The deal is worth up to S$1.7 billion.

 

Keppel might sell off its local telecommunications subsidiary company M1 by June 2025, The Edge reported on Nov. 7, 2024.

 

While nothing appears to be set in stone yet, StarHub looks to be the most likely acquirer.

 

Among the current four mobile operators in Singapore, namely Simba, Singtel, M1 and StarHub, Singtel is the leading operator with a market share of more than half, The Edge added.

 

Spectrum usage payment deadline

If M1 were to be sold off, it would likely be before its spectrum usage payment deadline, a Nov. 5 report by Foo Zhiwei of Macquarie Securities cited by The Edge said.

 

Moreover, M1' s spectrum usage payment of S$188 million, initially due this month, could be postponed to June 2025, M1' s chief executive officer (CEO) Manjot Singh Mann said during Keppel' s third quarter financial year 2024 briefing on Oct. 24.

 

" We would be looking at June of next year to pay for the spectrum and use the spectrum," Manjot said.

 

This would mean the sale is likely to take place before June 2025.

 

A possible sale of S$1.7 billion

If the deal goes through, it could potentially fetch upwards of S$1.7 billion, Foo estimated.

 

Foo added that Keppel would likely only sell off M1' s consumer mobile business, which StarHub would be looking to acquire for the additional market share, and not its enterprise business.

 

A DBS Insights report back on May 14, 2024, outlined several reasons behind Keppel' s possible sale of M1, including a strategic shift to the enterprise market with revenues tripling since privatisation.

 

M1, which is currently privately-held, was delisted from the Singapore Exchange in April 2019.

 

Foo upgraded StarHub' s shares to possibly " outperform" and hit a target price of S$1.30.

 

According to Foo, the possible acquisition of M1 would likely lift StarHub' s shares to between S$1.39 and S$1.40, depending on the transacted price.

 

M1

M1 was first founded as a consortium known as MobileOne in 1994.

 

It was the first telecommunications company in Singapore, apart from Singtel, to obtain a cellular licence in May 1995.

 

M1' s entrance into the telecommunications market was part of a period of market liberalisation across the Asia-Pacific region.

Analysts note that recent moves by the telcos could help to move negotiations forward, grow subscriber base

 

TELCOS StarHub : CC3 +2.52% and M1 may be posturing for more subscribers ahead of StarHub&rsquo s long-rumoured acquisition of the latter.

 

In a Nov 13 Macquarie report, analyst Foo Zhiwei noted that StarHub has deferred the payment for its 700-megahertz (MHz) spectrum to somewhere between November 2024 and end-June 2025.

 

Similarly, M1&rsquo s parent company Keppel : BN4 +0.3%has also deferred its payment for the same spectrum to June next year, Foo reported on Nov 5.

 

These moves suggest that one party may try to close the deal before June to avoid the spectrum fees.

 

The 700 MHz spectrum is a frequency of radio waves used to carry mobile broadband signals.

 

It was allotted to both companies in an auction that was awarded in April 2017. The terms required M1 to pay S$188 million for two lots of 700 MHz spectrum, while StarHub would pay S$282 million for three lots.

 

Foo said that at StarHub&rsquo s third-quarter earnings call with analysts, the telco reiterated it was &ldquo well-positioned for sector consolidation&rdquo in the Singapore market.

 

He also noted that StarHub&rsquo s mobile revenues fell 6 per cent year on year as consumers continued to switch to SIM-only plans. As at Sep 30, the company had 1.7 million subscribers, a year-on-year increase of 83,000 subscribers.

 

In May this year, mobile virtual network operator Eight began to distribute free SIM cards with 88 gigabytes (GB) of mobile data. It then began offering 288 GB of mobile data for S$8 in October.

 

A StarHub spokesperson has since confirmed that Eight is working with the company to deliver 4G to customers.

 

Similarly, Maxx, M1&rsquo s SIM-only brand, is offering 290 GB of mobile data for S$7.90 until Dec 2.

 

Price moves

These price moves have not gone unnoticed and could be a form of posturing between the two parties to secure a larger subscriber base, said Paul Chew, head of research at Phillip Securities Research.

