Singapore telecommunications report q4 2012

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  • 1. Q4 2012 www.businessmonitor.comsinGapoRetelecommunications ReportINCLUDES BMIS FORECASTSISSN 1748-4790Published by Business Monitor International Ltd.
  • 2. SINGAPORE TELECOMMUNICATIONS REPORT Q4 2012 INCLUDING 5-YEAR INDUSTRY FORECASTS TO 2016Part of BMIs Industry Report & Forecasts SeriesPublished by: Business Monitor InternationalCopy deadline: August 2012 Business Monitor International © 2012 Business Monitor International. 85 Queen Victoria Street All rights reserved. London EC4V 4AB All information contained in this publication is UK copyrighted in the name of Business Monitor Tel: +44 (0) 20 7248 0468 International, and as such no part of this publication Fax: +44 (0) 20 7248 0467 may be reproduced, repackaged, redistributed, resold in email: subs@businessmonitor.com whole or in any part, or used in any form or by any web: http://www.businessmonitor.com means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained.
  • 3. Singapore Telecommunications Report Q4 2012© Business Monitor International Ltd Page 2
  • 4. Singapore Telecommunications Report Q4 2012CONTENTSBMI Industry View ............................................................................................................................................ 5SWOT Analysis ................................................................................................................................................. 6 Singapore Mobile SWOT ....................................................................................................................................................................................... 6 Singapore Wireline SWOT ..................................................................................................................................................................................... 6 Singapore Political SWOT ..................................................................................................................................................................................... 7 Singapore Economic SWOT ................................................................................................................................................................................... 8 Singapore Business Environment SWOT ............................................................................................................................................................... 9Risk/Reward Ratings...................................................................................................................................... 10 Asia Pacific .......................................................................................................................................................................................................... 10 Table: Asia Pacific Telecoms Risk/Reward Ratings Q412 ................................................................................................................................... 14 Singapore............................................................................................................................................................................................................. 15Industry Forecast Scenario ........................................................................................................................... 17 Mobile ....................................................................................................................................................................................................................... 17 Table: Mobile – Historical Data & Forecasts, 2009-2016 .................................................................................................................................. 17 ARPU ........................................................................................................................................................................................................................ 19 Table: Mobile ARPU – Historical Data & Forecasts, 2009-2016 (SGD) ............................................................................................................ 19 Fixed Line ................................................................................................................................................................................................................. 21 Table: Fixed Line – Historical Data & Forecasts, 2009-2016............................................................................................................................. 21 Internet ..................................................................................................................................................................................................................... 23 Table: Internet – Historical Data & Forecasts, 2009-2016 ................................................................................................................................. 23Market Overview ............................................................................................................................................. 25 Mobile ....................................................................................................................................................................................................................... 25 Regional Perspective ................................................................................................................................................................................................ 25 Table: Singapore Mobile Market Regional Comparisons, 2011 .......................................................................................................................... 26 Key Market Developments ........................................................................................................................................................................................ 26 Market Growth.......................................................................................................................................................................................................... 27 Market Shares ........................................................................................................................................................................................................... 28 Table: Singapores Subscriber Base (000) .......................................................................................................................................................... 30 ARPU & MOU .......................................................................................................................................................................................................... 30 Table: Singapore ARPU (SGD) ........................................................................................................................................................................... 32 Mobile Content/Value-Added Services...................................................................................................................................................................... 33 Table: Selected VAS Launched, 2011-2012 ......................................................................................................................................................... 34 Mobile Operator Data .............................................................................................................................................................................................. 36 Table: Singapore Market Overview ..................................................................................................................................................................... 36 Table: SingTel Mobile ......................................................................................................................................................................................... 37 Table: StarHub .................................................................................................................................................................................................... 38 Table: M1 ............................................................................................................................................................................................................ 39 Mobile Content ......................................................................................................................................................................................................... 40 Regional Outlook ................................................................................................................................................................................................. 40 Selected NFC Developments, 2011 ...................................................................................................................................................................... 41 Fixed Line ................................................................................................................................................................................................................. 46 International Traffic Lines ................................................................................................................................................................................... 46 Internet ..................................................................................................................................................................................................................... 48 Broadband ........................................................................................................................................................................................................... 48 Table: Composition Of Broadband Internet Access Subscribers (‘000)............................................................................................................... 50© Business Monitor International Ltd Page 3
  • 5. Singapore Telecommunications Report Q4 2012 Pay-TV ................................................................................................................................................................................................................. 50Industry Trends And Developments ............................................................................................................ 52 Networks .............................................................................................................................................................................................................. 52 Table: Telecoms Market Development, 2009-2012 .............................................................................................................................................. 54Regulatory Environment And Industry Developments .............................................................................. 56 Table: Division Of Regulatory Responsibilities In Singapore .............................................................................................................................. 56 Next Generation National Infocomm Infrastructure ................................................................................................................................................. 56 Regulatory Developments ......................................................................................................................................................................................... 57Competitive Landscape ................................................................................................................................. 59 Table: Key Players – Singapore Telecoms Sector................................................................................................................................................ 59 Table: Selected Operators – Financial Indicators, 2004-2011 (US$mn) ............................................................................................................. 59Company Profiles ........................................................................................................................................... 60 Singapore Telecommunications (SingTel)............................................................................................................................................................ 60 SingTel Mobile ..................................................................................................................................................................................................... 64 StarHub ............................................................................................................................................................................................................... 67 M1........................................................................................................................................................................................................................ 71Regional Overview ......................................................................................................................................... 74 Altobridge: Connecting Remote Communities .......................................................................................................................................................... 74 Altobridge Commercial Deployments, July 2012 ................................................................................................................................................. 75Demographic Outlook .................................................................................................................................... 76 Table: Singapores Population By Age Group, 1990-2020 (000) ........................................................................................................................ 77 Table: Singapores Population By Age Group, 1990-2020 (% of total) ............................................................................................................... 78 Table: Singapores Key Population Ratios, 1990-2020........................................................................................................................................ 79 Table: Singapores Rural And Urban Population, 1990-2020 ............................................................................................................................. 79Glossary Of Terms ......................................................................................................................................... 80 Table: Glossary Of Terms.................................................................................................................................................................................... 80BMI Methodology ........................................................................................................................................... 81 How We Generate Our Industry Forecasts ............................................................................................................................................................... 81 Table: Key Indicators For Telecommunications Industry Forecasts.................................................................................................................... 81 Telecoms Business Environment Ratings .................................................................................................................................................................. 83 Risk/Reward Ratings Methodology ...................................................................................................................................................................... 83 Table: Ratings Indicators .................................................................................................................................................................................... 84 Weighting............................................................................................................................................................................................................. 85 Table: Weighting Of Indicators ........................................................................................................................................................................... 85 Sources ................................................................................................................................................................................................................ 85© Business Monitor International Ltd Page 4
  • 6. Singapore Telecommunications Report Q4 2012BMI Industry View BMI View: Singapore’s telecommunications industry has outperformed many of its regional peers with strong adoption of the latest products and services. Partially due to the country’s small landmass and population size, the telecoms market has rapidly grown to a stage where it is approaching saturation. Next generation technologies, both mobile and fixed, are therefore the next step in fostering new developments and revenue streams, and industry players – the regulator and operators – have rightly moved in that direction. Key Data: 3G subscriber growth is showing signs of weakness in light of maturity; we have further downgraded our expectations following a poor performance in H112. The number of fixed-line subscribers has remained flat for three consecutive quarters, suggesting that the start of a downtrend could materialise in the near future. Wireless technologies remain the main growth driver for the broadband industry, although the fibre broadband market is starting to take off. Key Trends And Developments Singapore Telecommunications (SingTel), StarHub and M1 launched NFC-based mobile services in August 2012. StarHub unveiled its digital wallet NFC service ‘SmartWallet’ on August 3, while SingTel and M1 launched their NFC mobile payment service on August 22. Meanwhile, Netherlands-based digital security systems specialist Gemalto has announced that NFC services management has gone live in Singapore. The service is driven by Gemaltos Allynis Trusted Services Manager (TSM) solution, which is hosted at the firms local TSM datacentre. The project lines up a consortium of local partners, inclusive of operators, banks and service providers. Despite issues hindering greater service adoption, the Infocomm Development Authority of Singapore reported that the number of fibre broadband subscribers reached 177,200 at the end of June 2012, up by 34.1% q-o-q. Singapore remained in second position in BMI’s Asia Pacific Telecoms Risk/Reward Ratings with a Telecoms Rating score of 73.3. Although Singapores ruling Peoples Action Party (PAP) suffered a rebuke of its recent policies in 2011s general elections, we believe that the party will retain its dominance in parliament over the medium term in view of a weak and fragmented opposition. Furthermore, the party has shown that it is capable of adjusting its policies in order to adapt to evolving public sentiment, and, as such, we expect to see continued tightening of immigration. Still, as long as the PAP is in power, we hold that the government is unlikely to embrace any measures that will seriously inhibit the city-states enviable business environment.© Business Monitor International Ltd Page 5
  • 7. Singapore Telecommunications Report Q4 2012SWOT AnalysisSingapore Mobile SWOTStrengths The country has a mature mobile sector where consumers and businesses are receptive to new products and services Strong competition exists in the market, chiefly between SingTel, StarHub and M1. Next generation LTE technology has been launched and nationwide services are expected in 2012/2013.Weaknesses Limited scope for growth exists in 2G mobile subscriber bases while the 3G market is approaching saturation. Strong increases to prepaid subscriber numbers could prove to be a downfall for blended ARPUs.Opportunities Mobile data usage is likely to increase significantly to 25% or more of ARPU. An increasing tendency towards annual handset replacement will benefit vendors. Investments in next generation technologies such as LTE and HSPA+ are on the rise, which should help drive demand for mobile data services.Threats Impending mobile saturation makes Singapore a less attractive market for multinational vendors, who are more likely to be interested in the potential of China, India and Indonesia. Weak economic outlook could threaten consumer spending on large-ticket products and services.Singapore Wireline SWOTStrengths Singapore has an increasingly mature broadband infrastructure. Wireless forms of broadband access are increasing and offered by all three main operators: SingTel, StarHub and M1. Fibre broadband services are slowly gaining traction with 177,200 subscribers at the end of June 2012.Weaknesses SingTel still retains a significant lead in the fixed-line, internet and broadband sectors. Wide availability of alternative technologies results in little demand for fixed line.Opportunities Value-added services such as IPTV and VoIP over fibre should increase the appeal of high-speed broadband services, thereby mitigating the decline of traditional fixed- line business. Next generation broadband network based on FTTH will provide 1Gbps speeds by 2015.Threats Operators are struggling from poorly performing fixed-line operations and the need to offset fading income.© Business Monitor International Ltd Page 6
