Although the potential for telco consolidation in Singapore remains, it is unlikely to ease competition among incumbents due to Simba’s strong growth, says Maybank Securities analyst Hussaini Saifee in his Jan 6 note.
Simba has captured 5% of Singapore telcos revenue market share within four years of its launch and is expected to gain further traction. This is due to its competitively priced mobile and fixed broadband plans, which are 30% to 50% cheaper than the incumbents' lower-speed options. While Simba’s network is comparatively weaker, the end-user experience shows only a modest lag of 6% to 10%. These dynamics are likely to intensify competition in the industry.
“We think the desired results of industry consolidation, if it happens at all in 2025, may not percolate to the incumbents,” says Hussaini.
Nonetheless, Hussaini has maintained his “buy” call on Singapore Telecommunications (Singtel) with a target price of $3.65.
Singtel’s management earlier flagged a $6 billion in potential capital recycling as part of its Singtel28 strategy. Hussaini highlights two medium-term potential capital-recycling targets: equalisation of Singtel’s stake in Bharti with the Mittal family and divestment of its stake in Thailand’s Gulf Energy.
Singtel has already made progress on its capital recycling efforts, raising $2 billion in 2024 to 2025. Additionally, its 22%-owned associate, SingPost, has announced plans to divest its Australia business at an enterprise value of AU$1 billion, potentially contributing $79 million in special dividends to Singtel.
Hussaini projects that Singtel will generate $4.9 billion in free cash flow (FCF) over FY2025 to FY2027, with an additional $8 billion buffer from capital recycling.
If SingPost monetises more Singapore-based assets, $300 million in special dividends could be added, yielding a $13.2 billion cashflow and asset recycling buffer for dividends for FY2025 to FY2027.
Singtel’s estimated dividends over FY2025 to FY2027 total $8.9 billion, suggesting excess capital of $4.3 billion that could be partly used for share buybacks, says Hussaini.
As at 11.44 am, shares in Singtel are trading flat at $3.09.
