Singapore telco price war squeezes earnings, strengthens case for StarHub-M1 deal, say analysts
They say that consolidation has to be among the mobile network operators, not just the virtual operators
Analysts say Singapore's mobile telco market is in need of consolidation to improve earnings. StarHub and Singtel Singapore's earnings have been pressured by aggressive pricing from competitors. StarHub's mobile revenue dropped 10.5% in the first half of 2023 and Singtel Singapore's mobile revenue fell 4% in its first quarter. Analysts warn that without industry rationalization, there's limited hope for a recovery in mobile service revenue growth for incumbent operators.
The aggressive pricing has harmed earnings, with StarHub's EBITDA falling 23.8% in H1 2023 and Singtel Singapore's EBITDA down 4.6% in Q2 2023. The Australian-listed parent company of Simba, Tuas Limited, is expected to report its FY 2026 results in September. Despite some improvement in Singtel's rating, the Singapore telco operations remain a concern.
RHB equity research argues that a StarHub-M1 merger could reverse the industry's average revenue per user (ARPU) decline. While the move could strengthen StarHub's position, analysts note financial and regulatory hurdles would need to be overcome.
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