  • 8. Singapore Telecommunications Report Q4 2012 Singapore Political SWOTStrengths Singapore enjoys a stable political system, following the countrys second change of leadership in 40 years, which saw Lee Hsien Loong – the son of the countrys founder Lee Kuan Yew – take over as prime minister in 2004. Official promises have been made to eradicate Singapores reputation as an overprotective nanny state, with efforts to enhance freedom of expression.Weaknesses Singapore is not a properly functioning democracy. The ruling Peoples Action Party has won all but six seats in parliament and the opposition is restricted from campaigning through tight control over political debate and frequent use of libel laws. The government has yet to improve the situation for the less well off in Singapore, and there is a rising wage gap between the top earners and lowest paid.Opportunities Lee Hsien Loong is proving to be a capable leader, moving away from the shadow of his father by repeatedly calling for more openness. Singapore is leading its regional neighbours by signing free trade agreements. Increased regional integration is likely to give the country more influence in Asia.Threats There are fears that Singapores foreign policy alignment with the US will cause the city-state to become a target for terror attacks launched by Muslim extremists. The last election showed that segments of the electorate are becoming disenchanted with the Peoples Action Party and its repression of opposition voices.© Business Monitor International Ltd Page 7
  • 9. Singapore Telecommunications Report Q4 2012Singapore Economic SWOTStrengths Singapores monetary policymakers have gained credibility by guiding the exchange rate to offset inflationary pressures while ensuring stable growth. Singapores current account surplus remains about 20% of GDP and its external finances are in good shape. This is reflected by the worlds credit rating agencies, which continue to award Singapore top marks for external strength.Weaknesses The trade-dependent economy remains exposed to global trends in demand for electronic goods, which account for about half of Singapores non-oil exports. Singapore faces a number of long-term economic problems. Competition from low- cost neighbouring countries is increasing and its population is ageing rapidly.Opportunities In the face of regional competition for exports and investment, the government is encouraging economic diversification to boost competitiveness. New areas being promoted include biomedical sciences, medical services, financial services and tourism. There may be increased prospects for Singapore to expand its investments in the Iskandar Malaysia project (a government-directed economic corridor initiative) in Johor, following a cordial visit by Malaysian Prime Minister Najib Razak in May 2009.Threats There is significant state involvement in the private sector, with the government refusing to disclose the assets of the Government of Singapore Investment Corporation (GIC). The GIC is one of the worlds largest institutional investors, managing foreign exchange reserves and government funds worth more than US$100bn. Without increased openness, investor confidence could be damaged and domestic growth hindered. Singapores exporters will need to constantly adapt to competition from low-wage economies such as China and India.© Business Monitor International Ltd Page 8
  • 10. Singapore Telecommunications Report Q4 2012Singapore Business Environment SWOTStrengths Singapore is the fifth least corrupt country in the world, according to Transparency Internationals 2011 Corruption Perceptions Index. Strikes and labour protests will remain rare, if not absent, for the foreseeable future owning to the governments autocratic insistence on a business-friendly environment. Policymakers will continue to use heavy handed tactics to ensure unions stay pliant.Weaknesses Political and economic stability has come at a price. The government censors the media and limits the distribution of foreign publications. The judiciarys record of siding with prominent politicians calls into question the true extent of its neutrality in any contract dispute involving a politically sensitive issue.Opportunities Due to the lack of progress at the WTO, the government has committed the country to sign 18 bilateral free trade agreements with 24 trading partners. Singapore has already signed agreements with several countries, including the US, Japan, India and Australia. Singapore has one of the best business operating environments in Asia. This is reflected by its second place in the Index of Economic Freedom league table compiled by Heritage Foundation and the Wall Street Journal.Threats Singapore is potentially at risk of a terrorist attack. The city-state has previously been identified as a target by Islamist militants from neighbouring Indonesia and elsewhere. Singapores adjacency to the Malacca Straits means its trade is vulnerable to international piracy.© Business Monitor International Ltd Page 9
  • 11. Singapore Telecommunications Report Q4 2012Risk/Reward RatingsAsia Pacific BMIs Asia Pacific Telecoms Risk/Reward Ratings examines the opportunities and downsides in selected telecoms markets in the region. While market maturity suggests that there is limited upside potential for developed countries such as Japan and Singapore, strong demand for the latest products and services - driven by technological advancements - and robust economic conditions are more than sufficient to support growth. Meanwhile, emerging countries hold raw potential, largely due to the comparatively untapped markets, although positive developments are typically pegged to their broader economy and we do not expect significant improvements in the next few years. In this quarters update, while a number of countries experienced changes to their Telecoms Rating score, their respective rankings were largely unaffected. Japan retained its top position with a Telecoms Rating score of 74.6, while Sri Lanka remained rooted to the bottom with a score of 36.6. The largest LTE operator by subscriber in Asia Pacific comes from Japan, although as a whole, there are more subscribers in South Korea as all three mobile operators there have launched commercial services. Nevertheless, we expect Japan to catch up as operators are currently in the midst of expanding network coverage and increasing their compatible devices portfolios. However, the picture of the Japanese economy remains worrying. We are wary of the increasing risks of recession as external demand continues to deteriorate. With summer power shortages looming, businesses have begun cutting both job advertisement and headcount, and we expect the employment and private consumption growth outlook to dampen. While Singapore similarly has strong consumer demand for the latest technologies, its limited population size meant that it had the lowest Industry Reward score among the top five countries in our Risk/Reward Ratings table. However, Singapore benefits from having the highest Country Rewards (83.3) and Country Risk (95.5) scores in the region. That said, the country is highly dependent on global trade and susceptible to macro headwinds. Singapores export sector grew by a mediocre 3.2% year-on-year (y-o-y) in May 2012, and the effects of a slowdown would have a negative impact on consumer confidence.© Business Monitor International Ltd Page 10
  • 12. Singapore Telecommunications Report Q4 2012 Population Size Equals Opportunities Asia Pacific Telecoms Risk/Reward Ratings Q412 Source: BMI At present, Australias ambitious National Broadband Network project is progressing relatively well. Meanwhile, the government has announced that the 700MHz and 2.5GHz spectrum, which are suitable for 4G services, will be auctioned in April 2013. These developments would prepare the country for lucrative enterprise and consumer telecoms services such as machine-to-machine and high-definition video-on-demand. Australias Telecoms Rating score remained stable at 70.1. Hong Kong was the first in the Asia Pacific region to launch commercial LTE services, although development has fallen wayward and the territory has been overtaken by South Korea and Japan. Data from the regulator showed that mobile data usage grew by 78% y-o-y to 605MB per subscriber in April 2012, which indicates the growth opportunities in the mobile content market. BMI previously highlighted that South Korea could overtake Hong Kong in our ratings table, although this view has yet to play out. Besides a deteriorating economy - the countrys HSBC/Markit purchasing managers index entered contractionary territory in June 2012 - the Korea Communications Commission has ruled that mobile operators are allowed to charge consumers for over-the-top mobile VoIP services. Consequently, we have downgraded South Koreas Industry Risks score to 80 as we are concerned about regulatory independence. Taiwans Telecoms Rating score declined from 63.9 the previous quarter to 63.1 due to a decrease in its Country Rewards score. Contrary to consensus expectations, recent economic data releases suggest that© Business Monitor International Ltd Page 11
  • 13. Singapore Telecommunications Report Q4 2012 the worst is not yet over for Taiwans economy. We looked at data that provide more leading indication, and we have observed signs that further weakness is in store for Taiwan. Malaysia continued to spearhead emerging markets in Asia Pacific, partially due to the fact that its economy is comparatively more developed. Malaysias High Speed Broadband network is experiencing strong take-up, which in turn is spurring growth in related sectors. The IPTV segment for one is expected to benefit, especially when the impending entry of more competition. China rose to eighth position after an upgrade Neck And Neck to its Industry Rewards score, up from 60.5 the Asia Pacific Telecoms Risk/Rewards Ratings Q412 previous quarter to 63.3. The improvement was due to robust mobile subscriber growth, particularly in the 3G market. According to the Ministry of Industry and Information Technology, there were 166.675mn 3G subscribers at the end of May 2012, representing 16% of the total, up from 8.1% in May 2011. Despite the change in position, China only has a 0.1 percentage point lead over Indonesia, which was due to Chinas Source: BMI weaker Country Rewards score. We believe that the Indonesian telecoms industry harbours significant growth opportunities, and this is reflected in its Industry Rewards score of 62.5, which was the second highest among the emerging markets in the region. Indonesian mobile operators are currently expanding network coverage and eyeing additional spectrum in order to capitalise on the prospects in the under tapped 3G sector. We believe that most mobile data users in Indonesia are using the cheaper 2.5G GPRS technology. India remained in 10th position with a Telecoms Rating score of 52.6. The attractiveness of the Indian telecoms market has declined in the last two years due to the emergence of a myriad of regulatory issues, which continue to be unresolved. Domestic and foreign investor confidence has been negatively impacted, which in turn have led to a slowdown in expansion plans. We do not believe that the complicated regulatory environment will be unravelled in the near term, leaving India lagging behind China and Indonesia. The long-awaited 3G auction is likely to take place after November 2012, although the Pakistan Telecommunication Authority has yet to make an official announcement. Media reports have blamed a lack of transparency in the process, in addition to the absence of an international consultant to facilitate the auction. The delay was already factored into Pakistans scores, which remained at 50.0.© Business Monitor International Ltd Page 12
  • 14. Singapore Telecommunications Report Q4 2012 While there was no change to Bangladeshs Telecoms Rating score, the country rose to 12th position. At the time of writing, Bangladesh is still on track to auction five 3G licences in September 2012, of which four will be issued to local operators while the remaining licence will be sold to a foreign company. The shift in Bangladeshs ranking came after the Philippines Industry Rewards score was downgraded from 47.5 the previous quarter to 45.0. The dominance of the Philippine Long Distance Telephone Company could extend to the TV sector as the operator, which already owns a stake in countrys third-ranked TV broadcaster, is in the midst of acquiring second-ranked GMA Networks. Like Bangladesh, Thailands planned 3G auction is grinding forward with a reserve price for 5MHz of spectrum being announced in end-June. The introduction of 3G services would provide a much-needed revenue stream for operators and content providers given the pent-up demand in the industry. However, the long-standing issue on foreign dominance in the telecoms sector could once again pose a threat to the restarted auction, which is scheduled for Q412. Cambodias overcrowded telecoms industry The Laggards Falling Behind remains a concern, especially when the Asia Pacific Telecoms Risk/Reward government continues to adopt a liberal Ratings approach in the issuance of licences. The departure of major international operators chimes with our view that there is a lack of meaningful opportunities in the existing competitive landscape. The creation of an independent telecoms regulator could potentially bring stability into the market by ensuring that policies are free from government influence and agenda, although we caution that Source: BMI it would take a few years before we see significant improvements. Recent subscriber data published by the Ministry of Information and Communication highlighted the dominance of state-owned entities, which bodes poorly for the markets business environment. We see further downside risks to Vietnams Telecoms Rating score as the Vietnam Posts and Telecommunications Group has submitted a request to merge subsidiaries VinaPhone and MobiFone, which would result in the creation of an operator that would have almost 50% mobile market share and 78% market share in the 3G sector. The Laotian telecoms market has exhibited some signs of stability after all the operators agreed to adhere to a minimum tariff rate of LAK800. However, we believe that depressed ARPU rates will persist in the near term, partially due to an agreement to offer lower tariff rates on certain days such as holidays and© Business Monitor International Ltd Page 13
  • 15. Singapore Telecommunications Report Q4 2012 continued lack of access to credit by smaller businesses and the purported lack of the flow-on effects from investments to the local community. There was no change to Sri Lankas Telecom Rating score of 36.6, partially due to a lack of notable developments. The market is gradually expanding, with the public and private sectors engaging in network expansions and new product launches. On the macroeconomic front, despite a respectable Q112 real GDP growth rate, we highlight that the figure masked the substantial weakness of the countrys services sector, whose growth plunged at the start of this year.Table: Asia Pacific Telecoms Risk/Reward Ratings Q412 Rewards Risks Industry Country Telecoms RegionalCountry Rewards Rewards Industry Risks Country Risk Rating RankJapan 71.3 66.7 90.0 82.5 74.6 1Singapore 55.0 83.3 90.0 95.5 73.3 2Australia 57.0 80.0 80.0 83.6 70.1 3Hong Kong 57.5 76.7 80.0 80.2 69.0 4South Korea 62.5 57.0 80.0 74.0 65.5 5Taiwan 52.5 57.0 90.0 78.6 63.1 6Malaysia 52.3 57.0 90.0 69.8 61.7 7China 63.3 31.7 70.0 67.9 57.2 8Indonesia 62.5 45.0 60.0 57.7 57.1 9India 60.0 32.1 60.0 56.4 52.6 10Pakistan 55.0 42.0 60.0 37.6 50.0 11Bangladesh 52.5 36.7 60.0 46.8 48.9 12Philippines 45.0 46.7 60.0 51.0 48.6 13Thailand 47.5 32.7 60.0 56.8 47.1 14Cambodia 44.0 38.3 50.0 36.8 42.4 15Vietnam 40.0 33.3 60.0 46.9 42.4 16Laos 40.5 39.0 50.0 39.7 41.4 17Sri Lanka 33.8 26.7 50.0 48.0 36.6 18Regional Average 52.9 49.0 68.9 61.7 55.6Scores are weighted as follows: Rewards: 70%, of which Industry Rewards 65% and Country Rewards 35%; Risks: 30%, of whichIndustry Risks 40% and Country Risks 60%. The Rewards rating evaluates the size and growth potential of a telecoms market inany given state, and countrys broader economic/socio-demographic characteristics that impact the industrys development; theRisks rating evaluates industry specific dangers and those emanating from the states political/economic profile, based on BMIsproprietary Country Risk Ratings that could affect the realisation of anticipated returns. Source: BMI© Business Monitor International Ltd Page 14
  • 16. Singapore Telecommunications Report Q4 2012Singapore Singapore remained in second position in BMI’s latest Asia Pacific Telecoms Risk/Reward Ratings with a Telecoms Rating score of 73.3, unchanged from the previous quarter. While Singapore’s population size and maturity in the telecoms sector has resulted in an average Industry Rewards score, strong macroeconomic and regulatory environment, which encourage innovations, ensure that the country is positioned high in our table. All three mobile operators will have launched next generation LTE services by end-2012, with StarHub being the last to the market. Given that more than half of the sector is using postpaid subscriptions, in addition to a lack of compatible devices, we do not anticipate a surge in LTE adoption in the near future, even though operators achieve nationwide coverage. However, we envisage the higher data speeds and capacity to allow operators to create more value-added services in order to better monetise its network and investment. Content providers will also be able to introduce services such as mobile TV and high- definition video chat. Additionally, StarHub and SingTel Mobile have reduced their generous mobile data caps from 12GB to 1-2GB, which should allow them to better capture revenue from consumers that use a disproportionately large amount of bandwidth. In order to boost the adoption of Singapore’s Next Generation Nationwide Broadband Network, the Infocomm Development Authority (IDA) of Singapore announced in early August that it has imposed a new quality of service (QoS) on OpenNet, the network’s builder. The regulator mandates that OpenNet fulfils 98% of residential orders within three working days, and all orders within seven days, among other QoSs. The minimum standards will take effect from January 2013. OpenNet has expressed concerns that the new standards rewrite the original network company contract, but the IDA will address the issue through its appeal process. Singapore’s Industry Risks score remained at 90.0. Revised estimates for Q212 indicate that Singapores GDP contracted by 0.7% in q-o-q annualised, seasonally adjusted terms (versus initial estimates of 1.1%), following a revised 9.4% expansion in Q112. The stagnant performance chimes with our ongoing view that Singapores economy will slow in 2012 to a pace of 2.6% for the entire year (before witnessing a mild recovery to 3.6% in 2013) as the globally connected city-states relatively healthy domestic economy battles the deleterious effects of languid external demand. While the two main drivers of inflation, accommodation and transportation, will remain supported over the remainder of the year, price pressures in the other subcategories will likely subside in view of declining credit and money supply growth. As a result of declining inflationary pressures, as well as slow economic growth and poor export performance, we now expect the Monetary Authority of Singapore to slightly ease monetary policy at its bi-annual meeting in October. Following a decade of rapid, policy-supported economic growth, public sentiment has begun to shift away from the ruling Peoples Action Party (PAP). Among the most controversial PAP policies have been those focused on attracting foreigners to Singapores workforce, which, as we have written before,© Business Monitor International Ltd Page 15
  • 17. Singapore Telecommunications Report Q4 2012 resulted in astounding population growth of 21.5% from 2005 to 2011. Although the governments pro- immigration policies have diversified the countrys workforce, the rapid rise in population has challenged the land-scarce island-state in a number of ways, most notably by crowding its once vaunted public transport infrastructure and, in some industries, suppressing wages.© Business Monitor International Ltd Page 16
  • 18. Singapore Telecommunications Report Q4 2012Industry Forecast ScenarioMobileTable: Mobile – Historical Data & Forecasts, 2009-2016 2009 2010 2011 2012f 2013f 2014f 2015f 2016fNo. of mobile phone subscribers (000) 6,857 7,285 7,756 8,144 8,388 8,556 8,641 8,728No. of mobile phone subscribers/100inhabitants 138.6 143.2 149.5 154.9 158.2 160.3 160.8 161.1No. of mobile phone subscribers/100fixed-line subscribers 361.7 367.2 384.6 401.8 415.9 426.4 432.8 439.3No. of 3G phone subscribers (000) 3,181 4,705 5,755 6,273 6,650 6,916 7,054 7,1253G market as % of entire mobile market 46.4 64.6 74.2 77.0 79.3 80.8 81.6 81.6f = BMI forecast. Source: BMI, IDA, operators The latest figures from Singapore’s three mobile operators – SingTel Mobile, Industry Trends – Mobile Forecast StarHub and M1 – showed that there 2009-2016 were 7.846mn mobile subscribers in the country in June 2012, an increase of a mere 0.7% q-o-q and 4.1% y-o-y. The slowing growth momentum is a clear sign that the sector is increasingly close to saturation. Consequently, we believe that operators have to focus more on generating higher revenue from their existing subscriber bases. We believe that annual mobile subscriber f = BMI forecast. Source: BMI, IDA, operators growth in Singapore will remain in the low single-digit range in light of the country’s limited population size. We expect operators to focus on migrating prepaid subscribers to postpaid subscriptions, while sustaining overall mobile subscriber growth through prepaid subscriptions by targeting markets such as foreign labourers, tourists and low- income consumers.© Business Monitor International Ltd Page 17
