Z74) is trading at fair value and gave it a “Hold” call with a target price of $3.83.