 

He added that StarHub&rsquo s subscriber increase was an &ldquo exceptional and unusual surge&rdquo , and that the telco now has more subscribers than it has had in more than a decade.

 

While the merged entity will not be able to avoid paying for both sets of the 700 MHz spectrum, delaying the payment could take negotiations a step forward between the two companies, he noted.

 

&ldquo It might help catalyse (the deal) on the seller&rsquo s side &ndash that to avoid this payment, maybe the merger might help,&rdquo he said, adding that the delay itself will not be enough to seal the deal.

 

DBS analyst Sachin Mittal declined to speculate on the timing of the deal, although he said that such an arrangement continues to have its merits.

 

&ldquo There are some good benefits, whether in terms of how they can manage their cost structure, how they can increase their cross-selling. There is a strong business case.&rdquo

 

In a report in May this year, Mittal noted that Singtel : Z74 -0.63%continues to command outsized earnings before interest, taxes, depreciation and amortisation (Ebitda) margins in Singapore of 37 per cent.

 

This suggests that there could be room for a merged entity between StarHub and M1 to improve their Ebitda margins too, which were about 20 per cent at the time of the report.

 

&ldquo Admittedly, Singtel commands higher-end consumer and enterprise customers, but it also reflects sub-optimal scale of StarHub&rsquo s and M1&rsquo s (businesses),&rdquo Mittal said.

 

In response to media queries about the 700 MHz spectrum during Singtel&rsquo s earnings briefing on Nov 13, chief executive Yuen Kuan Moon said the telco has paid for its allotted share of the spectrum.

 

Ng Tian Chong, chief executive of Singtel Singapore, said that the company is &ldquo super excited&rdquo to take on the spectrum now that it has been made available.

 

&ldquo At this low-band spectrum, (700 MHz) will add a lot more coverage capability,&rdquo he said, adding that the company will share its plans for the spectrum &ldquo in good time&rdquo .

Analysts note that recent moves by the telcos could help to move negotiations forward, grow subscriber base

 

TELCOS StarHub : CC3 +2.52% and M1 may be posturing for more subscribers ahead of StarHub&rsquo s long-rumoured acquisition of the latter.

 

In a Nov 13 Macquarie report, analyst Foo Zhiwei noted that StarHub has deferred the payment for its 700-megahertz (MHz) spectrum to somewhere between November 2024 and end-June 2025.

 

Similarly, M1&rsquo s parent company Keppel : BN4 +0.3%has also deferred its payment for the same spectrum to June next year, Foo reported on Nov 5.

 

These moves suggest that one party may try to close the deal before June to avoid the spectrum fees.

 

The 700 MHz spectrum is a frequency of radio waves used to carry mobile broadband signals.

 

It was allotted to both companies in an auction that was awarded in April 2017. The terms required M1 to pay S$188 million for two lots of 700 MHz spectrum, while StarHub would pay S$282 million for three lots.

 

Foo said that at StarHub&rsquo s third-quarter earnings call with analysts, the telco reiterated it was &ldquo well-positioned for sector consolidation&rdquo in the Singapore market.

 

He also noted that StarHub&rsquo s mobile revenues fell 6 per cent year on year as consumers continued to switch to SIM-only plans. As at Sep 30, the company had 1.7 million subscribers, a year-on-year increase of 83,000 subscribers.

 

In May this year, mobile virtual network operator Eight began to distribute free SIM cards with 88 gigabytes (GB) of mobile data. It then began offering 288 GB of mobile data for S$8 in October.

 

A StarHub spokesperson has since confirmed that Eight is working with the company to deliver 4G to customers.

 

Similarly, Maxx, M1&rsquo s SIM-only brand, is offering 290 GB of mobile data for S$7.90 until Dec 2.

 

Price moves

These price moves have not gone unnoticed and could be a form of posturing between the two parties to secure a larger subscriber base, said Paul Chew, head of research at Phillip Securities Research.

 

He added that StarHub&rsquo s subscriber increase was an &ldquo exceptional and unusual surge&rdquo , and that the telco now has more subscribers than it has had in more than a decade.

 

While the merged entity will not be able to avoid paying for both sets of the 700 MHz spectrum, delaying the payment could take negotiations a step forward between the two companies, he noted.