  • 19. Singapore Telecommunications Report Q4 2012 Although the subscriber growth in Q212 was below our expectation, we are happy to maintain our view that the Singaporean mobile market will expand by 5% in 2012 to bring the total to 8.144mn, representing 154.9% penetration rate, as we note that the growth momentum tends to pick up in the second half of the year. Nevertheless, we expect the subscriber growth momentum in the next few years to continue trending downwards. We forecast the industry to expand by an average of 2.4% between 2013 and 2016 to reach 8.728mn. We expect 3G demand to remain strong in Singapore. Mobile operators have introduced a slew of smartphones and tablet computers, which caters to the various needs of consumers, and generous data allowance as well as pricing caps. However, further growth potential is rapidly declining as the market approaching saturation. Further, the launch of large-scale LTE services presents downside pressure to the 3G sector. As seen in Japan and South Korea, LTE has resulted in operators’ 3G subscriber bases to contract, which could happen in Singapore if Singaporean operators adopt a similar aggressive approach to promote the next generation mobile data service. That said, we believe that Singaporean operators will adopt a slower approach due to a lack of compatible LTE devices and the desire to maximise returns from their 3G networks. We envisage Singapore’s 3G sector expand by 9% in 2012, a downward revision from 12% given a sustained slowdown in the growth momentum. This will result in 6.273mn 3G subscribers, representing 77.0% of the total mobile market. By end-2016, we forecast the number to increase to 7.125mn. Further declines in the growth trajectory will be due to the increasing adoption of LTE services.© Business Monitor International Ltd Page 18
  • 20. Singapore Telecommunications Report Q4 2012ARPU Table: Mobile ARPU – Historical Data & Forecasts, 2009-2016 (SGD) 2009 2010 2011 2012f 2013f 2014f 2015f 2016f SingTel Mobile 51.0 56.0 53.0 50.0 48.5 47.6 47.1 46.6 StarHub 47.0 45.6 46.2 45.8 44.9 44.2 43.8 43.3 M1 38.7 37.4 34.1 34.5 33.8 33.1 32.5 31.8 Market Average 51.0 56.0 53.0 50.0 48.5 47.6 47.1 46.6 Market average has been adjusted based on operators’ market shares. f = BMI forecast. Source: BMI, operators According to our calculations, StarHub’s Industry Trends – ARPU Forecast blended ARPU has largely remained stable in 2009-2016 the last two years with improvements in its postpaid ARPU negating declines in prepaid ARPU. Meanwhile, the blended ARPUs of SingTel Mobile and M1 have been largely trending downwards during this period due to falling postpaid ARPU. However, ARPU levels of Singaporean telecoms operators are still some of the highest in the region due to its comparatively high proportion of postpaid subscribers and a significant base of 3G subscribers. f = BMI forecast. Source: BMI, operators SingTel Mobile and M1 have launched LTE services, while StarHub is expected to follow suit by end- 2012. This should provide a boost to their ARPUs, although we do not expect an immediate significant positive impact. There is still a general lack of compatible devices, which would limit the rate of adoption. Further, SingTel Mobile, the only operator to have launch LTE services for smartphones, has not charged a premium of its plans compared with its 3G packages. Given the declining potential for subscriber growth, we believe that operators will be increasing efforts to migrate prepaid subscribers to postpaid subscriptions. However, we believe that improvements in postpaid ARPU will be offset by efforts to target lower-value markets such as foreign labours through prepaid promotions. Nevertheless, the presence of strong competition between the three operators means that we foresee a steady decline in their ARPUs.© Business Monitor International Ltd Page 19
  • 21. Singapore Telecommunications Report Q4 2012 BMI forecasts the market average ARPU to reach SGD50.0 in 2012 (after adjusting based on operators’ market shares), with all three operators experiencing a decline. We expect the average ARPU to fall to SGD46.6 in 2016.© Business Monitor International Ltd Page 20
  • 22. Singapore Telecommunications Report Q4 2012Fixed Line Table: Fixed Line – Historical Data & Forecasts, 2009-2016 2009 2010 2011 2012f 2013f 2014f 2015f 2016f No. of main telephone lines in service (000) 1,896 1,984 2,017 2,027 2,017 2,007 1,997 1,987 No. of main telephone lines/100 inhabitants 38.3 39.0 38.9 38.6 38.0 37.6 37.1 36.7 f = BMI forecast. Source: BMI, IDA, operators According to the data provided by the Industry Trends – Fixed-Line Sector Infocomm Development Authority of 2009-2016 Singapore, the country’s fixed-line sector continued to trend upwards even though most countries in the region are experiencing the reverse. At the end of June 2012, the regulator reported that there were 2.017mn fixed-line subscribers, up from 1.944mn in June 2011, with continued demand from both the residential and corporate market segments. Nevertheless, the growth momentum for Singapore’s fixed-line market seems to be on f = BMI forecast. Source: BMI, IDA, operators its last legs. The sector has not experienced subscriber growth in the first two quarters of 2012, while net additions in 2011 were 33,000, down from 88,000 the previous year. Much of the growth momentum has been sustained by operators’ bundling strategy, and we believe that actual fixed-line service usage continued to decline as consumers opt for alternative communication means such as mobile and VoIP. Widespread adoption of Singapore’s Next Generation Nationwide Broadband Network could sound the death knell for the country’s fixed-line sector as VoIP over fibre should eventually replace the traditional service, although the scenario could play out only towards the end of our forecast period through 2016. We previously anticipated the fixed-line market to peak in 2013, but we had also highlighted that a decline could occur at an earlier stage. This scenario is becoming increasingly likely after the market remained flat in H112. We continue to expect the market to increase by 0.5% in 2012 to reach 1.987mn subscribers, but we have adjusted our forecasts to reflect the market contracting in 2013. However, fixed-line services still have an important role for businesses given its reliability and quality while consumers could continue subscribing© Business Monitor International Ltd Page 21
  • 23. Singapore Telecommunications Report Q4 2012 to the service due to operators’ bundling strategy and inertia. That said, improvement in VoIP technologies could accelerate the decline as companies opt for more cost-effective solutions. At the end of 2016, we forecast 1.987mn fixed-line subscribers in Singapore, representing 36.7% penetration.© Business Monitor International Ltd Page 22
  • 24. Singapore Telecommunications Report Q4 2012Internet Table: Internet – Historical Data & Forecasts, 2009-2016 2009 2010 2011 2012f 2013f 2014f 2015f 2016f No. of internet users (000) 3,413 3,611 3,891 4,163 4,371 4,546 4,683 4,776 No. of internet users/100 inhabitants 69.0 71.0 75.0 79.2 82.5 85.2 87.1 88.1 No. of broadband internet subscribers (000) 5,819 7,849 9,222 10,144 10,753 11,075 11,297 11,410 No. of broadband internet subscribers/100 inhabitants 117.7 154.3 177.8 193.0 202.8 207.5 210.2 210.6 BMI’s definition of broadband subscriber includes wireline and wireless. f = BMI forecast. Source: BMI, ITU, IDA, operators Data provided by the International Industry Trends – Internet Sector Telecommunication Union (ITU) indicate 2009-2016 that there were about 3.891mn individuals using the internet in Singapore in 2011, representing 75.0% penetration. According to the ITU’s 2010 definition, data on the number of internet users include those using the Internet from any device (including mobile phones) in the last 12 months. A growing number of countries are measuring this through household surveys. In countries where BMI’s definition of broadband subscriber includes wireline household surveys are available, this and wireless. f = BMI forecast. Source: BMI, ITU, IDA, estimate should correspond to the operators estimated number derived from the percentage of Internet users collected. In situations where surveys are not available, an estimate can be derived based on the number of Internet subscriptions.’ On the back of increasing adoption of fixed and mobile internet services given Singaporean consumers’ strong purchasing power, we expect the number of individuals using the internet will continue to increase. We envisage the momentum to remain robust in the near future with the number reaching 4.163mn at the end of 2012. By 2016, we envisage 4.776mn individuals using the internet, representing an 88.1% penetration rate.© Business Monitor International Ltd Page 23
  • 25. Singapore Telecommunications Report Q4 2012 Meanwhile, the Infocomm Development Authority of Singapore reported that there were 9.643mn fixed and wireless broadband subscribers at the end of June 2012. Wireless technologies such as 3G, WiMAX and Wi-Fi hotspots accounted for the biggest proportion at around 86.1%. However, the high number of broadband subscribers is by no means an indication that the market is approaching saturation. In addition to a fixed broadband service at home, consumers are also subscribing to at least one wireless broadband connection in light of mobile devices such as smartphones and tablet computers. The launch of Singapores Next Generation National Broadband Network services would also chip in as packages become more affordable. Latest figures from the IDA revealed that there were 177,200 fibre broadband subscribers in Singapore at the end of June 2012, up from 40,200 in June 2011. Although the growth momentum is not as impressive as that of 3G subscriptions, we expect the momentum to pick up in the next two years as operators try to upgrade subscribers from non-fibre technology after the expiration of the existing broadband contracts. While we expect the fixed and wireless broadband industry to continue to expand, the momentum is undeniably slowing down. One of the main subscriber growth drivers, 3G connections, has been showing increasing signs of weakness due to market saturation. We do not expect the launch of large-scale commercial LTE services to result in a spike in subscribers as we envisage technology migration from 3G to 4G. By end 2016, we envisage 11.410mn fixed and mobile broadband subscribers in Singapore, up from 10.144mn in 2012. However, we reiterate that the figure would include several instances of double counting as consumers would several mobile devices and fixed broadband connections at home.© Business Monitor International Ltd Page 24
  • 26. Singapore Telecommunications Report Q4 2012Market OverviewMobileRegional Perspective The maturity and developed state of Singapore’s mobile industry is evident from the fact that the country scored significantly better than its regional peers on multiple fronts. Singapore lagged behind the region in only two components, data ARPU and 5-year CAGR. Despite the country’s limited population size and subscriber growth opportunities, operators are not short of new revenue-generating potential such as LTE and premium value-added services, which should further bolster their ARPU levels. Further, consumers’ strong preference for postpaid services ensures a constant and sustainable revenue stream for operators. Singapore Mobile Market Regional Comparison 2009-2016f = BMI forecast. Source: BMI, operators© Business Monitor International Ltd Page 25
  • 27. Singapore Telecommunications Report Q4 2012Table: Singapore Mobile Market Regional Comparisons, 2011 Singapore Asia PacificPostpaid As % Of Market 51.9 32.2Mobile Penetration (%) 149.5 109.3Blended ARPU (US$) 41.4 16.33G as % Of Entire Market 74.2 30.0Data ARPU (US$) 16.4 23.55-year CAGR (%) 6.7 15.1Data from 18 countries when available. Source: BMI, regulators, operatorsKey Market Developments Singapore Telecommunications (SingTel), StarHub and M1 launched NFC-based mobile services in August 2012. StarHub unveiled its digital wallet NFC service ‘SmartWallet’ on August 3, while SingTel and M1 launched their NFC mobile payment service on August 22. Meanwhile, Netherlands-based digital security systems specialist Gemalto has announced that NFC services management has gone live in Singapore. The service is driven by Gemaltos Allynis Trusted Services Manager (TSM) solution, which is hosted at the firms local TSM datacentre. The project lines up a consortium of local partners, inclusive of operators, banks and service providers. CITIC Telecom International CPC, a telecoms service provider with headquarters in Hong Kong, opened a datacentre in Singapore on July 27 2012. The firm is expanding operations in South East Asia and its several clients have regional headquarters in Singapore. This is the firms sixth datacentre, with cloud datacentres in Shanghai, Guangzhou and Taiwan. The firm has started to offer services, including multi-protocol label switching-based virtual private network and managed security. M1 is planning to introduce a new range of 4G LTE service plans by end-Q312. The announcement will come at the same time that the operator will confirm it has achieved full nationwide service coverage. M1 aims to offer a first for the city-state when it introduces the new tariff plans. The firm was the first to commercially launch an LTE offering when it introduced LTE for business customers only in June 2011.© Business Monitor International Ltd Page 26
  • 28. Singapore Telecommunications Report Q4 2012Market Growth In recent years, mobile operators have Singapore Mobile Market had limited growth as Singapore’s mobile 2009-2012 market approaches saturation point. The slowdown in net additions has led to aggressive price planning and the launch of numerous promotions as the three operators compete to retain their market share. This competition has only heightened since full mobile number portability (MNP) was launched in June 2008. However, the introduction of smartphones and 3G services has sparked Source: BMI, operators much-needed subscriber growth for the industry in recent quarters, although the momentum has started to taper off. After a strong performance in the first three quarters of 2011, where an average of 127,000 mobile subscribers were added, the Singaporean mobile industry gained only 89,000 subscribers in the quarter ended December 2011. The weak performance continued in the subsequent two quarters when the market noted net additions of 38,000 and 52,000 in the quarters ended March and June 2012 respectively. At the end of June 2012, there were 7.846mn mobile subscribers in Singapore, based on the data published by the three operators – SingTel Mobile, StarHub and M1. The market is clearly approaching saturation as seen by the y-o-y growth rate. In the quarter ended June 2012, the number of mobile subscribers increased by 4.1% y-o-y, down from 5.5% in March 2012, 6.5% in December 2011 and 6.8% in September 2011. While nominal subscriber growth opportunities are becoming limited, especially given the country’s small population size, the launch of next generation LTE services has been timed to provide another revenue source as operators look to transition subscribers to more expensive services.© Business Monitor International Ltd Page 27
  • 29. Singapore Telecommunications Report Q4 2012Market Shares SingTel Mobile continued to hold a Singapore Mobile Market Share (%) commanding lead over its rivals with a mobile subscriber base of 3.638mn at 2009-2012 the end of June 2012, representing a market share of 46.4%. After experiencing a period of declining market share between late 2009 and early 2011, SingTel Mobile has managed to gradually increase its market share. At the end of June 2011, the operator had a market share of 45.3%, up from 44.4% in June 2010. While SingTel Mobile’s net additions of 89,000 subscribers in H112 was less Source: BMI, operators than the 188,000 in H111, it was still significantly greater than its competitors. There are several factors behind SingTel Mobile’s improving performance. The Infocomm Development Authority of Singapore reported that SingTel Mobile had the highest street-level 3G service coverage and call success rate among the three Singaporean mobile operators in 2011. SingTel Mobile’s 3G service coverage was 99.97% while call success rate came in at 99.34%. Additionally, SingTel Mobile has presence in Singapore’s fixed-line, broadband and pay-TV sector, which allows bundling of multiple services, thereby translating into cost savings for consumers. SingTel Mobile’s market leadership position is present in both the prepaid and postpaid market. The operator had 1.646mn prepaid and 1.992mn postpaid subscribers at the end of June 2012. In the last two years, SingTel Mobile has achieved significant success in growing its postpaid subscriber base. At the end of December 2009, SingTel Mobile reported 1.586mn prepaid and 1.595mn postpaid subscribers. Further, SingTel Mobile had the greatest proportion of postpaid subscribers with 54.8% at the end of June 2012, up from 53.6% in June 2011. Second-ranked StarHub reported a mobile subscriber base of 2.173mn at the end of June 2012, representing 27.7% market share. This was up from 2.153mn in June 2011, although the operator had a market share of 28.6% back then. StarHub reported net additions of 227,000 in 2010 but this plunged to 47,000 in 2011. The weak momentum continued in 2012 with net losses of 19,000 in the first half of the year. Net losses of 27,000 mobile subscribers Q212 negated the net additions of 8,000 subscribers in Q112.© Business Monitor International Ltd Page 28
  • 30. Singapore Telecommunications Report Q4 2012 StarHub reported a postpaid subscriber base of 1.069mn at the end of June Singapore Mobile Net Additions (‘000) 2012, up from 1.051mn in June 2011. 2009-2012 While StarHub’s prepaid subscriber base of 1.104mn in June 2012 was an improvement from 1.102mn in June 2011, the operator noted net losses of 29,000 subscribers from March 2012. The q-o-q decline was attributed to a high number of subscribers acquired during promotion offers expiring. While StarHub also held the second-ranked position in the prepaid and postpaid market, the company had the lowest Source: BMI, operators proportion of postpaid subscribers among the three operators. At the end of June 2012, StarHub had 1.069mn postpaid subscribers, representing 49.2% of its total, which was up from 48.8% in June 2011. M1 had 2.035mn mobile subscribers at the end of June 2012, an equivalent of 25.9% market share. Like StarHub, M1’s market share has been declining in light of strong net additions posted by market leader SingTel Mobile. At the end of June 2011, M1 had 1.968mn mobile subscribers, representing 26.1% market share. M1 fared better than StarHub in 2011 and H112 in terms of net additions. The third-ranked operator added 104,000 subscribers, down from 153,000 the previous year. In H112, M1 reported net additions of 20,000, with net additions of 21,000 in Q212 offsetting the net losses of 1,000 subscribers in Q112. M1 had the lowest number of prepaid and postpaid subscribers in Singapore. At the end of June 2012, the operator reported 971,000 prepaid and 1.064mn postpaid subscribers. M1 achieved constant subscriber growth in both market segments, and it remains on track to overtake StarHub in the postpaid market. The gap between the two operators has shrunk to 5,000 subscribers at the end of June 2012, down from 22,000 in June 2011. Further, M1 had a larger proportion of subscribers using postpaid subscriptions with 52.3% of its total.© Business Monitor International Ltd Page 29
  • 31. Singapore Telecommunications Report Q4 2012Table: Singapores Subscriber Base (000)PrepaidOperator Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12SingTel Mobile 1,586 1,496 1,468 1,483 1,504 1,531 1,584 1,615 1,632 1,633 1,646StarHub 979 1,009 1,062 1,097 1,109 1,114 1,102 1,111 1,125 1,133 1,104M1 846 863 895 916 910 919 940 974 969 961 971PostpaidOperator Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12SingTel Mobile 1,595 1,620 1,645 1,684 1,725 1,776 1,833 1,873 1,917 1,947 1,992StarHub 939 966 994 1,024 1,036 1,031 1,051 1,059 1,066 1,067 1,069M1 912 933 954 976 1,001 1,015 1,029 1,035 1,046 1,053 1,064Source: BMI, operatorsARPU & MOU SingTel Mobile is the only operator in Singapore Blended ARPU (SGD) Singapore to release mobile blended ARPU data. In the quarter ended June 2009-2012 2012, SingTel Mobile reported blended ARPU of SGD50, down from SGD53 in the quarter ended June 2011. The decline was attributed to lower postpaid ARPU, which declined from SGD87 to SGD80 over the same period. SingTel Mobile explained that this was because of lower roaming traffic and higher take-up of discounted bundled service. Meanwhile, prepaid ARPU remained stable at SGD14. SingTel Mobile’s Blended ARPUs of StarHub and M1 are calculated by BMI. Source: BMI, operators prepaid ARPU has been largely hovering at the SGD14-15 level and we have been seeing prepaid ARPU levels of StarHub and M1 converging towards this level.© Business Monitor International Ltd Page 30
