SingTel: CIMB opines that there will be minimal negative impact for SingTel despite its Australian arm Optus losing a mobile virtual network operator (MVNO) partnership with TPG Telecom (TPG) to Vodafone.
TPG announced yesterday that it is expecting to migrate 320,000 of its mobile customers over to Vodafone’s network. On top of that, iiNet which was recently taken over by TPG is also likely to port over 167,000 of its mobile customers once its MVNO contract with Optus lapses.
This means Optus is on the brink of losing 487,000 or 5.2% of its current mobile subscriber base of 9.4m. However, from a financial perspective, the impact will be minimal as the house estimates Optus’s EBITDA would be dented by a mere 1.8%.
Moreover, TPG’s mobile subscriber base has been on a downfall, shrinking 13.5% from 370,000 in Jan ’14 to 320,000 in Jul ’15. TPG would also need to provide a new SIM card to its customers for the migration. This additional hassle will buy time and provides an opportunity for Optus to retain the subscribers on its network.
The loss is even more negligible after considering that Optus only contributes 25% to the group’s FY16 estimated earnings.
The telco currently trades at 15.2x FY16e P/E, and the house maintains its Buy rating as well as a TP of $4.30 on SingTel.
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