SG Telcos: UOB Kay Hian has sector report. House remains O/w on sector and note that SingTel and M1 have launched mobile broadband plans based on Long Term Evolution (LTE), also increasingly known as 4G. LTE is optimized for data transmission and allows users to enjoy real-time internet applications, such as live TV and multi-player 3D gaming.
Add that Telcos in SG will double efforts to monetise usage of mobile data, as the industry makes the transition to LTE. Most telcos likely to introduce a lower cap on bundled mobile data for LTE-based mobile packages vs existing generous threshold of 12GB for 3G-based packages. Increased usage of mobile data, differentiated services, such as SingTel’s premium priority pass, and imposition of lower caps on mobile data would enhance ARPU over time.
Overall, note that investors will gravitate towards defensive sectors, such as telco, with the sovereign debt crisis in EU still yet to be contained. Telecommunications sector provides defensive strength through positive free cash flow and attractive div yield. House preferred picks are M1 and SingTel.
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