  • 32. Singapore Telecommunications Report Q4 2012 The importance of mobile data is evident from its raising percentage of ARPU. In the quarter ended June 2012, data services accounted 42% of ARPU, representing SGD21, up from 40% in the quarter ended June 2011. SingTel Mobile reported prepaid MOU reached 339 minutes in the quarter ended June 2012, down from 346 minutes in the same period in 2011, while postpaid MOU fell from 341 minutes to 320 minutes over the same period. We calculated that this gave the operator a blended MOU of approximately 329 minutes. The declining voice usage can be largely attributed to the increasing use of SMS and SMS over IP services, in addition to alternative communications such as social media. StarHub only reports its prepaid and Singapore Blended MOU (minutes) postpaid ARPUs, but we have used this information to calculate the operator’s 2009-2012 blended ARPU. In the quarter ended June 2012, StarHub’s prepaid and postpaid ARPU reached SGD18 and SGD75 respectively. While prepaid ARPU declined from SGD20 in the quarter ended June 2011, postpaid ARPU increased from SGD73. Based on StarHub’s prepaid and postpaid subscriber data, we estimate that the operator’s blended ARPU in the quarter ended June 2012 was SGD46, flat from Blended MOUs are calculated by BMI. Source: BMI, operators the previous year. StarHub reported that non-voice services as a percentage of prepaid ARPU was 17.9% and 40.5% for postpaid ARPU. We estimate that this gave StarHub a data ARPU of approximately SGD17 in the quarter ended June 2012. Likewise, StarHub provides data for its prepaid and postpaid MOU. Prepaid MOU decline from 488 minutes in the quarter ended June 2011 to 454 minutes in the quarter ended June 2012. Meanwhile, postpaid MOU fell from 341 minutes to 336 minutes over the same period. We estimate that blended MOU decreased from 416 minutes to 396 minutes. Similarly, M1 does not report its blended ARPU, only providing prepaid and postpaid ARPU data. The operator reported a prepaid ARPU of SGD15.7 in the quarter ended June 2012 while postpaid ARPU reached SGD53.0. We estimate that this gave the operator a blended ARPU of about SGD35.2, slightly down from SGD35.4 the previous year.© Business Monitor International Ltd Page 31
  • 33. Singapore Telecommunications Report Q4 2012 M1 reported that data plan ARPU reached SGD23.7 in the quarter ended June 2012, up from SGD21.8 the previous year. Like its rivals, this revenue stream has been boosted by the increasing demand for mobile broadband, smartphones and tablet computers. While M1’s postpaid MOU declined from 365 minutes in the quarter ended June 2011 to 346 minutes in the quarter ended June 2012, its prepaid MOU increased from 277 minutes to 335 minutes. M1’s prepaid MOU has been trending upwards, which can be attributed to promotional efforts to encourage greater adoption of its prepaid services. M1 has the smallest prepaid subscriber base among the three operators.Table: Singapore ARPU (SGD)PrepaidOperator Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12SingTel Mobile 14 14 14 14 14 15 14 14 14 15 14StarHub 23 23 21 21 20 20 20 19 18 19 18M1 14 15 15 14 14 14 13 14 14 14 16PostpaidOperator Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12SingTel Mobile 89 86 89 88 92 87 87 85 86 82 80StarHub 72 71 72 72 73 72 73 74 76 74 75M1 61 60 60 60 59 56 55 54 53 53 53Source: BMI, operators© Business Monitor International Ltd Page 32
  • 34. Singapore Telecommunications Report Q4 2012Mobile Content/Value-Added Services SMS Singapore SMS Market (mn) According to the Infocomm Development 2009-2012 Authority of Singapore, a monthly average of 2.052mn SMSs were sent in Q212, down from 2.207mn the previous quarter. SMS usage has grown through prepaid and postpaid usage. Subscribers often use SMS as a cheaper alternative to voice calls on prepaid platforms while postpaid subscribers pay for bundles of voice minutes and messages. For postpaid subscribers this offers highly discounted Source: IDA prices. Further, SMS is also being widely incorporated into next generation network platforms, ensuring its future as a valuable VAS service for operators. However, we have started to see a sustained decline in SMS usage, which can be attributed to the proliferation of 3G services, which allows subscribers to use alternative forms of communications such as SMS over IP (for example, Skype, WhatsApp and KakaoTalk) and social media (such as Facebook and Twitter). Unlike traditional SMS, SMS over IP allows more rich features such as location sharing while social media enables greater number of users to interact. Additionally, there is no limit of the number of messages received and sent (assuming that subscribers stay within data cap). Exceeding the SMS cap would mean additional costs for subscribers. StarHub is the only operator to disclose its SMS data. In the quarter ended June 2012, the average monthly SMS per registered prepaid subscriber was 108, down from 129 in the quarter ended June 2011. Meanwhile, the average monthly SMS per registered postpaid subscriber declined from 250 to 200 over the same period. Despite the mass appeal and use of SMS in the market, however, the service does not provide operators with strong returns given the low prices for SMS, and Singapore’s operators have increasingly turned to mobile broadband to help drive data revenue.© Business Monitor International Ltd Page 33
  • 35. Singapore Telecommunications Report Q4 2012Table: Selected VAS Launched, 2011-2012Date Details SingTel announced the launch of a mobile payment service for smartphones using NFC technology. The payment service allows users to make cashless payments by tapping supported handsets at NFC contactless payment terminals at overAug-12 20,000 points island-wide that accept EZ-Link payment, such as taxis, supermarkets and fast food chains. M1 announced the launch of two new NFC services, M1 NFC Prepaid MasterCard and EZ-link CEPAS, in collaboration with MasterCard and EZ-link. With an NFC SIM and NFC-certified handset, customers will be able to make contactless payments nationwide, at merchants that accept Paypass and EZ-Link NFC payments. Customers who top up their M-Cards with the M1Aug-12 NFC Prepaid MasterCard will also enjoy additional bonus airtime. In collaboration with DBS, EZ-Link and MasterCard, StarHub unveiled its NFC app SmartWallet, a seamless and secure digital wallet service. StarHub’s SmartWallet will allow its mobile customers to enjoy the convenience of using three contactless payment cards on an NFC-enabled smartphone – DBS One.Tap, NFC EZ-Link purse and NFC FEVO PrepaidAug-12 MasterCard. SingTel launched NewsLoop, an e-Reader app for iPad that offers a large selection of Singapore news, blogs, lifestyleJul-12 articles, photographs and videos. The app also includes content from a wide range of leading international sources. M1, EZ-Link and MasterCard Worldwide announced the launch of the M1 Prepaid MasterCard card, a multipurpose card thatMay-12 allows users to top up M1’s prepaid mobile M Card, make payments for public transit and pay for everyday purchases. StarHub will offer users improved data roaming rates following a new partnership agreement with Vodafone. StarHubs customers will benefit from more affordable rates when roaming in many European markets, Australia, New Zealand and South Africa. The first 20MB of international data usage will cost customers SGD25 in a 24-hour period, costing SGD3 forMar-12 each additional MB of data used. eBay-owned PayPal has introduced the Shop and Pay-On-the-Go pilot programme in subway stations in Singapore. The launch will enable commuters to make purchases while en route, using their mobile phones. Commuters will be required to scan a quick response (QR) code on billboards or posters using their smartphones and can then make payments by PayPalFeb-12 account for the selected goods. SingTel launched Singapore’s first e-book service, At launch, Skoob offers more than 39,000 local and international bestsellers for smartphones, tablet computers and personal computers. Skoob is available on Apple and Android tablets and smartphones via a free app. It can also be enjoyed on personal computers using standard browsers. Customers have the flexibility to download books on up to five devices. Payments can be made via Singapore credit cards. SingTel customersNov-11 can choose to have purchases conveniently charged to their monthly bills. SingTel has launched a satellite communication package for shipping firms in the country. The package, available at a monthly tariff of US$2,888, offers broadband as well as all the ICT components a firm needs on a 36-month contract. The service is inclusive of SingTels All-in-One (AIO) Connect Service and an integrated network management system (iNMS).Oct-11 The iNMS allows end-to-end management and visibility of the entire fleet from the sea shore. StarHub launched its i2Surf mobile plan, which comes bundled with a free multi-SIM and will provide instant voice and data accessibility for subscribers who own two devices. Subscribers of the service will receive two SIM cards (regular or micro SIM cards) and enjoy two years of free multi-SIM subscription, which can be used on a second mobile handset device orOct-11 over their tablet or USB dongle. SingTel announced that it will collaborate with the Infocomm Development Authority of Singapore, EZ-Link, banks, public transport operators, payment service providers, ICT application vendors and handset manufacturers to develop near field communications solutions for consumers and businesses.Oct-11 M1 launched two mobile service plans for clients and members of the Singapore Association for the Deaf. The plans include 50 minutes free outgoing video calls, 10,000 SMS and MMS and 3GB data bundle with excess data usage bill capped atSep-11 SGD30. SingTel announced that more 3D TV content will be introduced to its mio TV subscribers. SingTel offered a Barclays PremierApr-11 League match in 3D in May 2011 and will offer 3D movies in the future. SingTel, StarHub and M1 announced the adoption of a common brand called ‘Connecting Tones’, which is a music ringback tone service. Subscribers of all three operators will be able to access the service using a common access mode to facilitateMar-11 selection and purchasing of music tracks. StarHub launched its Roam Manager service, which provides its roaming subscribers with roaming-related information and data usage cost notifications. Subscribers are able to select different tiers of alerts, which will be set off when data roamingMar-11 usage hits a specific amount in a day.© Business Monitor International Ltd Page 34
  • 36. Singapore Telecommunications Report Q4 2012Table: Selected VAS Launched, 2011-2012 SingTel increased its AMPed music service library to more than 2mn tracks after signing agreements with Warner MusicJan-11 Group and EMI.Jan-11 StarHub launched a Facebook application for feature phones, which is available to all of its prepaid Happy Stars subscribers.Source: BMI© Business Monitor International Ltd Page 35
  • 37. Singapore Telecommunications Report Q4 2012Mobile Operator DataTable: Singapore Market Overview Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12Subscriber Numbers (‘000)Total mobile subscribers(‘000) 7,018 7,180 7,285 7,386 7,538 7,667 7,756 7,794 7,846Type: Prepaid (‘000) 3,425 3,496 3,523 3,564 3,626 3,700 3,726 3,727 3,721Type: Postpaid (‘000) 3,593 3,684 3,762 3,822 3,913 3,967 4,029 4,067 4,125No. of net additions (‘000) 131 162 105 101 152 129 89 38 52Total 3G numbers (‘000) 3,869 4,326 4,705 4,996 5,296 5,549 5,755 5,917 6,066No. of 3G net additions(‘000) 451 458 378 292 300 253 206 162 148Mobile broadband numbers(‘000) 5,577 6,120 6,587 6,928 7,228 7,641 7,899 8,112 8,306SMS messages (mn) 6,755 7,174 7,247 7,332 7,317 7,392 6,906 6,621 6,156Financial StructureOperating revenue (SGDmn) 2,312 2,384 2,454 2,477 2,371 2,418 2,605 2,570 2,497Net Profit (SGDmn) 471 417 466 415 449 441 463 716 515EBITDA (SGDmn) 812 775 834 789 810 800 833 805 798Capital expenditure(SGDmn) 172 303 351 267 255 223 386 305 239Capital expenditure as %operating revenue 7.4 12.7 14.3 10.8 10.8 9.2 14.8 11.9 9.6Capital expenditure/subscriber 24.5 42.2 48.2 36.2 33.9 29.1 49.7 39.2 30.5Source: BMI, IDA, operators© Business Monitor International Ltd Page 36
  • 38. Singapore Telecommunications Report Q4 2012Table: SingTel Mobile Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12Subscriber Numbers (‘000)Total mobile subscribers (‘000) 3,113 3,167 3,229 3,307 3,417 3,488 3,549 3,580 3,638Type: Prepaid (‘000) 1,468 1,483 1,504 1,531 1,584 1,615 1,632 1,633 1,646Type: Postpaid (‘000) 1,645 1,684 1,725 1,776 1,833 1,873 1,917 1,947 1,992Market Share (%) 44.4 44.1 44.3 44.8 45.3 45.5 45.8 45.9 46.4Market share (prepaid, %) 42.9 42.4 42.7 43.0 43.7 43.6 43.8 43.8 44.2Market share (postpaid, %) 45.8 45.7 45.9 46.5 46.8 47.2 47.6 47.9 48.3No. of net additions (‘000) -3 54 62 78 110 71 61 31 58Market share of net additions (%) -2.3 33.3 59.0 77.2 72.4 55.0 68.5 81.6 111.5Mobile broadband numbers (‘000) 567 670 767 869 975 1,065 1,174 1,255 1,342Subscriber UsageMinutes of use/subscriber/month(prepaid) 334 355 357 350 346 342 337 338 339Minutes of use/subscriber /month(postpaid) 367 369 359 351 341 335 329 323 320Blended MOU (minutes) 351 362 358 351 343 338 333 330 329Monthly blended ARPU (SGD) 53 53 56 53 53 52 53 51 50Monthly ARPU (Prepaid) (SGD) 14 14 14 15 14 14 14 15 14Monthly ARPU (Contract) (SGD) 89 88 92 87 87 85 86 82 80Data services as % of ARPU 37 38 40 40 41 41 43 42 42Monthly postpaid churn rate (%) 1.0 1.1 0.9 0.8 0.8 0.9 1.0 0.9 0.9Financial StructureOperating revenue (SGDmn) 1,520 1,586 1,634 1,661 1,557 1,601 1,675 1,717 1,674Mobile revenue (SGDmn) 432 437 465 455 472 477 491 478 479Net profit (SGDmn) 372 295 348 303 328 324 333 587 393EBITDA (SGDmn) 591 524 587 551 567 553 574 551 546Capital expenditure (SGDmn) 115 197 200 214 201 138 229 251 142Capital expenditure as % operatingrevenue 7.6 12.4 12.2 12.9 12.9 8.6 13.7 14.6 8.5Capital expenditure /subscriber 3.7 6.2 6.2 6.5 5.9 4.0 6.5 7.0 3.9Acquisition cost per postpaidsubscriber (SGD) 369 371 342 343 294 300 364 291 301Source: BMI, operator © Business Monitor International Ltd Page 37
  • 39. Singapore Telecommunications Report Q4 2012Table: StarHub Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12Subscriber Numbers (‘000)Total number (‘000) 2,056 2,121 2,145 2,145 2,153 2,170 2,192 2,200 2,173Type: Prepaid (‘000) 1,062 1,097 1,109 1,114 1,102 1,111 1,125 1,133 1,104Type: Postpaid (‘000) 994 1,024 1,036 1,031 1,051 1,059 1,066 1,067 1,069Market share (%) 29.3 29.5 29.4 29.0 28.6 28.3 28.3 28.2 27.7Market penetration (%) 40.0 41.3 41.7 41.3 41.5 41.8 42.3 42.0 41.5No. of net additions (‘000) 81 65 24 0 8 17 22 8 -27Market share of net additions (%) 61.8 40.1 22.9 0.0 5.3 13.2 24.7 21.1 -51.9Subscriber UsageMonthly minutes of use/subscriber(prepaid) 544 523 500 493 488 482 476 467 454Monthly minutes of use/ subscriber(postpaid) 381 371 354 341 341 337 336 333 336Blended MOU 465 450 429 420 416 411 408 402 396Blended ARPU (SGD) 46 46 46 45 46 46 46 46 46Monthly ARPU (Prepaid) (SGD) 21 21 20 20 20 19 18 19 18Monthly ARPU (Contract) (SGD) 72 72 73 72 73 74 76 74 75 1Monthly churn rate (%) 1.1 1.0 1.1 1.1 1.0 1.1 1.2 1.3 1.3Non-voice services as % of prepaidARPU 13.4 14.5 15.4 16.0 17.0 16.5 17.0 17.6 17.9Non-voice services as % of postpaidARPU 35.1 35.9 35.8 36.8 37.5 38.4 39.8 39.9 40.5Financial StructureTotal revenue (SGDmn) 569.3 552.3 559.0 558.5 568.6 572.2 612.6 590.9 590.7Service revenue (SGDmn) 544.4 534.1 553.0 531.0 539.2 542.7 559.4 548.7 560.4Mobile revenue (SGDmn) 294.0 298.3 302.7 295.6 302.5 307.4 312.2 306.6 306.2Net profit (SGDmn) 58.1 82.0 80.0 69.1 78.0 75.8 92.6 88.4 86.8EBITDA (SGDmn) 141.0 172.0 170.0 159.8 163.7 167.2 185.3 176.8 179.1Capital expenditure cash payments(SGDmn) 45.0 72.0 107.0 41.5 42.2 46.1 117.0 40.6 57.0Capital expenditure as % operatingRev 7.90 13.04 19.1 7.4 7.4 8.1 19.1 6.9 9.6Capital expenditure /subscriber 21.9 33.9 49.9 19.3 19.6 21.2 53.4 18.5 26.2Average acquisition cost per grossconnection (SGD) 109 124 120 126 na na na na nana = not available. Source: BMI, operator © Business Monitor International Ltd Page 38
  • 40. Singapore Telecommunications Report Q4 2012Table: M1 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12Subscriber Numbers (‘000)Total number (‘000) 1,849 1,892 1,911 1,934 1,968 2,009 2,015 2,014 2,035Type: Prepaid (‘000) 895 916 910 919 940 974 969 961 971Type: Postpaid (‘000) 954 976 1,001 1,015 1,029 1,035 1,046 1,053 1,064Market share (%) 26.3 26.4 26.2 26.2 26.1 26.2 26.0 25.8 25.9Market share (Prepaid, %) 26.1 26.2 25.8 25.8 25.9 26.3 26.0 25.8 26.1Market share (Postpaid, %) 26.6 26.5 26.6 26.6 26.3 26.1 26.0 25.9 25.8Market penetration (%) 36.0 36.8 37.2 37.3 37.9 38.7 38.8 38.5 38.9No. of net additions (‘000) 53 43 19 23 34 41 6 -1 21Market share of net additions (%) 40.5 26.5 18.1 22.8 22.4 31.8 6.7 -2.6 40.4Subscriber UsageMonthly minutes of use/subscriber(prepaid) 259 265 267 275 277 283 285 292 335Monthly Minutes of Use/Subscriber(postpaid) 368 367 364 356 365 359 360 343 346Blended MOU 315 318 318 318 323 322 324 319 341Monthly ARPU (prepaid) (SGD) 14.5 14.4 14.1 14.2 13.4 13.5 13.8 14.0 15.7Monthly ARPU (postpaid) (SGD) 59.7 59.6 58.5 56.1 55.4 53.9 53 52.9 53.0Monthly data plan ARPU (SGD) 21.4 21.6 22.0 21.8 21.8 22.2 23.1 23.6 23.7Monthly churn rate (%) 1.5 1.4 1.3 1.2 1.2 1.3 1.4 1.5 1.3% of non-voice service revenue 31.8 32.7 33.3 34.7 35.7 35.9 36.2 36.9 37.3ow SMS 14.0 14.1 14.5 14.9 14.9 14.7 14.0 13.8 13.6ow mobile data 17.8 18.6 18.8 19.9 20.8 21.2 22.2 23.1 23.7Financial StructureOperating revenue (SGDmn) 223.1 245.7 261.0 257.6 245.4 244.8 317.1 262.5 232.3Mobile revenue (prepaid) (SGDmn) 18.9 19.7 19.6 19.5 19.2 19.9 19.5 19.4 19.3Mobile revenue (postpaid) (SGDmn) 125.8 124.2 127.8 125.8 128.5 127.6 127.4 129.6 131.2Net profit (SGDmn) 40.8 39.5 37.5 42.5 42.8 41.1 37.6 40.3 35.2EBITDA (SGDmn) 79.7 79.2 77.4 77.9 79.2 79.3 74.0 76.8 72.4Capital expenditure (SGDmn) 12.0 34.0 44.0 11.7 12.0 39.2 39.6 13.7 40.2Capital expenditure as % operatingrevenue 5.4 13.8 16.9 4.5 4.9 16.0 12.5 5.2 17.3Capital expenditure/subscriber 6.5 18.0 23.0 6.0 6.1 19.5 19.7 6.8 19.8Acquisition cost per subscriber(SGD) 303 359 368 330 296 286 423 363 320Source: BMI, operator © Business Monitor International Ltd Page 39
  • 41. Singapore Telecommunications Report Q4 2012Mobile ContentRegional Outlook The Asia Pacific region comprises a mix of well-established highly developed countries and emerging markets that are trying to balance economical, political and social issues in order attract investors. As a result, there is a combination of telecoms industries in various stages of technological development and maturity, which gives rise to a wide spectrum of value-added services (VAS) that cater to the diverse needs of consumers and businesses. As expected, developed countries such as Japan and South Korea are well ahead of the curve with the communication (NFC). The presence of high-speed connectivity and increasingly sophisticated devices has lifted the constraints for integration between industries and services that were previously understood to be mutually exclusive. While emerging markets are still primarily reliant on the traditional SMS and voice services for communication, we are seeing a rapidly growing appetite for the latest technologies and services in these countries, which has not been hindered by lower purchasing power. Shifting Market Warrants New Strategy As the market approaches saturation, telecoms operators cannot expect to maintain their revenue growth momentum through acquiring new subscribers. Instead, companies need to source for new revenue streams in uncharted territories or engineer means to extract higher earnings from their existing subscriber base. Venturing into new industries or countries is often a costly and risky proposition, especially amid an uncertain global economy that has yet to fully bounce back from the 2008 financial crisis. Consequently, there is an increasing emphasis on VAS, which leverages on telecoms companies existing infrastructure and knowledge. Furthermore, the ubiquitous nature of telecoms services and their deep integration into the daily life of consumers and businesses have attracted the attention of other industries. This, in turn, has presented new business opportunities such as mobile payment and e-health. NFC: The Next Big Thing? Google launched its mobile payment service, Google Wallet, on September 19 2011, which enables users to perform financial transactions using their NFC-enabled devices. NFC is a wireless technology that allows data transmission between two objects in close proximity, and replacing existing credit cards and coupons is just one of the many possibilities. While Google Wallet is currently only available in the US, Asian telecoms companies have been exploring opportunities to take advantage of the technology. Japanese and South Korean mobile operators announced in February 2011 strategic partnerships to launch NFC-based cross-border mobile services. South Koreas SK Telecom planned to complete mutual compatibility tests with Japans KDDI and Softbank Mobile by H111 before launching NFC-based mobile services in both countries by end-2011. Similarly, Japanese mobile operator NTT DoCoMo and© Business Monitor International Ltd Page 40
  • 42. Singapore Telecommunications Report Q4 2012 South Koreas KT plan to launch commercial services using NFC in their respective markets by end- 2012. Although both companies have prior experience with NFC-based services in their respective domestic markets, it is no longer sufficient to have a narrow business scope when the global market is several times larger. In order to ensure that its NFC technology could be widely adopted, the companies have submitted their technological specifications to global industry associations and standardisation bodies. BMI believes that this is an important step to minimise fragmentation, which frustrates consumers and businesses, thereby hindering adoption. Meanwhile, the South Korean telecoms regulator has formed an NFC alliance that brings together domestic mobile network operators, financial institutions, equipment manufacturers, billing services providers and government organisations. The rationale was to rope in various stakeholders while the market is still in its infancy in order to ensure the entire industry moves in the same direction. The Korea Communication Commission (KCC) went a step further by planning to mandate domestic smartphone manufacturers to offer NFC-enabled mobile phones in the country. The concerted approach is largely due to the potential size of the market. The KCC has reckoned that its NFC mobile industry would generate KRW1.034trn in production revenue, KRW347.5bn in added values, as well as create 5,707 jobs in the next five years. Despite the publicity generated by NFC-based mobile payment services, we believe that companies have yet to devise a definitive business model to generate significant revenue from the technology. Consumers and businesses would expect lower transaction costs or there would be few incentives to embrace another new system. However, we believe that at present, companies are keen to quickly bring the technology to mass-market status before concocting novel and profitable methods to capitalise on the capabilitiesSelected NFC Developments, 2011Date Country Details LG Electronics announced plans to launch NFC-based B2B products in 2012. Products, which includeJan-11 South Korea interactive TVs and payment terminals, will be initially launched in Europe. Softbank plans to offer polyurethane stickers to allow iPhone 4 users to use mobile payment servicesJan-11 Japan Edy, Waon and Nanaco. China Telecom a launched commercial NFC service in Beijing, which allows users to make payments onJan-11 China public transport systems and at more than 2,000 businesses. Japan, KDDI partnered with Softbank and SK Telecom, while NTT DoCoMo teamed up with KT to explore cross-Feb-11 South Korea border NFC opportunities. ZTE announced that it will include NFC functionality in all of its next generation handsets from Q211 afterFeb-11 China signing a deal with semiconductor manufacturer NXP. SK Telecom launched its Q-Store, which allows consumers to browse items in-store and purchase them online via their mobile handset. Around 200 products such as consumer electronics products and luxuryMar-11 South Korea items are available in the first store in Seoul. Samsung Electronics plan to release two more NFC-enabled Bada-based smartphones in 2011, which itApr-11 South Korea did in August 2011, on top of the Samsung Wave 578 NFC device launched in February 2011.© Business Monitor International Ltd Page 41
