Singapore Telecommunications Report Q3 2012

Despite its small population, with significantly lower subscriber growth potential compared with regional peers such as Japan and Indonesia, Singapore remains one of the more attractive investment destinations due to factors such as the country’s strong macroeconomic fundamentals, stable political environment, a competent regulator and technology-savvy consumers who are receptive of new products and services.

Singapore’s mobile industry grew by 0.5% q-o-q in Q112, which was the lowest since Q110 when it increased by 0.4% q-o-q or 30,000 subscribers. We believe that the weak performance is both structural and cyclical and it poses a downside risk to our end-2012 forecast. We have retained our forecast of 8.144mn mobile subscribers at end-2012 as we expect the market to recover in the remainder of the year.

The fixed-line sector is projected to reach a peak of 2.037mn in 2013 largely due to the continued bundling of traditional fixed lines with more popular services such as mobile and broadband by operators.

However, we expect consumers and businesses to opt for alternative solutions such as VoIP as their reliability improves. Meanwhile, we expect mobile solutions to continue driving growth in the broadband industry. Besides 3G, LTE should grow in popularity with the launch of more compatible devices, although fibre broadband will also chip in, having shown positive initial take-up figures.

In Q312, the Infocomm Development Authority of Singapore has published its proposed framework for the reallocation of spectrum for 4G services in April, which could lead to near-ubiquitous next generation mobile network coverage in 2016. The regulator is proposing to refarm spectrum in the 1,800MHz, 2.3GHz and 2.5GHz bands, and its preliminary position is to make spectrum available in all three bands in the upcoming refarming exercise (late 2012 or early 2013), which will give operators better network planning ability due to the asynchronous expiry of the 1,800MHz and the 2.3GHz and 2.5GHz bands.

OpenNet, the company responsible for the deployment of the Next Generation Nationwide Broadband Network, has announced that coverage for the fibre network has reached more than 90% of homes and businesses, and it is it is scheduled to reach its promise of 95% of all Singapore premises by July 2012.

Initial take-up rate of the services has been promising with 132,100 subscribers at the end of March 2012. Singapore retained its second rank position in BMI’s Asia Pacific Telecoms Risk/Reward Ratings with a Telecoms Rating score of 73.3. Despite a decidedly weak external demand outlook, Singapore managed to post nominal y-o-y growth of 6.1% in Non-Oil Domestic Exports in Q112. Still, we caution that China, Singapore's largest national export market, has yet to see the bottom of its structural economic woes, while demand from the EU will also be under pressure as the eurozone crisis continues to simmer. Even with expectations for just 1.8% real growth in exports in 2012, though, the city-state's current account surplus should decline only slightly from SGD71.7bn (21.4% of GDP) in 2011 to SGD67.7bn (18.9% of GDP) in 2012.