Telcos

Telcos: Deutsche notes that two main factors can largely explain the divergence in share price performance of the three telcos namely, IDA’s decision to reserve spectrum at a discount for an entrant, and Consistel and MyRepublic signalling bidding intentions.
However for several reasons, the German bank feels that the local market does not offer sufficient space for a fourth player.
One of the main reasons is the high barriers to entry in the Singapore market even with the spectrum discounts that IDA is willing to offer. These include low revenue growth, high 4G penetration, high number of post-paid customers.
At current valuations, the bank feels that the market has already priced in the entry of a 4th telco. It reiterates its Buy rating on Singtel with TP of $4.60, reflecting the strength of the diversified franchise and attractive valuation while its M1 Buy rating with TP of $3.90 is underlined by its valuation as well as the bank’s overall view that the spectre of competition has been overplayed. The bank maintains StarHub on Hold with TP of $4.05 on unattractive valuations versus its peers.