  • 43. Singapore Telecommunications Report Q4 2012Selected NFC Developments, 2011Date Country Details The Grand NFC Korea Alliance was formed by the Korea Communications Commission, which brought stakeholders such as handset manufacturers, financial institutions, payment service providers and mobileJun-11 South Korea operators together. FarEasTone announced that it plans to introduce NFC technology after it has launched its mobileJun-11 Taiwan payment service in 2011. NewJul-11 Zealand Vodafone New Zealand announced that it was trialling NFC, and plans to roll out services in 2012. The Commonwealth Bank of Australia said it plans to launch a mass-market microSD-based NFC service in the next three months. The system will be powered by a microSD card programmed with consumersJul-11 Australia banking information and inserted into an NFC-enabled mobile handset. Australian supermarket Coles ran a two-week advertising campaign that allowed consumers to downloadSep-11 Australia exclusive digital Coles content such as recipes and cookbook videos via an NFC-enabled handset. SK Telecom introduced an NFC-enabled USIM card that brings NFC functionality to any mobile phone.Sep-11 South Korea Besides payments, the USIM also supports peer-to-peer communications. Chunghwa Telecom, FarEasTone and Taiwan Mobile have agreed to partner to promote NFC-based mobile e-commerce and e-wallet services. The companies have approached HTC, Samsung Electronics, contactless smartcard provider EasyCard, VIBO Telecom and Asia Pacific Telecom to join theSep-11 Taiwan collaboration.Source: NFC World, BMI 4G Brings New Opportunities Next-generation LTE technology has been making its presence felt across the Asia Pacific region as mobile operators progressively roll out commercial services. Hong Kongs CSL New World Mobility was the quickest off the blocks with a limited launch of its LTE/Dual Cell-HSPA+ network in November 2010, which was swiftly followed by Japans NTT DoCoMo. Operators such as Singapores M1 and Australias Telstra have also hopped on the bandwagon in mid-2011. At present, LTE services are largely limited to USB modems due to a lack of compatible mobile devices. However, we expect the situation to begin changing in 2012, and the large-scale launch of 4G smartphones and tablet computers should herald a new generation of mobile VAS. Mobile devices with 3G connectivity has enabled consumers to engage in activities such as web browsing, email, internet messaging and a vast variety of mobile applications. However, many of these features do not strictly require high-speed mobile internet access promised by 4G. That said, we believe that companies are moving towards introducing data-intensive VAS that fully utilise the ability of next- generation mobile connections. For example, Australias Optus formed a partnership with FetchTV in May 2011 to launch an IPTV service in the country in H211. The collaboration will go beyond the traditional method of delivering content via a fixed-broadband network by integrating mobile functionality, which will enable subscribers to access the IPTV service on smartphones and tablet© Business Monitor International Ltd Page 42
  • 44. Singapore Telecommunications Report Q4 2012 computers. BMI believes that Optus push to develop a multi-device IPTV service is in line with consumers changing behaviour where mobility is highly sought after, and would spur interest in next- generation high-speed 4G technologies. Besides services such as video streaming and video conferencing, the machine-to-machine (M2M) market could be one area that could receive more attention from Asian companies following the launch of LTE services. M2M technologies refer to the ability of different devices to communicate and relay information. They can be used in areas such as smart utility metering, e-health, telematics and digital billboards, and Western European mobile operators and M2M vendors have been actively developing the market to pursue greater adoption. By comparison, the momentum in Asia has yet to gain significant traction, but we see companies increasing their emphasis on the new growth prospect. The Philippines Globe Telecom launched its first M2M service - a GPS vehicle tracking system - in 2008 and expanded its portfolio further in August 2011 to encompass monitoring of fixed assets, surveillance and security, as well as tracking of various objects ranging from vending machines to tanks. SMS Still King In Emerging Markets For Now Although there is growing consumer demand for 3G and next-generation variants in emerging markets, and it is in the general interest of mobile operators to push out data services to offset declining voice revenue in light of decreasing tariff rates due to competition, industry developments tend to be held back by poor planning and lack of foresight from the governments and regulators. Thailand is a prime example after its long-awaited 3G auction, which was supposed to take place in September 2010, was derailed after a legal challenge by state-owned operators. A similar situation exists in Pakistan, where an auction scheduled to happen by end-2011 is looking increasingly unlikely to materialise.© Business Monitor International Ltd Page 43
  • 45. Singapore Telecommunications Report Q4 2012 SMS Losing Its Shine Faster In Developed Countries SMS Count For Philippine Long Distance Telephone Company And Entire Singapore Market, 2007-2011 C o n s e q u Sources: BMI, Infocomm Development Authority, Philippine Long Distance Telephone Company Consequently, basic SMS-based VAS still has a vital role to play, especially considering that a significant proportion of consumers in emerging markets are still using feature phones. For example, although 3G services have made their way into China, 2G subscribers accounted for 90% of the total market (by August 2011), or 846mn subscribers, according to the Ministry of Industry and Information Technology. A similar situation exists in India, where we forecast that 98% of the 940mn mobile subscribers would still be using 2G subscription by end-2011. Untapped Population Bring Financial And Telecoms Industries Together Mobile banking is one area in Asias emerging markets where there have been significant developments due to rural consumers lack of access to traditional financial services. The Bangladesh Bank released a guideline on mobile financial services in September 2011 and it aims to bring formal banking and payment services to its unbanked population at an affordable cost. The increasingly prevalent mobile service (49% at the end of June 2011) is an efficient means to raise the accessibility of financial services, particularly in rural regions where mobile operators are currently expanding their network coverage. Reportedly, just 15% of Bangladeshs population has bank accounts. We expect a close collaboration between mobile operators and financial institutions to order to introduce easy-to-use and affordable SMS- based mobile banking services, which could become a profitable venture if a critical subscriber mass is achieved. While Bangladesh is only starting to embrace mobile banking, the Philippines already has a robust domestic mobile money transfer system, powered by Globe Telecoms GCASH and Smart© Business Monitor International Ltd Page 44
  • 46. Singapore Telecommunications Report Q4 2012 Communications Smart Money. The Philippine Long Distance Telephone Company, Smart Communications parent, reported that 26mn financial-related SMS were sent in 2010, which generated PHP40mn in revenue. The number of SMS increased to 16mn in the half year ended June 2011 and earned the company revenue of PHP21mn. Besides extending their domestic service coverage - Globe Telecom and its wholly owned unit, G- XChange, partnered with the Philippine Savings Bank and UnionBank respectively in August 2011 - Philippine mobile operators have also set their sights on the significant population of overseas Filipino workers (OFW). Globe Telecom and Smart Communications teamed up with Ericsson to launch an SMS-based international remittance service between Europe and the Philippines. The Ericsson Money Services portfolio was previously available in seven European markets – the UK, Italy, Germany, Spain, France, Sweden and Poland – but Ericsson has connected the Philippines to the loop. The Bangko Sentral ng Pilipinas reported that OFW remittances from the seven countries grew by 5.7% year-on-year (y-o-y) to US$885mn in the January-May 2011 period, which made up 62.0% of the total in Europe. The basic SMS serves as a convenient and possibly affordable means for OFWs to quickly remit money, and we envisage strong demand for Ericssons money service, especially if transaction costs are lower compared with traditional third-party international remittance providers. 3G Gaining Momentum Although the traditional SMS and voice services are still the dominant communication modes, we are starting to see 3G taking centre stage, especially with increasingly more affordable smartphones due to Googles open Android mobile operating system and low-cost manufacturers hopping on the bandwagon. Sales of smartphones in Vietnam surged by 73% y-o-y to almost 850,000 units in the first seven months of 2011, according to GfK Vietnam. By comparison, sales of feature phone units grew by 24% y-o-y, down from 34% in the same period in the preceding year. While SMS and voice revenue would come under threat, companies could more than offset the decline by adapting to the changing consumer preference by introducing 3G-based VAS catered to consumer needs.© Business Monitor International Ltd Page 45
  • 47. Singapore Telecommunications Report Q4 2012Fixed Line The Infocomm Development Authority’s latest fixed-line data for Fixed-Line Subscribers (’000) Singapore relates to the end of June 2009-2012 2012. The total number of fixed-line subscribers grew to 2.017mn, up from 2.008mn in June 2011. Residential fixed-line subscriptions noted an increase in the number of subscribers. At the end of June 2012, there were 1.238mn residential fixed- line subscribers, up from 1.231mn in the same period in 2011. Meanwhile, the number of corporate fixed-line Source: IDA subscribers increased by 2,000 over the year to reach 779,000. Incumbent Singapore Telecommunications (SingTel) remains the largest supplier of fixed lines in Singapore, with 1.686mn subscribers at the end of June 2012. This was a decrease of 18,000 subscribers from June 2011. Previously, the sustained growth momentum from late 2009 to mid-2011 could be attributed to the bundling of mio services, which incorporate mobile services or mio TV, fixed broadband and fixed-line. However, fixed-to-mobile substitution and competition have gained stronger traction. According to our calculations, the number of fixed lines that are not provided by SingTel reached 331,000 subscribers in June 2012. This was an increase from 304,000 in June 2011. We believe that a significant portion could be attributed to StarHub, which continued to report sustained growth due to continuing promotions and subscription discounts for its hubbing package that encourages residential subscribers to sign up to one or more services. In the quarter ended June 2012, StarHub had 786,000 hubbing households (households with at least one service of postpaid mobile, pay-TV and/or broadband services), down from 791,000 in June 2011. The operator’s hubbing promotion also comes with a free fixed line.International Traffic Lines The Infocomm Development Authority provides figures for the total number of outgoing retail international telephone call minutes, and data including transit. The country’s international telephone services market has grown considerably in the diversity of services offered and number of operators.© Business Monitor International Ltd Page 46
  • 48. Singapore Telecommunications Report Q4 2012 In the quarter ended June 2012, there were 651mn outgoing retail international International Traffic (mn) telephone call minutes, down from 2009-2012 679mn in the same period in 2011. Despite the decline, we believe it is likely that the international traffic would continued its medium-term uptrend. The recent downtrend in the recent months could be attributed to seasonality and an increasing use of VoIP services, which should continue gaining traction in the longer term. SingTel reported total international Source: IDA telephone outgoing minutes (excluding Malaysia) of 819mn minutes in the quarter ended June 2012, up from 785mn minutes in the same period in 2011. Average international direct dialling (IDD) call collection rate (excluding Malaysia) fell to SGD0.108 a minute from SGD0.117 a minute over the same period. The overall international telephone revenue (including Malaysia, but excluding inpayments and net transit) decreased by 2.8% y-o-y to SGD104mn in the quarter ended June 2012. While StarHub does not release information on its international telephone unit, M1’s total international retail minutes for the quarter ended June 2012 increased by 0.3% y-o-y to 290mn. Total international call revenue fell by 7.5% y-o-y to SGD28.6mn in the quarter ended June 2012.© Business Monitor International Ltd Page 47
  • 49. Singapore Telecommunications Report Q4 2012Internet According to the Infocomm Development Authority (IDA), there were 54,000 dial- Singapore Dial-Up Internet Subscriptions up internet subscribers in Singapore by 2009-2012 the end of June 2012, a decline of 4.3% q-o-q and 13.6% y-o-y. This long-term downtrend shows that, with the presence of so many alternatives available to subscribers, dial-up has lost its importance and appeal to internet subscribers in Singapore. The average quarterly rate of decline slowed to 3.6% in 2011, down from 4.1% in the whole of 2010 and 6.3% in 2009. Under IDA definition, dial-up internet subscribers include However, BMI does not see this as a sign subscribers paying internet access service for all IASPs including ISDN dial-up subscribers and subscribers to free of reversal as few subscribers are likely internet access. With free dial-up internet access stopping in March 2008, the number of subscribers post-March 2008 to be interested in dial-up internet. only includes paid internet subscriptions. Source: IDA The decline in dial-up customers relates to the popularity and affordability of broadband tariffs. Once the network operators stopped offering free dial-up services, customers preferred to switch to the faster speeds offered by broadband services.Broadband The Infocomm Development Authority of Singapore (IDA)’s broadband figures indicate there were 9.643mn broadband subscriptions in Singapore at the end of June 2012. However, the regulator has adopted a broad definition of broadband subscriptions, which includes ‘retail xDSL, cable modems, leased line Internet, 3G, 3.5G/HSDPA, WiMAX or its equivalent and Wi-Fi hotspots access (including Wireless@SG subscriptions)’. The IDA reported that from March 2011 ‘Total Residential Wired Broadband’ will be published and this will include all retail residential wired broadband subscriptions (ie, for connection speeds equal to, or greater than, 256kbit/s, in one or both directions) provided over xDSL, cable modems, leased line and optical fibre. Residential wireless broadband subscriptions will be excluded. Similarly, ‘Total Corporate Wired Broadband’ will be published and this will include all retail corporate wired broadband subscriptions (ie, for connection speeds equal to, or greater than, 256kbit/s, in one or both directions) provided over xDSL, cable modems, leased line and optical fibre. Corporate wireless broadband subscriptions will be excluded.© Business Monitor International Ltd Page 48
  • 50. Singapore Telecommunications Report Q4 2012 By June 2012, the regulator reported that there were 1.248mn residential wired broadband subscriptions, up from 1.221mn in June 2011. Meanwhile, there were 90,000 corporate wired subscribers, up from 81,000. Singapore Telecommunications (SingTel) reported that it had 548,000 Residential And Corporate Broadband Subscriptions (‘000) fixed broadband subscribers, of which 105,000 are using its fibre-based service, 2011-2012 at the end of June 2012. This was up from 537,000 in June 2011. Meanwhile, SingTel’s mobile broadband segment continued its impressive growth momentum by adding 367,000 subscribers from 975,000 in June 2011 to reach 1.342mn at the end of June 2012. The take-up of the operator’s fixed broadband service has slowed as a result of high broadband penetration rates in the From March 2011, "Total Residential Wired Broadband" and country and competitive market “Total Corporate Wired Broadband” will be published and these will include all retail residential and corporate wired conditions. By contrast, mobile broadband subscriptions (i.e. for connection speeds equal to, or greater than, 256kbit/s, in one or both directions) broadband (which includes data packs provided over xDSL, cable modems, leased line and optical attached to voice services) is benefiting fibre. Residential and corporate wireless broadband subscriptions will be excluded. Source: IDA from 2G-to-3G subscriber migration and multiple device ownership. The only other operator to consistently provide data is StarHub. The operator provides only residential broadband services based on its cable modem technology. At the end of June 2012, StarHub had a total of 439,000 residential broadband subscribers, up from 431,000 residential broadband subscribers in June 2011. We calculate that StarHub had around 35,000 fibre broadband subscribers at the end of June 2012, based on the published data from SingTel and M1, and the IDA of Singapore. The IDA reported that there were 177,200 fibre broadband subscribers in Singapore at the end of June 2012, while M1 had 37,000 subscribers.© Business Monitor International Ltd Page 49
  • 51. Singapore Telecommunications Report Q4 2012 Table: Composition Of Broadband Internet Access Subscribers (‘000) Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Wireless broadband1 7,228 7,641 7,899 8,112 8,306 – of which 3G 5,296 5,549 5,755 5,917 6,066 Cable Modem 696 686 679 666 655 xDSL 563 559 542 525 498 Total Optical Fibre Broadband Subscription2 40 68 99 132 177 Total Subscribers using other Broadband Internet Access Platforms3 2 2 3 4 7 Total 8,529 8,956 9,222 9,439 9,643 (1) With effect from Apr 2007, "Total Broadband Subscriptions" (i.e. for connection speeds equal to, or greater than, 256 kbit/s, in one or both directions) includes retail xDSL, cable modems, leased line Internet, 3G, 3.5G/HSDPA, WiMAX or its equivalent and Wi-Fi hotspots access (including Wireless@SG subscriptions) (2)i.e., offered via PON or Active Ethernet. (3) From Nov 2010 to May 2011, the "Total Broadband Subscriptions using other Broadband Internet Access Platforms" included Fibre Broadband subscriptions. With effect from June 2011, this indicator will exclude Fibre Broadband Subscriptions. Instead, Fibre Broadband subscriptions will be reflected under a new and standalone indicator known as "Total Optical Fibre Broadband Subscriptions". Source: IDA At the end of June 2012, the bulk of subscriptions continued to be dominated by wireless broadband, which comprises ‘all retail broadband Internet access subscriptions (ie, for connection speeds equal to, or greater than, 256 kbit/s, in one or both directions) provided on wireless platforms such as 3G, 3.5G/HSDPA, WiMAX or its equivalent and Wi-Fi hotspots (including Wireless@SG subscriptions)’, according to IDA’s definition. Unfortunately the regulator does not provide a further breakdown in the usage volumes of each access type. Excluding 3G subscriptions, there were 2.240mn alternative wireless broadband subscribers at the end of June 2012. As for alternative technologies, subscriptions for xDSL reached 498,200 in June 2012, down from 563,400 in June 2011. Meanwhile, cable modem subscriptions declined from its peak of 696,000 in June 2011 to 655,000 in June 2012. The IDA has started to report the number of fibre broadband subscribers. By June 2012, there were 177,200 subscribers using fibre technology, up from 40,200 in June 2011. We expect this number to gradually increase in the next two years as operators try to transition consumers from existing broadband plans to fibre network after the expiration of existing contracts. OpenNet, the company behind the rollout of Singapore’s Next Generation Nationwide Broadband Network, announced in May 2012 that the roll-out has reached 90% of all residential and non-residential premises and it aimed to meet the target of 95% coverage by July 2012.Pay-TV StarHub, which acquired Singapore Cable Vision in 2001, was the country’s only pay-TV provider until Singapore Telecommunications (SingTel) launched its IPTV mio TV in January 2007. Meanwhile,© Business Monitor International Ltd Page 50
