Telecom sector

Telecom sector: likely to see trading interest, as Nucleus Connect (the Opco) officially commences commercial operations for the National Broadband Network (NBN). Retail service providers (RSPs) are therefore expected to roll out NBN services to end-users soon.
NBN would likely affect the consumer and enterprise markets differently...

For consumer, competition could be more constrained, given that there appears to be limited demand for faster data-rates than currently available (take-up of Starhub’s 100 Mbps pdt remains limited). New entrants, eg. M1 may struggle against incumbents Starhub and Singtel, which have entrenched competitive positions...

However, enterprise would likely see intensifying competition, particularly in the SME segment where SingTel dominates. Nucleus Connect suggested there could be 10-12 enterprise RSPs, while Starhub sees corporates / SMEs as a significant opportunity and key revenue driver from 2011...

StarHub: preferred telco by Deutsche, Daiwa, with targets of $2.62, $2.65 respectively, in view of above comments. Technical breakout yesterday could signal further upside today.

M1: Citi top pick, with $2.50 target. Essentially a yield play, at 7.2% FY10E yield. Rollout of NBN would allow it to catch up with peers in terms of its pdt offering, and raise its competitiveness.

Singtel: generally unloved by the Street, given expectations for market share decline arising from greater competition.