Singtel could be an outlier as its EBITDA could expand through higher associate earnings and lower group digital life losses.
This chart from CGS-CIMB shows that incumbent telco players in Singapore may see declining average revenue per users excluding roaming by 8 to 6% in the FY19/20F before stabilising in FY21F. This is based on the firm’s assumption that a 10% negative impact will come from TPG’s entry in Singapore.
“Based on our estimates, overall FY19/20F Singapore service revenue would be largely steady at 0.1%/0.7% YoY due to growth in enterprise fixed revenue,” the research firm noted. “Whilst the growth in enterprise fixed revenue would help to cushion the drop in mobile service revenue, we note that the enterprise fixed business generally earns a lower EBITDA margin (mid-teens vs. mobile services’ 35-40%).”
For Singapore telcos, CGS-CIMB thinks that the industry’s EBITDA will fall by 5.4 to 4.17% in FY19/20F. Meanwhile, they are positive that Singtel will see its EBITDA to expand by 5 to 5.3% YoY in FY20/21 amidst higher associate earnings and lower group digital life losses which would more than offset lower Singapore EBITDA.
“At the core net profit level, we expect Singapore earnings of the incumbents to fall by 10.4%/11.5% in FY19/20F, further chipped off by amortisation of 700MHz and the interest cost on debt to pay for the spectrum (assuming payment in mid2019 and licence starts in Jan 2020),” the firm explained.
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