  • 52. Singapore Telecommunications Report Q4 2012 M1 launched its online media entertainment offering called 1box in November 2010 and the service is available as a value-added service that delivers content such as movies, music and games through the operators broadband network on a monthly subscription or pay-per-view basis. BMI believes that the announcement in March 2010 by Singapore’s Media Development Authority that pay-TV retailers will have to cross-carry content that each has acquired exclusively and the ongoing rollouts of Singapores Next Generation National Broadband Network have prompted M1 to venture into the pay-TV industry in order to diversify its business model. StarHub has a dominant position in the market due to a lack of competition for a number of years. StarHub was also well placed to stand up to the challenge of SingTel, following the latter’s entry in 2007 due to StarHub’s exclusive agreement to broadcast the highly popular Barclays Premier League (BPL) football matches. However, the balance swung in SingTel’s favour in September 2009 when the operator was declared the winner for the right to BPL football matches from 2010 to 2013. SingTel, which gained 96,000 mio TV subscribers in 2009 to report an end-2009 subscriber base of 155,000, went on to attract 109,000 subscribers in 2010 and 89,000 in 2011. By contrast, StarHub lost 1,000 subscribers in 2010 and added only 7,000 subscribers in 2011. At the end of June 2012, SingTel had 380,000 mio TV subscribers, while StarHub had 543,000 pay-TV subscribers.© Business Monitor International Ltd Page 51
  • 53. Singapore Telecommunications Report Q4 2012Industry Trends And DevelopmentsNetworks 3G Singapore’s three mobile operators Singapore 3G Mobile Customer Growth received 3G licences in April 2001 and (‘000) each paid the reserve price of 2009-2012 SGD100mn. M1 was first to launch commercial services in February 2005, followed by SingTel Mobile in March 2005 and StarHub in April 2005. All three operators were also awarded 5MHz of 3G spectrum at a cost of SGD20mn in October 2010 after a 3G auction organised by the Infocomm Development Authority (IDA) failed to attract a new entrant. Based on the latest figures provided by IDA provides a breakdown from December 2009 onwards. Source: IDA the IDA, there were a total of 6.066mn 3G subscribers comprising 3.949mn postpaid and 2.117mn prepaid subscribers by June 2012. Net additions in the sector peaked at 458,000 in Q310, and the momentum has been steadily declining since then. Q212 saw net additions decline to 148,000, down from 162,000 in Q112 and 206,000 in Q410. The slowdown is largely due to market saturation with 3G subscriptions accounting for 77.3% of the country’s total mobile market. Although the increasing prevalent trend of consumers owning multiple mobile devices such as smartphones and tablet computers could translate into multiple 3G connections, we believe that the majority of consumers typically subscribe to one 3G service for their smartphone while using free Wi-Fi or tethering to access the internet on other devices. The rapid pace at which Singapore’s 3G market is approaching saturation is also partially attributed to quick network deployment by operators, in addition to factors such as the availability of affordable 3G plans and devices. SingTel Mobile, StarHub and M1 have also upgraded their networks to HSPA technology and secured additional spectrum in order to cope with the burgeoning data demand. However, 3G technology is approaching its limit, and operators have turned to LTE with the majority of network investment going towards next generation technology.© Business Monitor International Ltd Page 52
  • 54. Singapore Telecommunications Report Q4 2012 LTE M1 was the first mobile operator in South East Asia to launch a commercial Wireless Broadband Subscriptions (‘000) LTE network on June 21 2011. The 2009-2012 operator’s dual band LTE network, which operates on the 1,800MHz and 2.6GHz frequency bands, will have an initial theoretical downlink speed of 75Mbps and uplink speed of 37.5Mbps. By end- 2012, the theoretical downlink and uplink speeds will be upgraded to 150Mbps and 75Mbps respectively. At launch, network coverage includes major areas within the financial district and nationwide service was expected by Q112. However, only Source: IDA M1’s enterprise customers would enjoy the USB-based next generation mobile broadband service. M1’s LTE network is being rolled out by Huawei Technologies. In May 2011, M1 announced the deployment of the network, and has awarded the Chinese vendor a five-year contract worth SGD280mn to supply turnkey LTE solution. The contract will also include the installation of macro base stations, distributed base stations and Evolved Packet Core. SingTel announced the commercial launch of its LTE mobile broadband service, which is available to both consumer and business customers, in December 2011. The service offers theoretical download speeds of up to 75Mbps and typical download speeds between 3.4Mbps and 12Mbps. SingTel claimed that mobile internet access is more than three times faster than existing 3G-based services, with one-fifth of the network latency. At launch, the service provides outdoor coverage in the central financial district and other areas that experience high data usage such as Shenton Way, Orchard, City Hall, Marina Bay, River Valley, Tanglin, Newton, Novena, Kallang, Rochor, Outram, Tanjong Pagar, Jurong West, Boon Lay, Bukit Panjang, Bedok and Changi. In-building coverage is available in major shopping malls such as Ngee Ann City, Plaza Singapura, Ang Mo Kio Hub, Tampines Mall, West Mall, Parkway Parade and Jurong IMM. Office buildings such as Republic Plaza and Temasek Tower are also covered. The service falls back to SingTel’s 3G-based Premium 21 service when users roam outside the LTE coverage area. In June 2012, SingTel announced that the launch of its LTE service for consumer smartphone users.© Business Monitor International Ltd Page 53
  • 55. Singapore Telecommunications Report Q4 2012 StarHub commenced technical trials of LTE technology in March 2010, at the same time when the operator announced that it has successfully concluded tests of its HSPA+ network using Dual Carrier frequency technology to achieve a peak data downlink speed of up to 42.2Mbps. In April 2012, StarHub announced that it selected Nokia Siemens Networks as its LTE mobile broadband infrastructure and services vendor. The operator will refarm its 1,800MHz GSM band to carry LTE services, and the first phase of the network is expected to go live by the end-2012, covering key business areas such as Changi Airport, Marina Bay, Suntec and Shenton Way. Table: Telecoms Market Development, 2009-2012 Date Value Details Aug-12 na Netherlands-based digital security systems specialist Gemalto has announced that NFC services management has gone live in Singapore. The service is driven by Gemaltos Allynis Trusted Services Manager (TSM) solution, which is hosted in the firms local TSM datacentre. The project lines up a consortium of local partners, inclusive of operators, banks and service providers. Following the commercial launch, users will be able to pay through their NFC-enabled mobile devices at more than 20,000 retail points, including convenience stores, fast food outlets, retailers and even for taxis. Jul-12 na Telecom International CPC, a telecoms service provider with headquarters in Hong Kong, opened a datacentre in Singapore. The firm is expanding operations in South East Asia and its several clients have regional headquarters in Singapore. This is the firms sixth datacentre, with cloud datacentres in Shanghai, Guangzhou and Taiwan. The firm has started to offer services, including multi-protocol label switching-based virtual private network and managed security. May-12 SGD12mn SingTel announced that it has signed an agreement to acquire 100 percent of GTW Holdings Private Limited, the owners of HungryGoWhere. Restaurant review portal HungryGoWhere.com is the leading food portal in Singapore, with additional online presence in Hong Kong, Malaysia, Vietnam, Cambodia and Australia. Under the agreement, GTW will become a wholly owned subsidiary of SingTel. Its operations will be merged with inSing.com – also a subsidiary of SingTel – Singapore’s leading lifestyle and local search site. Apr-12 na Nokia Siemens Networks (NSN) was selected by StarHub as its LTE 4G mobile broadband infrastructure and services vendor. In order to cope with the rising demand for smartphone-driven data services, StarHub will refarm its 1,800MHz GSM spectrum to provide LTE services. The first phase of the operators LTE network would likely go live by end-2012. Under the deal, NSN will also carry out modernisation of StarHubs GSM network, enabling the firm to reduce power consumption of network equipment by up to 50%. Feb-12 na More than 19,000 commercial buildings and offices in Singapore have been equipped to receive the ultra-high speed Next Generation Nationwide Broadband Network (Next Gen NBN) by December 2011. The Infocomm Development Authority of Singapore (IDA) will introduce a Fibre Ready! Mark for the identification of commercial buildings and offices that are linked with Next Gen NBN. The IDA states that 12 service providers are providing more than 40 fibre connection packages to fulfil residential and enterprise requirements. Jan-12 na Australia-based private submarine cable developer ASSC-1 Communications Group is developing a new submarine fibre-optic cable system connecting Perth to Singapore, reports TeleGeography. China-based submarine cable system company Huawei Marine Networks will provide and install the ASSC-1 system. The four-fibre pair cable system, which is 4,600km in length, is designed to respond to the huge increase in internet and data traffic between Australia and the rest of the world. Oct-11 na Verizon Communications and the M1 have collaborated to complete a fibre-optic expansion project in north and west Singapore. This development increases M1s fibre-optic ring in the region to 160 kilometres, while increasing network coverage and doubling capacity for M1s enterprise customers. As a result of the development, Verizon can now access an additional six datacentres. May-11 US$225.7mn M1 selected Huawei Technologies to provide telecoms equipment for the roll-out of its 4G LTE network. The contract is valid for five years and valued at SGD280mn. The transaction will enable Huawei to expand its international business operations and boost its growth in 4G technology. The roll-out of M1s new LTE network was scheduled to conclude in Q112. Feb-10 na M1 and Nokia Siemens Networks (NSN) announce that they have successfully carried out tests on M1’s trial LTE network, with transmission speeds reaching 100Mbps on a data call. The ongoing trial© Business Monitor International Ltd Page 54
  • 56. Singapore Telecommunications Report Q4 2012 Table: Telecoms Market Development, 2009-2012 Date Value Details uses NSN’s commercially ready LTE hardware and software, based on the vendor’s Flexi Multiradio base stations. M1’s network modernisation contract with NSN is said to represent the first step in the operator’s evolution towards LTE. Jan-10 na M1 selected Huawei Technologies to supply an advanced telecommunications computing architecture (ATCA) platform-based IP multimedia subsystem (IMS) solution. The solution will enable M1 to offer enhanced broadband multimedia services including VoIP, IPTV and high-definition video conferencing. The vendor will also enhance national bandwidth network service and install fixed mobile convergence capabilities for M1. Dec-0+ US$200mn SingTel and Chunghwa Telecom, co-owners of the ST-2 satellite project, awarded a contract to Mitsubishi Electric of Japan to build the satellite, due for launch in 2010. This will replace the ST-1 satellite, which will retire in 2011. Sep-09 SGD1bn Nucleus Connect awarded contracts worth a total of SGD1bn for its Next Generation Nationwide Broadband Network project to Huawei Technologies and Alcatel-Lucent. Huawei will supply the hardware for the network with an IP MPLS core and a GPON and active Ethernet access network. Alcatel-Lucent will supply the OSS/BSS and act as systems integrator. Sep-09 na Huawei was awarded the bulk of Singapore’s Next Generation National Broadband Network project, at 70% of the total value (unspecified). It will deploy an end-to-end network with an IP MPLS core and GPON, and an active Ethernet access network. Alcatel-Lucent Technologies, accounts for the remaining 30% of the total value and will supply the OSS/BSS, and act as systems integrator. Completion is targeted for July 2010. Sep-09 SGD14.9mn M1 acquired local ISP Qala Singapore to help support its foray into the corporate fixed-line broadband market and build on its broadband business, launched in early 2009. Jun-09 na The OpenNet consortium announced a plan to deploy fibre-optic cables in commercial and residential properties, beginning in September 2009. Apr-09 na StarHub won the right to build and operate a wholesale next generation broadband network across Singapore. Under the company name of Nucleus Connect, commercial services will be offered by H110 and universal coverage by 2013. Mar-09 SGD100mn SingTel announced plans to invest SGD100mn in the following two years to promote its corporate internet services, aiming to become the top internet service provider for businesses in the Asia-Pacific region by YE09. na = not available. Source: BMI, operators© Business Monitor International Ltd Page 55
  • 57. Singapore Telecommunications Report Q4 2012Regulatory Environment And Industry DevelopmentsTable: Division Of Regulatory Responsibilities In Singapore Regulatory Body ResponsibilitiesMinistry of Information, The Ministry of Information, Communications and the Arts develops and formulates broadCommunications and the Arts telecommunications policy in Singapore. It also has a substantial role in setting legislation MITA Building governing the regulation of the telecommunications market, although it devolves responsibility for 140 Hill Street #02-02 the day-to-day policing of the sector to the IDA. Singapore 179369 Singapore Tel: +65 6270 7988 Fax: +65 6837 9480 Web: www.mica.gov.sgInfocomm Development Singapore’s regulatory body is the Infocomm Development Authority (IDA), which was formed inAuthority of Singapore (IDA) December 1999 following a merger between the Telecommunications Authority of Singapore and 8 Temasek Boulevard the National Computer Board. Under the Info-communications Development Authority of 14-00 Suntec Tower Three Singapore Act 1999, the IDA is charged with the following responsibilities: Singapore 038988 Singapore positioning Singapore as a vital node in the regional and global information infrastructure; Tel: +65 6211 0888 building a critical mass of ICT users; Fax: +65 6211 2222 Web: www.ida.gov.sg developing electronic commerce-related supporting services; encouraging companies to adopt ICT as a competitive tool; promoting and developing the ICT industry; attracting and developing a competent workforce to make Singapore the ICT talent capital; harnessing ICT to enhance quality of life; keeping policy and the regulatory framework transparent, pro-business and pro- consumer; and, enabling the government to be a leading and exemplary user of ICT.Next Generation National Infocomm Infrastructure In February 2006, Prime Minister Lee Hsien Loong announced a programme to create Singapore’s Next Generation National Infocomm Infrastructure (Next Gen NII), a new digital superhighway. Next Gen NII comprises complementary wired and wireless networks. The wired broadband network or Next Generation National Broadband Network (Next Gen NBN) will deliver ultra-high broadband symmetric speeds of 1Gbps and above, to all homes, offices and schools, while the Wireless Broadband Network (WBN) will offer connectivity around Singapore. In line with the government’s philosophy of public/private partnership, the IDA launched a request for concept (RFC) for the Next Gen NBN and a© Business Monitor International Ltd Page 56
  • 58. Singapore Telecommunications Report Q4 2012 wireless broadband market development call for collaboration (CFC) to set in motion the deployment of the infrastructure. Singapore launched commercial Next Gen NBN services in September 2010, bringing high-speed broadband with speeds of up to 1Gbps to consumers. Besides the three mobile operators – SingTel, StarHub and M1 – Singapore also saw new players such as SuperInternet and LGA Telecom enter the broadband industry. Nucleus Connect, the wholesaler of Next Gen NBN bandwidth, expects a total of 10 players by end-2011 and is in the middle of achieving 95% network coverage by mid-2012. In February 2012, another company, MyRepublic, entered the fibre broadband market. As a means to entice subscribers, the firm promised not to bind the first 100,000 subscribers with contracts.Regulatory Developments IDA Calls For Net Neutrality Feedback Singapores Infocomm Development Authority (IDA) published a consultation paper on November 11 2010 seeking industry and public feedback on net neutrality. The telecoms regulators approach towards net neutrality is geared towards a transparent competitive landscape to safeguard consumer interests. The IDA announced its position towards net neutrality in the consultation paper, which contained the following points: No blocking of legitimate internet content by ISPs and telecoms operators; Compliance with the regulators competition and interconnection rules; Compliance with the IDAs information transparency requirement and disclosure to end- consumers of their network management practices; Reasonable network management practices are allowed to maintain the minimum broadband quality of service standards and; Niche or differentiated internet service offerings are allowed provided they meet the requirements mentioned above. IDA Eyes Nationwide 4G By 2016 The IDA of Singapore published its proposed framework for the reallocation of spectrum for 4G services in April 2012, which could lead to near-ubiquitous next generation mobile network coverage in 2016. The IDA is proposing to refarm spectrum in the 1,800MHz, 2.3GHz and 2.5GHz bands. At present, the spectrum has been allocated to SingTel, M1, StarHub, QMax Communications and Packet One, and the associated rights will expire on June 30 2015 (2.3GHz and 2.5GHz) and March 31 2017 (1,800MHz). The regulators preliminary position is to make available spectrum in all three bands in the upcoming© Business Monitor International Ltd Page 57
  • 59. Singapore Telecommunications Report Q4 2012 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. SingTel, StarHub and M1 are the dominant telecoms providers in Singapore, but the IDA is keen to introduce new entrants, which are defined as any operator that does not provide nationwide mobile system and service coverage. The IDA is proposing to set aside 2x20MHz in the 2.5GHz band, for which only new entrants will be eligible to bid. Additionally, new entrants will be given more time to provide nationwide coverage.© Business Monitor International Ltd Page 58
  • 60. Singapore Telecommunications Report Q4 2012Competitive LandscapeTable: Key Players – Singapore Telecoms SectorCompany name Major Shareholders MarketSingapore Telecom (SingTel) (1) Temasek Holdings (54.41%), DBSN Services Fixed-line telephony (local, (9.83%), Citibank Nominees Singapore (9.23%), international) data, Mobile, Internet DBS Nominees (8.17%), Central Provident Fund Board (5.91%)StarHub (2) Asia Mobile Holdings (56.6%), NTT (10.0%), Cable, Data, Internet, Mobile Singapore Press Holdings (0.8%)M1 (3) Axiata Investments (29.28%), Keppel Telecoms Mobile (19.73%), SPH Multimedia (13.73%)(1) As of May 31 2011. (2) As of November 14 2011. (3) As of June 30 2011. Source: Operators, BMITable: Selected Operators – Financial Indicators, 2004-2011 (US$mn)Company name 2004 Rev 2005 Rev 2006 Rev 2007 Rev 2008 Rev 2009 Rev 2010 Rev 2011 RevSingapore Telecom(SingTel) – Group 1 7,139.9 7,648.5 9,491.1 9,550.5 10,900.9 12,438.8 10,485.5 14,836 1SingTel 2,407.7 2,454.5 3,664.8 3,732.0 3,601.3 4,419.2 3,701.0 5,163 2M1 446.2 478.46 504.6 580.1 550.9 539.3 764.6 850.2StarHub 2 796.9 971.28 1,187.6 1,454.9 1,468.6 1,482.8 1,747.3 1,845.51 YE March 31; 2 YE December 31. Source: BMI, operators© Business Monitor International Ltd Page 59
