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Singapore Telecommunications Report Q1 2012

In this quarters update for Singapores telecoms report, we have incorporated the latest data from the Infocomm Development Authority (IDA), Singapore Telecommunications (SingTel), StarHub and M1 into our various forecast scenarios, which were extended to 2016. In spite of mobile penetration in excess of 140%, the three mobile operators continue to report robust subscriber growth in both the prepaid and postpaid segments. In the former, we believe that the growth momentum was sustained due to demand from a significant portion of foreign labour in the country, which have lower purchasing power. As for the postpaid market, 3G services are increasingly popular due to the slew of attractive mobile devices bundled with generous data allowance. By the end of 2016, we expect 8.822mn mobile and 7.833mn 3G subscribers in Singapore.

Meanwhile, we also envisage the fixed and mobile broadband sector to maintain their strong growth path due to the launch of next generation technologies. M1 was the quickest off the blocks for LTE services with limited services in 2011 but SingTel and StarHub are expected to follow suit shortly. According to the IDA, there were 68,000 fibre broadband subscribers in Singapore at the end of September 2011, up by 69.2% from 40,000 in June 2011. SingTel had the largest market share with 54.4% or 37,000 subscribers at the end of September 2011 while M1 said it had 16,000 subscribers. Consequently, this leaves StarHub in third position with 15,000 subscribers. We expect the growth momentum of fibre broadband to accelerate in the next two years following the introduction of more bandwidth-intensive services and the expiration of consumers existing non-fibre broadband contracts.

Large-scale near field communication (NFC) technology is expected to reach Singaporean consumers in mid-2012 after the IDA announced in late October that a consortium of seven companies was awarded a contract to deploy Asia Pacifics first nationwide interoperable NFC mobile payment system. Analysts believe that the regulators initiative to bring important stakeholders onboard would prove vital to helping NFC gain mass adoption in the country, which, in turn, would help to create a vibrant NFC ecosystem. Besides payment services in retail outlets and on public transport systems, consumers would have access to a wide variety of NFC-based services such as mobile coupons, mobile ticketing and interaction with digital signage advertisements.

Although there were no changes to Singapores Telecoms Ratings score in this quarters Asia Pacific Telecoms Risk Reward Ratings, the country fell to third position after an improvement in Australias Industry Rewards score. Singapores export data have been extremely weak, with a 16.0% y-o-y non-oil domestic export drop in October 2011, underscoring the deleterious effect of external weaknesses on Singapores economy. We see this trend continuing as the eurozones woes continue to plague the global economy at large, with US demand remaining weak and the Chinese economy headed for a hard landing.

Correspondingly, and in lieu of our GDP growth forecast downgrade for the eurozone, we have downgraded our 2012 Singapore GDP real growth forecast to 2.6% from 3.8%, as we see exports growing by a meagre 3.0% y-o-y versus our previous estimate of 3.5%.

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