Telco shares plunge as 4th mobile carrier looms

SINGAPORE — The share prices of M1, StarHub and Singtel plummeted on Friday (Sept 2) after the Infocomm Development Authority (IDA) announced on Thursday it had received formal expressions of interest from three companies to become Singapore’s fourth mobile carrier. 

Shares in M1, which is especially vulnerable to a new player as its business model is the least diversified, fell as much as 6.8 per cent, while StarHub shares shed as much as 4.7 per cent and Singtel shares lost up to 3.3 per cent. Analysts said the plunge in the share prices was bigger than expected considering that preparations had been made for a fourth telco for some time. 

“I think the market is overreacting a little. This (possibility for a fourth telco) is nothing really new; the news yesterday means it’s getting closer to a firm deal,” said Ms Margaret Yang, market analyst at CMC Markets Singapore. “As the news spreads, the selling could last for a couple of days. But eventually it would reach a balance point when people feel it’s oversold. It cannot fall forever.” 

However, another analyst said the larger number of interested parties and the entrance of Australian stock exchange-listed TPG Telecom into the fray were key factors in the sell-off.

“The share reaction is justified as the three incumbent telcos’ share prices were bid up due to expectations that the potential bidders may fail to raise sufficient funding. The announcement of three bidders, which is more than expected, is also a surprise to investors. The bid from Australia-based TPG is especially surprising. That explained the sharp fall in share prices,” said Mr Bernard Aw, market strategist at financial services firm IG.

At the close of trading on Friday, M1 shares were down 5.6 per cent at S$2.51, while StarHub shares lost 4.4 per cent to S$3.47 and Singtel shares fell 2.5 per cent to S$3.87. 

The IDA is looking to increase competition in the mobile services market and has said that a new entrant is likely to bring about a wider variety of innovative services and more competitive offerings to consumers. 

On Thursday, the IDA announced that MyRepublic, newly formed company airYotta, and TPG Telecom submitted their expressions of interest to become the fourth mobile operator in Singapore. A spectrum auction to determine the fourth mobile telco is expected by October, with the winning bidder rolling out its services as early as April next year.

“The introduction of a fourth telco is expected to shake up the stagnant and complacent sector. If the new competition is able to force the existing telcos to improve their offerings and services while keeping prices affordable and competitive, this is positive for consumers,” said Mr Aw. 

Analysts told TODAY they foresee competition among the incumbent telcos to intensify in the near term, with M1 to be the most affected by a new player and Singtel to be the least affected. “The cake will be cut by four, so everybody might get a smaller share ... Among these three players, M1 is relatively a small player and so is more susceptible to rising competition in this sector. For Singtel, more than 70 per cent (of its earnings) is from overseas, so it is less susceptible to a fourth telco player in the market,” said CMC Markets’ Ms Yang.

M1 and StarHub said they are prepared for the upcoming competition, while Singtel declined to comment. 

“M1 is not new to competition, and we will continue to compete to protect our market share,” said a company spokesperson.

“We’re always prepared for competition. Regardless of the number of operators in this saturated market, StarHub will keep our focus on ensuring our offerings remain attractive and relevant,” said a StarHub spokesperson.