Telcos

Telcos: While Singtel and Starhub have outperformed STI by 9.7% and 6.3% on a 1-year basis, M1 has underperformed by 7.3%.

Two factors largely explain the divergence:
1) IDA’s decision to reserve spectrum at a discount for an entrant;
2) Consistel & MyRepublic signalling bidding intentions.

M1, the smallest player, is justifiably expected to bear the maximum brunt. However, for several reasons, Deutsche do not think the local market offers space for a fourth player.

Deutsche has the following ratings on the telcos:
- Singtel (Buy, TP $4.60);
- Starhub (Hold, TP $4.05);
- M1 (Buy, $3.90).

Deutsche's Buy rating on Singtel reflects the strength of the diversified franchise and attractive valuation. M1's rating is underlined by its valuation and outlook for the competitive landscape for Singapore, while Starhub's valuation is less attractive vs. its peers hence the Hold rating.