  • 61. Singapore Telecommunications Report Q4 2012Company ProfilesSingapore Telecommunications (SingTel)Strengths SingTel is an integrated domestic telecommunications service provider offering mobile, data, internet and broadband services. It also launched IPTV services commercially in 2007. The company is a leading domestic fixed, mobile and broadband operator. Ability to compete directly with StarHub across the three major sectors of voice, TV and data.Weaknesses National telephony revenue are declining as the number of local fixed lines in service falls, a result of the popularity of alternative services such as VoIP and mobile. Economic slowdown may affect SingTel’s overseas Asian markets, which account for two-thirds of group sales and profit.Opportunities 3G offerings, including 3G TV services, provide scope for a greater number of high- ARPU customers. Success in tapping into the foreign expatriate community has resulted in a strong prepaid offering take-up. The corporate internet protocol virtual private network (IP-VPN) market is expected to grow significantly in the medium term. Part of winning consortium for the building of Singapore’s ultra-high-speed broadband network.Threats The continued growth of StarHub and M1’s subscriber bases could see them continue to threaten SingTel’s market leadership. Growing competition in South Asia from the likes of Axiata is also a worry. Cross-carriage pay-TV could threaten SingTel’s offerings.Company Overview Established in 1992, SingTel was listed on the Singapore Stock Exchange in 1993 and now supplies communications services in more than 20 countries. It provides national fixed-line services, mobile services (through SingTel Mobile – see following profile), broadband, IP and internet access, and international telephone services. SingTel also operates an ADSL network across the island and has four satellite earth stations. As part of its long-term growth plans, the company will continue to invest in strategic regional markets, including India, Indonesia, the Philippines, Thailand and Bangladesh, and is looking to invest elsewhere in the region.Strategy Continued growth in its regional subscriber base is the way forward for SingTel. India and Indonesia will continue to be integral to the operator’s success. The operator will also continue to enter new high-growth markets. Beyond the Asia Pacific region, SingTel is looking at possible investments in Africa, the Middle East and Central Asia as growth dries up in South East Asia. Domestically, SingTel plans to continue to challenge StarHub with its IPTV services. The securing of the Barclays Premier League swings the balance in SingTel’s favour at least until the agreement ends in 2013.© Business Monitor International Ltd Page 60
  • 62. Singapore Telecommunications Report Q4 2012 In Singapore, SingTel is investing in key strategic initiatives to drive longer term growth in the new Next Generation National Broadband Network era. In the domestic consumer segment, SingTel plans to leverage its strength in carriage business and iconic sports content to build scale in mio TV and drive take-up of its multimedia bundled services. In the business segment, SingTel will continue to drive growth in managed ICT services by expanding its suite of hosted infrastructure and software applications. In the short term, the investment in mio TV will incur costs, particularly in content, customer acquisitions and roll out, before it delivers longer term scale benefits. Managed ICT services are also expected to register lower margins than traditional carriage services.Corporate Structure SingTel’s Singaporean subsidiaries include SingTel Mobile (mobile services provider), SingNet (internet service provider), NCS (ICT solutions provider), SingTel Digital Media (local content provider) and SingTel Innov8 (corporate venture capital fund). SingTel also controls Australia’s Optus, which became a wholly owned subsidiary on August 30 2011. As of March 2012, SingTel was 54.39% owned by Temasek Holdings. Other major shareholders include Citibank Nominees Singapore (9.54%), DBSN Services (9.08%), DBS Nominees (8.15%) and the Central Provident Fund Board (5.83%). The SingTel Group is structured along three key business: Group Consumer, Group Digital L!fe and Group ICT. Group Consumer: This unit bands SingTels consumer-based operations in Singapore, Australia and emerging markets together. Group Digital L!fe: This division will look at opportunities in the digital services market such as IPTV and e-commerce and shift away from traditional telecoms products and services. Offerings will also be marketed to SingTels consumers as bundles or value-added services. Group ICT: This unit focuses on the enterprise market and aims to better integrate SingTels portfolio of IT and telecoms products and services.Financial Performance For the quarter ended June 2012, SingTel Group reported operating revenue of SGD4.533bn, up by 1.6% y-o-y, of which SGD1.674bn was attributed to its business in Singapore. The remaining SGD2.859bn or 63.1% was generated through Optus, its telecoms operation in Australia. SingTel’s Singapore business grew by 7.5% y-o-y to SGD1.674bn in the quarter ended June 2012, which was underpinned by NCS’s strong growth of 20% from major projects. Mobile communications revenue grew 1.5% y-o-y to SGD479mn on strong customer growth, which was partially offset by lower postpaid ARPU. In Australia, Optus’s operating revenue declined 3.2% y-o-y to AUD2.239bn due to the mandated reduction in mobile termination rates and lower equipment sales as well as the recognition of service credits associated with the device repayment plans introduced from October 2011. SingTel Group’s EBITDA decline by 3.2% y-o-y to SGD1.243bn in the quarter ended June 2012 due to payments to NetLink Trust and higher mobile customer connection costs, which© Business Monitor International Ltd Page 61
  • 63. Singapore Telecommunications Report Q4 2012 were partially offset by revenue growth from NCS. Net profit for the quarter grew by 3.2% to SGD945mn.Operational Pay-TVDevelopments At the end of June 2012, the number of mio TV subscribers reached 380,000 up from 313,000 the previous year. In the quarter ended June 2012, SingTel expanded the range of ethnic programming and continued to refresh its video-on-demand services with the latest movie and ethnic titles within one month of local release. In July 2012, SingTel provided live coverage on mio TV for the London 2012 Olympic Games across 15 channels with 11 channels in HD. Broadband SingTel had a total of 1.890mn broadband subscribers at the end of June 2012, which comprised of 548,000 fixed and 1.342mn wireless broadband subscribers. Meanwhile, SingTel also reported that it had 105,000 fibre broadband subscribers in the consumer and business segments. SingTel consortium OpenNet, including Singapore Power, Singapore Press Holdings and Axia NetMedia, won the right to build the city’s ultra-high-speed broadband network in September 2008. SingTel and Axia NetMedia each have a 30% share in the consortium, with Singapore Press Holdings and Singapore Power’s telecoms unit retaining shares of 25% and 15% respectively. The next generation national broadband network will provide speeds of 1Gbps when fully complete in 2015. The operator is expected to invest about SGD2bn to design, build and maintain the network infrastructure, while the government will contribute about SGD750mn, according to the IDA. Under the terms of the OpenNet proposal, it would complete the fibre network roll-out to 60% of households and buildings by 2010, extending coverage to 95% by 2012. Having won the tender, OpenNet announced plans to commence deploying fibre-optic cables in commercial and residential properties from September 2009. Initial deployments will be in Macpherson, Jurong, Middle Road and Geylang, connecting about 56,000 households and 1,000 office buildings in the first month. Installation costs for residential sites are charged at SGD200, while all other properties are SGD450.Financial Data Group Group Revenue (YE March 2011): SGD18.071bn Group Revenue (YE March 2012): SGD18.825bn Group Revenue (QE June 2012): SGD4.533bn Group Net Profit (YE March 2011): SGD3.825bn Group Net Profit (YE March 2012): SGD3.989bn Group Net Profit (QE June 2012): SGD945mn Group EBITDA (YE March 2011): SGD5.119bn Group EBITDA (YE March 2012): SGD5.219bn© Business Monitor International Ltd Page 62
  • 64. Singapore Telecommunications Report Q4 2012 Group EBITDA (QE June 2012): SGD1.243bnOperational Data Local Fixed Lines (March 2010): 1.673mn Fixed Lines (March 2011): 1.701mn Fixed Lines (March 2012): 1.691mn Fixed Lines (June 2012): 1.686mn Broadband Subscribers (March 2010): 1.020mn Broadband Subscribers (March 2011): 1.402mn Broadband Subscribers (March 2012): 1.800mn Broadband Subscribers (June 2012): 1.890mn Mobile Subscribers (March 2010): 3.116mn Mobile Subscribers (March 2011): 3.307mn Mobile Subscribers (March 2012): 3.580mn Mobile Subscribers (June 2012): 3.638mn 3G Subscribers (March 2010): 1.45mn 3G Subscribers (June 2010): 1.50mn Employees, Singapore: 13,208 (June 2012) Employees, Group: 22,386 (June 2012)Address SingTel 10 Eunos Road 8 #10-01, Singapore Post Centre Singapore 408600 Tel: +65 6838 3388 Fax: +65 6734 2209 Web: www.singtel.com.sg© Business Monitor International Ltd Page 63
  • 65. Singapore Telecommunications Report Q4 2012SingTel MobileStrengths Singapore’s mobile market leader, as well as holding market leading positions in the prepaid and postpaid segment. Competitively priced bundled products have had positive effects on prepaid and postpaid subscriber figures. Over 90% of its postpaid base is made up of 3G subscribers. Mobile broadband is increasing as a proportion of the total broadband base.Weaknesses Worsening economic conditions and all round competitive operating environment will continue to have an effect on the operator. Strong growth emerging from the prepaid segment, due to customers tightening their belts. Prepaid and postpaid ARPUs falling over the year as SingTel Mobile introduces competitively priced tariffs.Opportunities Overseas expansion opportunities continue to offer an avenue of revenue growth. Ability to pursue new content places SingTel in a good place for encouraging take-up of its non-voice services.Threats Rivals StarHub and M1 placing additional pressure on the operator.Company Overview Singapore’s leading mobile operator is a 100%-owned subsidiary of SingTel. It first launched its services in 1992 through a dual-band GSM900 and GSM1800 system. The company has more than 1,900 base stations across the island with coverage of 100% of the population.Strategy SingTel Mobile has a firm grasp on the country’s telecoms sector with market leadership position in several segments. The company has also kept pace with rivals by launching LTE services, which is seen as the next revenue growth driver, in addition to alleviating the growing pressure on its 3G network. In order to prevent revenue lost to over-the-top content providers, SingTel Mobile has the benefit of working with SingTel Digital Media, which recently acquired food website HungryGoWhere, to boost traffic and advertising revenue.Financial Performance In the quarter ended June 2012, SingTel reported mobile revenue of SGD479mn, an increase of 1.5% y-o-y, which was attributed strong customer connections that was partially offset by lower postpaid ARPU.Operational Developments Mobile SingTel Mobile provides WAP, high-speed circuit switched data (HSCSD) and GPRS services, and launched the island’s first location-based services, allowing users to obtain information specific to their location. The operator was awarded a 3G licence in 2001 (for which it paid SGD98mn), and in December 2004 it completed a trial of 150 corporate and residential customers. In March 2005, SingTel Mobile officially launched its 3G service.© Business Monitor International Ltd Page 64
  • 66. Singapore Telecommunications Report Q4 2012 SingTel Mobile also provides HSDPA services, rivalling M1, which introduced commercial HSDPA services six months ahead of SingTel’s May 2007 launch. In February 2012, SingTel launched its Mobility Device Manager, which allows firms to manage devices running different operating systems and ensure their information is secure. In June 2012, SingTel announced the launch of its 4G smartphone service for Singaporean consumers. The operator claimed to provide mobile Internet access that is up to five times faster than existing 3G-based smartphone services, with one-fifth of the network latency. Users can enjoy theoretical download speeds of up to 75Mbps and typical download speeds between 3.4Mbps and 12Mbps. Island-wide roll-out of SingTel’s 4G network is expected to be completed in early 2013. In August 2012, SingTel and EZ-Link announced the launch of a mobile payment service for smartphones using NFC. The payment service allows users to make cashless payments by tapping supported handsets at NFC contactless payment terminals at more than 20,000 points island-wide that accept EZ-Link payment, such as taxis, supermarkets and fast food chains. Networks SingTel announced a contract in November 2009 with Alcatel-Lucent for the supply of LTE equipment for use in trials to be held in Australia, Indonesia, the Philippines and Singapore beginning in the first half of 2010. The results of these trials will be shared with the groups operations in other countries, such as Bangladesh, Pakistan and Thailand, enabling them to quickly migrate to 4G mobile technology. The value of Alcatel-Lucents contract was not disclosed, but it will provide radio access, packet core, IP routing and operation systems to the group. The trials are expected to run for between six and nine months. SingTel hopes to improve its understanding of how the technology works and how it may be best adapted to suit particular operating environments, which vary widely across its Asian operations. SingTel and Ericsson unveiled their LTE technology trial in May 2010 to better understand the field experience of LTE. The operator also became the first in the region to successfully power on air the 42Mbps mobile broadband network during this showcase. Although the 42Mbps network will be available in H210, the companies have featured higher speed LTE technology to support high speed mobile download and upload on the move. The purpose of the trial was to showcase the capability of the network to applications and content providers, as well as game producers to promote the next generation of products and services. Alcatel-Lucent reported that positive results have been achieved in its ongoing LTE trials with SingTel in November 2010. Alcatel-Lucent tested high-speed internet access, file transfers, high-definition video streaming, and real-time online gaming simultaneously under different scenarios and the next phase of the testing will encompass more advanced functionalities such as voice over internet protocol (VoIP),© Business Monitor International Ltd Page 65
  • 67. Singapore Telecommunications Report Q4 2012 integration with existing technologies (2G, 3G and HSPA) and network reliability. SingTel launched a new satellite called ST-2 May 2011. The new satellite will replace an older satellite, the ST-1, launched in August 1998. The ST-2 is twice as powerful as the ST-1 and has a larger transponder capacity and coverage footprint, according to SingTel. The new satellite will enable SingTel to cater to the growing demand for fixed and mobile satellite services in the oil and gas, broadcast and maritime sectors In December 2011, SingTel announced the commercial launch of its LTE mobile broadband service for consumer and business customers. The service offers data speeds three times faster than existing 3G services, with theoretical download speeds of up to 75Mbps and typical download speeds between 3.4Mbps and 12Mbps.Financial Data Revenue (YE March 2011): SGD6.401bn Revenue (YE March 2012): SGD6.551bn Revenue (QE June 2012): SGD1.674bn Net Profit (YE March 2011): SGD1.317bn Net Profit (YE March 2012): SGD1.572bn Net Profit (QE June 2012): SGD393mn EBITDA (YE March 2011): SGD2.253bn EBITDA (YE March 2012): SGD2.242bn EBITDA (QE June 2012): SGD546mnOperational Data Mobile Subscribers (March 2010): 3.116mn Mobile Subscribers (March 2011): 3.307mn Mobile Subscribers (March 2012): 3.580mn Mobile Subscribers (June 2012): 3.638mn 3G Subscribers (March 2010): 1.45mn 3G Subscribers (June 2010): 1.50mnAddress SingTel Mobile 10 Eunos Road 8#10-01, Singapore Post Centre Singapore 408600 Tel: +65 6838 3388 Fax: +65 6734 2209 Web: www.singtel.com.sg© Business Monitor International Ltd Page 66
  • 68. Singapore Telecommunications Report Q4 2012StarHubStrengths Offers an integrated telecommunications service, including mobile, data, internet, broadband and cable TV services. The number of households subscribing to triple-play services (hubbing) continues to increase. StarHub is the country’s largest cable TV operator and in January 2007 became the first operator in South East Asia to launch HDTV services commercially.Weaknesses The company’s core ownership has been significantly diluted, following the completion of its IPO. Minimal increase in mobile revenue due to lower voice usage, IDD and outbound roaming revenue. Broadband revenue similarly fell, a result of lower tariffs due to aggressive competition. Lost out to SingTel in bidding rights to broadcast the lucrative Barclays Premier League.Opportunities Winner of the wholesale next generation broadband network across Singapore. The company could maintain its dominance of the pay-TV market, as more consumers are attracted by extra broadcasting services.Threats SingTel’s commitment to focus on domestic mobile market and to challenge StarHub in the pay-TV market will provide tough competition. The company is currently suffering falling voice fixed-line revenue.Company Overview Established in 1998, StarHub offers a range of information, communications and entertainment services for both consumer and corporate markets. StarHub operates a HSPA+ mobile network that delivers up to 21Mbps for downlink to complement its nation- wide GSM network, and it is currently building its LTE network, which is expected go live first in key business areas by the end of 2012. Additionally, StarHub operates an HFC network that delivers multi-channel cable TV and broadband services. The operator also manages a fixed business network that provides a wide range of data, voice and wholesale services.Strategy With a saturated domestic mobile market, StarHub intends to concentrate on promotions aimed at its growing prepaid segment, which it hopes will increase usage levels. Any further growth in the mobile market is likely to come from non-voice services, including data services and transactional activity. To aid this growth, StarHub will promote new VAS content. Upgrading its 3G network to an HSDPA-enabled network should also help in providing quicker wireless broadband connectivity, while LTE services will be launched in 2012, following a similar path with its rivals. As regards its cable TV business, StarHub will continue its policy of introducing new content and launching HDTV commercially. StarHub will also aim to capture more broadband subscribers through a number of promotions, offering free broadband access to certain popular websites. Based on the current outlook, StarHub expects that its Group operating revenue in 2012© Business Monitor International Ltd Page 67
  • 69. Singapore Telecommunications Report Q4 2012 will be in the low single-digit range. The operator has also retained its Group EBITDA margin to be about 30% on service revenue. StarHub maintain that the total capex payment for FY2012 will not exceed 11% of operating revenue. The firm intends to maintain a cash dividend of SGD0.20 per ordinary share in 2012.Corporate Structure StarHub’s subsidiaries include StarHub Mobile (mobile services), StarHub Cable Vision (pay-TV), StarHub Internet (internet services), StarHub Online (broadband services) and Nucleus Connect (designing, building and operating the active infrastructure of Singapore’s Next Generation Nationwide Broadband Network). As of February 15 2012, StarHub’s largest shareholder, with a 56.6% stake in the operator, was Temasek Holdings. Japan’s Nippon Telegraph and Telephone Corporation was StarHub’s second largest shareholder with a 10.0% stake.Financial Performance In the quarter ended June 2012, the StarHub Group reported operating revenue of SGD590.7mn. Mobile revenue accounted for 51.8% of revenue at SGD306.2mn, up from SGD302.5mn in the same period in 2011, and mainly due to its postpaid mobile services, which offset lower prepaid mobile revenue. Revenue from the pay-TV segment increased to SGD103.7mn in the quarter ended June 2012 from SGD92.3mn the previous year due to subscription revenue from UEFA Euro 2012, which was broadcast in June 2012. Excluding this pay-per-view revenue, Pay-TV revenue for the quarter was up 6.3% y-o-y due to higher take-up of add-on channels, HD set-top box rental revenue and the SGD2 monthly subscription price increase, which has been effective since August 2011. Broadband revenue grew by 2.4% y-o-y to SGD62.4mn in the quarter ended June 2012 due to a larger subscriber base and increased ARPU. As for fixed network service revenue, this increased by 5.5% y-o-y to SGD88.0mn in the quarter ended June 2012 due to higher revenue from data and internet as well as voice services. The StarHub Group reported that its EBITDA increased by 9.5% y-o-y to SGD179.1mn while net profit grew by 11.4% to SGD86.8mn In the quarter ended June 2012.Operational MobileDevelopments Starhub launched a range of access plans and cloud computing solutions over Singapore’s Next-Generation National Broadband Network in September 2010. The new services offer features such as backup and storage, IP video surveillance as part of the cloud computing solutions, and Ethernet Local Link and Switched Ethernet services to help businesses connect to multiple sites in Singapore using Layer 2 and Layer 3 technologies, as a potential replacement for traditional lease line services. StarHub launched mobile payment services trials based on near field communications in December 2010. The trial will initially serve the operators 1,000 subscribers who are also the customers of local bank DBS Bank and will last for a period of eight months. The© Business Monitor International Ltd Page 68
