Temasek holds stakes in Singapore’s three major telecommunications operators — Singtel, StarHub CC3 and M1 — directly and indirectly.
However, the local market is becoming crowded with new entrants, putting pressure on average revenue per user (ARPU) levels.
Singtel is 50.29% owned by various Temasek units, including unlisted ST Telemedia and STT Communications, while StarHub is 56.3% owned.
Keppel is 21.2% owned by Temasek including deemed interest. Keppel also holds the majority stake in M1. The minority share is held by Cuscaden Peak, a consortium comprising Mapletree Investments, CLA Real Estate and Hotel Properties H15 .
Cuscaden Peak acquired this stake after purchasing the non-media assets of the former Singapore Press Holdings, primarily property, which was a founding shareholder of M1.
Although Temasek appears to hold a significant stake in these companies, it says in its annual report that “the day-to-day management and business decisions of companies in our portfolio are the responsibility of their respective boards and management”.
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Temasek does not direct its business decisions or operations, it adds.
When The Edge Singapore contacted Temasek in May for comment on the news of StarHub potentially acquiring M1, it declined to provide any comments.
Apart from these three operators, other players in the local market include Simba Telecom, the fourth operator, and a dozen mobile virtual network operators (MVNOs), including MyRepublic, Circles.Life and Changi Mobile.
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The MVNOs include sub-brands created by existing companies to compete directly with rivals or target previously neglected market segments.
For example, Singtel introduced Gomo while StarHub launched Giga in 1H2019.
With a market of six million people and 9.2 million subscriptions as of February, the only way for the consumer segment to grow is for subscribers to level up on subscriptions through higher data usage or by carrying more than one mobile line.
Market experts indicate that the crowded telecommunications landscape is ready for consolidation.
Speculation suggests StarHub may acquire M1, with both companies having previously collaborated on enhancing their 5G spectrum in Singapore.
StarHub has often signalled to the investment community it is “ready and able” to do deals, most recently at its 1QFY2024 ended March results briefing. Market-watchers indicate that M1 is the most likely to be combined with StarHub.
Nikhil Eapen, StarHub’s CEO, has steered the group towards its Dare+ transformation journey since 2021. Analysts have been wary about the costs of this transformation. The extensive multi-year programme of replacing legacy IT platforms and systems will be completed by FY2025. The result should see a reduction in costs and an improvement in margins.
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He says: “We are generating strong free cash flow, which, alongside our dividend yield, supports our Dare+ transformation into a company that offers total shareholders’ return. We remain focused on our Dare+ execution and expect to largely complete the build and investment phase by the end of FY2024.”
M1, on the other hand, can be considered a non-core asset to Keppel, which is transforming into a global asset manager.
As a strategy, Keppel has embarked on an asset-light strategy, which includes monetising its non-core assets.
M1’s CEO Manjot Singh Mann said in an interview in May that competition in the Singapore telco market is intense, describing the current landscape as “a tough market to be in” with numerous competitors vying for market share.
“As mobile penetration grows, the war for market share will typically become hot as everyone tries to outsmart each other. That is the nature of the beast, which is happening now in a crowded market,” he adds.
However, Mann did not comment on StarHub’s potential merger or acquisition due to its speculative nature.
Alternatively, Singtel is unlikely to be a contender to lead a consolidation. In an interview with The Edge Singapore, Singtel’s CFO Arthur Lang says that his company will not be able to participate in any consolidation here, given that it is already the largest player.
“What we can do is prepare for a potentially larger number two player. We’re increasing our agility and want to keep our cost structure lean for better margins if the competition comes together. If it doesn’t — it is ok, we are stronger, leaner.”
If consolidation does not happen, analysts expect the industry to find it harder to reignite the excitement of investors with share prices off their peaks and revenue growth somewhat subdued in Singapore.
At any rate, nothing spices up a market more than an anticipated M&A.
What more can telcos do? They are increasingly diversifying into owning and operating data centres.
In December 2023, Singtel announced the development of two state-of-the-art data centre projects in Thailand and Indonesia — in addition to the one in Tuas.
Upon completion, these projects will increase Singtel’s total pipeline capacity to over 200MW, up from its current operational capacity of 62MW in Singapore. Once completed and stabilised, Singtel may either form a Singtel data centre REIT or partially divest the projects into a private fund