 

&ldquo It might help catalyse (the deal) on the seller&rsquo s side &ndash that to avoid this payment, maybe the merger might help,&rdquo he said, adding that the delay itself will not be enough to seal the deal.

 

DBS analyst Sachin Mittal declined to speculate on the timing of the deal, although he said that such an arrangement continues to have its merits.

 

&ldquo There are some good benefits, whether in terms of how they can manage their cost structure, how they can increase their cross-selling. There is a strong business case.&rdquo

 

In a report in May this year, Mittal noted that Singtel : Z74 -0.63%continues to command outsized earnings before interest, taxes, depreciation and amortisation (Ebitda) margins in Singapore of 37 per cent.

 

This suggests that there could be room for a merged entity between StarHub and M1 to improve their Ebitda margins too, which were about 20 per cent at the time of the report.

 

&ldquo Admittedly, Singtel commands higher-end consumer and enterprise customers, but it also reflects sub-optimal scale of StarHub&rsquo s and M1&rsquo s (businesses),&rdquo Mittal said.

 

In response to media queries about the 700 MHz spectrum during Singtel&rsquo s earnings briefing on Nov 13, chief executive Yuen Kuan Moon said the telco has paid for its allotted share of the spectrum.

 

Ng Tian Chong, chief executive of Singtel Singapore, said that the company is &ldquo super excited&rdquo to take on the spectrum now that it has been made available.

 

&ldquo At this low-band spectrum, (700 MHz) will add a lot more coverage capability,&rdquo he said, adding that the company will share its plans for the spectrum &ldquo in good time&rdquo .

Quite surprised to see MS posting this. Is the G trying to send a soft message...?

 

Despite this, revenue falls 5.8% to S$575.2 million

 

STARHUB posted a net profit of S$40.4 million for its third quarter, up 11.1 per cent from S$36.4 million in the year-ago period.

 

Despite the rise in earnings, revenue for Q3 2024 fell 5.8 per cent to S$575.2 million, from S$610.9 million in Q3 2023, the telco said on Wednesday (Nov 13).

 

The fall in revenue was attributed mainly to the timing of revenue recognition in the cybersecurity services segment, and was offset by higher revenue from the enterprise managed services, regional informations and communications technology services, and broadband businesses.

 

Meanwhile, the earnings growth was driven by higher profit from operations, increased net non-operating income, a greater share of profits from associates and joint ventures, as well as lower taxes.

 

Mobile revenue fell 6.5 per cent to S$143.3 million in Q3 2024, from S$153.3 million in the same period a year ago.

 

Mobile postpaid average revenue per user (Arpu) fell to S$30 in Q3 2024 from S$32 in Q3 2023, due to fewer plan subscriptions, lower value-added services revenue, and decreased usage revenue from excess data, SMS, international calls and voice calls.

 

But quarter on quarter, Arpu remained stable despite competition in the value segment.

 

Mobile postpaid subscribers also rose to 1.7 million in Q3 2024, from 1.6 million in the year-ago period. It was also higher than the 1.6 million in Q2 2024. The monthly churn rate in Q3 remained stable at 1.1 per cent.

 

Broadband revenue rose 1.4 per cent to S$63.2 million in Q3, from S$62.4 million a year ago. Arpu in this segment also grew, to S$35 in Q3 2024 from S$34 in Q3 2023. It was also an improvement from the S$34 in Q2 2024.

 

StarHub attributed the improved broadband Arpu to greater take-up of its 5 gigabits per second (Gbps) and 10 Gbps plans.

 

Entertainment revenue declined 8.1 per cent to S$52.1 million in Q3 2024, from S$56.7 million in Q3 2023. This was mainly due to lower subscription and advertising revenue, partially offset by higher commercial TV revenue.

 

Enterprise revenue excluding D&rsquo Crypt &ndash the sale of the cryptographic technology company was completed in February &ndash was S$235 million in Q3 2024, a 3.1 per cent fall from S$242.5 million in Q3 2023. This was largely due to the revenue recognition timing in cybersecurity services projects.

 

&ldquo We remain laser-focused on bringing our customers new value while we drive sustainable long-term total shareholder return,&rdquo said StarHub CEO Nikhil Eapen.