  • 70. Singapore Telecommunications Report Q4 2012 project, organised by the operator in collaboration with DBS Bank, EZ-Link, Gemalto and MasterCard, will use the N-Flex solution that will enable conversion of conventional handsets into NFC-enabled mobile phones. In August 2012, StarHub unveiled its NFC mobile application SmartWallet, which is a seamless and secure digital wallet service that was developed in collaboration with DBS, EZ-Link and MasterCard. The service will enable StarHub’s mobile customers to enjoy the convenience of using three contactless payment cards on an NFC-enabled smartphone – DBS One.Tap, NFC EZ-Link purse and NFC FEVO Prepaid MasterCard. Networks Although StarHub – the leading consortium bidder for Singapore’s NGN, which included rival M1 – was beaten by SingTel’s consortium OpenNet, the operator was awarded the right to build and operate a wholesale NGN broadband network across the country. The consortium beat bids from SingTel, M1 and a joint proposal from Cisco and Axia NetMedia, of the US and Canada respectively. A new subsidiary, Nucleus Connect, has been established by StarHub for the purposes of handling the wholesale NGN broadband network. According to Telecomasia.net in April 2009, the government will invest SGD250mn in Nucleus Connect. Under the terms of its bid, Nucleus Connect has promised to commence commercial services by H110, and provide complete coverage by 2013. It will be limited to wholesale services only, with residential connection prices at SGD21 per month for speeds of up to 100Mbps, and SGD121 per month for 1Gbps. StarHub announced in February 2011 that it will jointly build a US$430mn submarine cable linking Japan, Malaysia, Singapore and the Philippines with Japan’s NTT Com, Telekom Malaysia and the Philippines’ PLDT. The 7,200km cable was scheduled to be launched in June 2012 and is expected to have a capacity of 15Tbps. In February 2012, Mobixell announced it was selected by StarHub to deploy its mobile data traffic management solution, which would help the operator reduce costs and enable introduction of new services such as video optimisation and personalised advertising, In April 2012, Nokia Siemens Networks (NSN) was selected by StarHub as its LTE 4G mobile broadband infrastructure and services vendor. The first phase of the operators LTE network would likely go live by end-2012. Under the deal, NSN will also carry out modernisation of StarHubs GSM network, enabling the firm to reduce power consumption of network equipment by up to 50%.Financial Data Annual Revenue (2010): SGD2.238bn Annual Revenue (2011): SGD2.312bn Revenue (March 2012): SGD590.9mn Revenue (June 2012): SGD590.7mn EBITDA (2010): SGD602mn EBITDA (2011): SGD676mn© Business Monitor International Ltd Page 69
  • 71. Singapore Telecommunications Report Q4 2012 EBITDA (March 2012): SGD176.8mn EBITDA (June 2012): SGD179.1mn Net Profit (2010): SGD263mn Net Profit (2011): SGD316mn Net Profit (March 2012): SGD78.0mn Net Profit (June 20120: SGD86.8mnOperational Data Mobile Subscribers (2010): 2.145mn Mobile Subscribers (2011): 2.192mn Mobile Subscribers (March 2012): 2.200mn Mobile Subscribers (June 2012): 2.173mn 3G Subscribers (Q110): 826,000 Broadband Subscribers (2010): 422,000 Broadband Subscribers (2011): 440,000 Broadband Subscribers (March 2012): 440,000 Broadband Subscribers (June 2012): 439,000 Pay-TV Subscribers (2010): 538,000 Pay-TV Subscribers (2011): 545,000 Pay-TV Subscribers (March 2012): 544,000 Pay-TV Subscribers (June 2012): 543,000Address StarHub 67 Ubi Avenue 1 #05-01 StarHub Green Singapore 408942 Tel: +65 6825 5000 Fax: +65 6721 5000 Web: www.starhub.com.sg© Business Monitor International Ltd Page 70
  • 72. Singapore Telecommunications Report Q4 2012M1Strengths M1 is the third largest domestic mobile operator, with about 2mn mobile subscribers. The increasing popularity of non-voice services has seen non-voice revenue rise to 36.9% of service revenue in Q112, compared with 34.7% in Q111.Weaknesses Strong growth of its prepaid subscriber base has led to weak blended ARPUs. Declining postpaid MOU and poor subscriber take-up has negatively affected postpaid ARPUs.Opportunities The introduction of an enhanced MNP service is expected to lead to more competition and churn away from the market leader. Greater concentration on prepaid line, with attention towards foreign labourer market (similar to SingTel). Launch of fixed broadband services to complement its mobile broadband services should see M1 placed on an equal footing with rivals SingTel and StarHub. M1 also became the first to launch a prepaid mobile broadband service. M1 started an LTE trial in February 2010, and launched commercial services in June 2011.Threats The strength of competitors SingTel and StarHub makes Singapore a challenging market. The continued decline in wholesale revenue is having an effect on the operator’s international call service revenue. Global economic slowdown has negatively affected handset sales, as more users hold on to their handsets for longer. A saturated domestic market provides little room for further mobile growth.Company Overview M1’s launch of its dual-band GSM 900/1800 MHz network in 1997 ended SingTel’s monopoly of Singapore’s mobile sector. M1’s network currently offers 2G/2.5G/3G and HSPA services. While the operator was the first in Singapore to launch LTE services, the 4G service is only available to its corporate customers in the financial district as a mobile broadband service. Aside from offering cellular services, M1 provides international call services to mobile and fixed-line customers. M1 ventured into Singapore’s pay-TV industry with the launch of its online media entertainment offering called 1box in November 2010. The service is available as a value-added service that delivers content such as movies, music and games on the operators broadband network on a monthly subscription or pay- per-view basis. In December 2002, M1 was listed on the Singapore Stock Exchange.Strategy Having pushed for growth from data revenue, we can expect M1 to continue this strategy in coming years. Data service growth should also come from the deployment of its HSPA and LTE networks, supported by an increasing number of compatible handsets and the faster downloading speeds and more innovative services that the operator is working to provide. M1 is also hopeful of growth in its prepaid subscriber mix through the expected increase of foreigners working in Singapore and the introduction of more VAS previously only available to postpaid subscribers.© Business Monitor International Ltd Page 71
  • 73. Singapore Telecommunications Report Q4 2012Corporate Structure As of December 31 2011, Axiata Investments was M1’s largest shareholder with a 29.23% stake. Keppel Telecoms and SPH Multimedia was the second and third largest shareholder respectively with 19.70% and 13.71%.On April 12 2010, M1 announced a name change from MobileOne Limited to M1 Limited to reflect its plans to be a full telecommunications company offering fixed and mobile voice and broadband services.Financial Performance In the quarter ended June 2012, M1 had operating revenue of SGD232.2mn, down by 5.3% y-o-y due to lower handset sales. EBITDA decreased to SGD72.4mn from SGD79.2mn over the same period. As for net profit, this decreased by 17.7% y-o-y to SGD35.2mn in the quarter ended June 2012. Mobile revenue increased to SGD150.5mn in the quarter ended June 2012, up from SGD147.7mn in the same period in 2011. International call service revenue decreased to SGD28.6mn from SGD30.9mn over the same period. However, the declines were offset by a SGD1.4mn increase in fixed services revenue to SGD11.3mn. Meanwhile, handset sales declined by 26.2% y-o-y to SGD41.9mn due to lower sales volume and unit selling price.Operational MobileDevelopments In March 2011, M1 partnered with SingTel and StarHub to launch Connecting Tones, a music ringback tone service offered by all three operators, which allows a user to replace the dialling tone so their caller hears music tracks while waiting for their call to be answered. In May 2012, M1, EZ-Link and MasterCard Worldwide announced the launch of the M1 Prepaid MasterCard card, a multipurpose card that allows users to top up M1’s prepaid mobile, make payments for public transit and pay for purchases. M1 announced the launch of two NFC services in August 2012 – M1 NFC Prepaid MasterCard and EZ-link CEPAS, in collaboration with MasterCard and EZ-Link. Together with an NFC SIM and NFC-certified handset, customers will be able to make contactless payments nationwide, at merchants that accept Paypass and EZ-Link NFC payments. Customers who top up their M-Cards with the M1 NFC Prepaid MasterCard will also enjoy additional bonus airtime. Networks In February 2010, M1 and Nokia Siemens Networks announced that they had successfully carried out tests on M1’s trial LTE network, with transmission speeds reaching 100Mbps on a data call. The ongoing trial uses NSN’s commercially ready LTE hardware and software, based on the vendor’s Flexi Multiradio base stations. M1’s network modernisation contract with NSN is said to be the first step in the operator’s evolution towards LTE. In March 2010, M1’s chief technical officer Patrick Scodeller, was quoted as saying that the Singaporean cellco could be ready to launch its so-called ‘4G’ LTE mobile broadband network by the second quarter of 2011. The company will reportedly begin to install LTE base stations in about 1,400 locations across the island sometime in October 2010. The full works should be completed by Q111. M1 selected Huawei Technologies in May 2011 to provide telecoms equipment for the roll-© Business Monitor International Ltd Page 72
  • 74. Singapore Telecommunications Report Q4 2012 out of its 4G LTE network in Singapore. The contract is valid for five years and is valued at SGD280mn. The transaction will enable Huawei to expand its international business operations and boost its growth in 4G technology. M1 launched its dual band LTE network in June 2011, operating on the 1.8GHz and 2.6GHz frequency bands. The network is capable of an initial theoretical downlink speed of 75 Mbps and uplink speed of 37.5 Mbps. By end 2012, the theoretical downlink and uplink speeds will be upgraded to 150 Mbps and 75 Mbps respectively. At launch, the service covers only major areas in the financial district but nationwide coverage was expected in Q112.Financial Data Annual Revenue (2010): SGD979mn Annual Revenue (2011): SGD1.065mn Revenue (March 2012): SGD262.5mn Revenue (June 2012): SGD232.3mn EBITDA (2010): SGD313mn EBITDA (2011): SGD310mn EBITDA (March 2012): SGD76.8mn EBITDA (June 2012): SGD72.4mn Net Profit (2010): SGD157mn Net Profit (2011): SGD164mn Net Profit (March 2012): SGD40.3mn Net Profit (June 2012): SGD35.2mnOperational Data Mobile Subscribers (2010): 1.911mn Mobile Subscribers (2011): 2.015mn Mobile Subscribers (March 2012): 2.014mn Mobile Subscribers (June 2012): 2.035mn 3G Subscribers (2009): 871,000Address M1 Ltd 10 International Business Park Singapore 609928 Tel: +65 6895 1111 Fax: +65 6899 3916 Web: www.m1.com.sg© Business Monitor International Ltd Page 73
  • 75. Singapore Telecommunications Report Q4 2012Regional OverviewAltobridge: Connecting Remote Communities Altobridge is a wireless network solutions provider based in Kerry Technology Park, Ireland. The privately owned firm provides solar powered, satellite backhauled network solutions for 2G and 3G networks to bring mobile voice and data services to remote, unconnected communities, with the potential of between 500-1,200 subscribers. The firms solutions are specifically designed to optimise satellite bandwidth and minimise power consumption, thereby enabling network operators to provide commercially viable services to remote areas where call volume and ARPU is low. Altobridge differentiates itself from traditional network equipment vendors in that its solutions are primarily tailored for rural areas which are often characterised by poor social infrastructure, low income levels, lack of fixed network coverage and a sparse population. These areas are largely underserved by telecoms services because the deployment of conventional base stations could prove expensive, while low income levels means that ARPUs are generally below US$2. Although Altobridge faces intense competition from other solution providers in this space, the firm has recorded impressive results from its deployments and is increasingly attracting the attention of leading network operators, governments and telecoms regulators. Network Solutions Altobridges solutions that are deployed in such communities rely on satellite connectivity and solar power to reduce costs. The firms Lite-site solution, which is 2G and 3G compatible, requires only 4kbps of bandwidth for each active call and minimises power consumption to an average of 90W per site. The Lite-site is solar powered and has a coverage radius of up to 10km, while its Local Connectivity design allows it switch local calls at the remote site base station, thereby eliminating backhaul for local calls. Altobridge partnered with the University College Cork to develop the Altobridge Data-at-the-Edge solution, which addresses the problem of mobile data network congestion. The solution helps mobile network operators maximise the efficiency of their existing mobile data network infrastructure by reducing mobile data backhaul requirements by over 50%. In addition to solutions for network operators, Altobridge has designed solutions for governments and international agencies, as well as for aeronautical and maritime operators. The firms Remote Contiguous Communications (RCC) solution enables secure, wireless communications services under different circumstances for business continuity and humanitarian relief efforts. The RCC in a disaster scenario has the benefits of easy set-up and tear-down, using a man-portable suitcase and secure voice and data services. Altobridges aeronautical solutions enable commercial in-flight communications on airlines,© Business Monitor International Ltd Page 74
  • 76. Singapore Telecommunications Report Q4 2012 while maritime shipping operators can offer their crews wireless communication services while at sea using the firms solutions. Deployments Considering the rural focus of Altobridges solutions for mobile network operators, it is expected that its deployments will mainly be in countries with high rural population ratios. As a result, Altobridge’s deployments to date are in Asia, the Middle East and Africa. Some of the firms most remarkable deployments in Asia are in Indonesia and Malaysia, where it has attracted the attention of the central government. In Malaysia and Mongolia, the deployment focused on remote palm oil and mining communities, some of which were at distances of up to 14 hours off-road drive from the nearest large population centre. Meanwhile, the solutions Local Connectivity feature has been beneficial in Indonesia where Lite-site was deployed across a cluster of villages. Calls between villages are classified as local calls requiring zero backhaul. This has the advantage of eliminating backhaul costs and improving call the quality of calls for end users.Altobridge Commercial Deployments, July 2012Date Country Operator Details Altobridge signed an agreement with Maxis to provide GSM network access toJun-07 Malaysia Maxis remote communities Altobridge won a three-year, fully managed services contract with Mobicom toMar-08 Mongolia Mobicom connect isolated regionsMay-10 Tonga TCC Altobridge signed an agreement to provide solutions and managed rural roll-out Indosat selected Altobridge as its main supplier for mobile connectivity to remoteFeb-11 Indonesia Indosat communities OUR Telekom Altobridge to provide solutions for voice, SMS and data connectivity toApr-11 Solomon Islands OUR Telekom rural communities Asiacell selected Altobridge to provide mobile voice, broadband and SMS services toAug-11 Iraq Asiacell rural communities2011 Oman Oman Mobile na2011 Falklands CWC na2011 Niger Orange Orange selected Altobridge for its rural roll-out projectna = not available. Source: Altobridge© Business Monitor International Ltd Page 75
  • 77. Singapore Telecommunications Report Q4 2012Demographic Outlook Demographic analysis is a key pillar of BMIs macroeconomic and industry forecasting model. Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is key to understanding issues ranging from future population trends to productivity growth and government spending requirements. The accompanying charts detail Singapores population pyramid for 2011, the change in the structure of the population between 2011 and 2050 and the total population between 1990 and 2050, as well as life expectancy. The tables show key datapoints from all of these charts, in addition to important metrics including the dependency ratio and the urban/rural split. Source: World Bank, UN, BMI© Business Monitor International Ltd Page 76
  • 78. Singapore Telecommunications Report Q4 2012Table: Singapores Population By Age Group, 1990-2020 (000) 1990 1995 2000 2005 2010 2012f 2015f 2020fTotal 3,017 3,482 3,919 4,266 5,086 5,256 5,375 5,5970-4 years 229 299 256 214 231 245 256 2675-9 years 212 247 303 284 281 256 238 26110-14 years 207 229 283 337 374 351 291 24415-19 years 253 224 254 283 367 389 385 29720-24 years 310 273 255 261 320 338 379 39425-29 years 345 333 321 257 376 358 330 38730-34 years 338 370 349 310 391 399 386 33735-39 years 282 362 388 377 390 392 402 39340-44 years 223 303 376 417 460 446 402 40845-49 years 138 238 315 406 428 455 473 40950-54 years 123 148 248 338 416 432 440 47955-59 years 103 129 151 261 340 380 422 44460-64 years 85 106 133 160 255 292 340 41965-69 years 61 84 107 132 162 194 249 33070-74 years 46 57 82 99 121 130 153 23375+ years 61 78 100 131 176 199 230 295f = BMI forecast. Source: World Bank, UN, BMI© Business Monitor International Ltd Page 77
  • 79. Singapore Telecommunications Report Q4 2012Table: Singapores Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2012f 2015f 2020f0-4 years 7.58 8.59 6.53 5.02 4.53 4.66 4.76 4.775-9 years 7.02 7.10 7.72 6.65 5.52 4.86 4.43 4.6610-14 years 6.86 6.57 7.21 7.90 7.34 6.68 5.41 4.3515-19 years 8.38 6.44 6.47 6.63 7.21 7.40 7.17 5.3120-24 years 10.28 7.83 6.51 6.11 6.29 6.44 7.04 7.0425-29 years 11.43 9.58 8.19 6.02 7.40 6.82 6.14 6.9130-34 years 11.19 10.64 8.91 7.27 7.70 7.59 7.18 6.0335-39 years 9.36 10.40 9.89 8.85 7.66 7.46 7.47 7.0140-44 years 7.40 8.70 9.58 9.78 9.04 8.49 7.47 7.3045-49 years 4.56 6.84 8.04 9.51 8.42 8.65 8.79 7.3150-54 years 4.09 4.24 6.34 7.92 8.18 8.22 8.19 8.5655-59 years 3.43 3.72 3.84 6.12 6.68 7.23 7.86 7.9260-64 years 2.83 3.05 3.40 3.75 5.01 5.55 6.33 7.4965-69 years 2.04 2.42 2.73 3.08 3.18 3.69 4.63 5.9070-74 years 1.53 1.65 2.08 2.33 2.37 2.48 2.84 4.1675+ years 2.03 2.25 2.55 3.07 3.46 3.78 4.28 5.28f = BMI forecast. Source: World Bank, UN, BMI© Business Monitor International Ltd Page 78
  • 80. Singapore Telecommunications Report Q4 2012Table: Singapores Key Population Ratios, 1990-2020 1990 1995 2000 2005 2010 2012f 2015f 2020fDependent ratio, % of 1total working age 37.1 40.0 40.5 39.0 35.9 35.4 35.8 41.1Dependent population, 2total, 000 816 995 1,130 1,197 1,343 1,374 1,416 1,630Active population, % of 3total 72.9 71.4 71.2 71.9 73.6 73.9 73.7 70.9Active population, total, 4000 2,200 2,487 2,790 3,069 3,743 3,882 3,959 3,967Youth population, % of 5total working age 29.4 31.2 30.1 27.2 23.6 21.9 19.8 19.4Youth population, total, 6000 647 775 841 835 885 851 785 771Pensionable population, 7% of total working age 7.7 8.8 10.3 11.8 12.2 13.5 15.9 21.6Pensionable population, 8000 169 220 289 362 458 523 631 858 1 2 3f = BMI forecast; 0>15 plus 65+, as % of total working age population; 0>15 plus 65+; 15-64, as % of total 4 5 6 7 8population; 15-64; 0>15, % of total working age population; 0>15; 65+, % of total working age population; 65+.Source: World Bank, UN, BMITable: Singapores Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2012 2015 2020Urban population, % oftotal 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0Rural population, % oftotal 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Urban population, 000 3,047.0 3,524.5 4,027.9 4,265.8 5,086.4 5,256.3 5,375.3 5,596.8Rural population, 000 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Source: World Bank, UN, BMI© Business Monitor International Ltd Page 79
  • 81. Singapore Telecommunications Report Q4 2012Glossary Of TermsTable: Glossary Of Terms2G second generation GDP Gross Domestic Product MHz megahertz3G third generation GPRS Global Packet Radio Service MNP Mobile Number Portability Asymmetric Digital Subscriber Global System for MobileADSL Line GSM Communications m-o-m month-on-monthAMOU Average Minutes of Use HDSL High-bit-rate Digital Subscriber Line MoU Memorandum of UnderstandingARPU Average Revenue per User HSDPA High-Speed Downlink Packet Access MPLS Multiprotocol Label SwitchingASP Average Selling Price HPSA High-Speed Packet Access MSC Mobile Switching Centrebn billion HSUPA High-Speed Uplink Packet Access MVNO Mobile Virtual Network OperatorBTS Base Transceiver Stations HTML HyperText Markup Language na not available Operating Income beforeCDMA Code Division Multiple Access Hz Hertz OIBDA Depreciation and AmortizationCEO Chief Executive Officer IDD International Direct Dialling POP Point of Presence Customer RelationshipCRM Management ILD International Long-Distance q-o-q quarter-on-quarter Digital-Advanced Mobile PhoneD-AMPS Service IPO Initial Public Offering R&D research and developmentDLD Domestic Long-Distance IP Internet Protocol SDSL Symmetric Digital Subscriber LineDMB Digital Multimedia Broadcasting IPTV Internet Protocol TV SIM Subscriber Identity ModuleDSL Digital Subscriber Line ISDN Integrated Services Digital Networks SMS Short Messaging Service Digital Subscriber Line AccessDSLAM Multiplexer ISP Internet Service Provider TDMA Time Division Multiple Access TD- Time Division-Synchronous CodeDSU Digital Subscriber Unit IT Information Technology SCDMA Division Multiple Access International TelecommunicationDTH Direct-To-Home ITU Union trn trillion Digital Video Broadcasting- Universal MobileDVB-H Handheld JV joint venture UMTS Telecommunications System Digital Video Broadcasting-DVB-SH Satellite Handheld Kbps kilobits per second VOD Video On Demande/f estimate/forecast KHz kilohertz VoIP Voice over Internet Protocol Earnings before Interest, Taxes,EBITDA Depreciation and Amortization km kilometres VLAN Virtual Local Area NetworkEC European Commission LANs Local Area Networks WAP Wireless Application Protocol W-EMEA Europe, Middle East & Africa LEC Local Exchange Carrier CDMA Wideband CDMAEV-DO Evolution-Data Optimised LTE Long-Term Evolution WiBro Wireless Broadband Worldwide Interoperability forFDI Foreign Direct Investment m metres WiMAX Microwave AccessFTTB Fibre-To-The-Building mn million WLL Wireless Local LoopFTTH Fibre-To-The-Home MEA Middle East & Africa WTO World Trade OrganizationFTP File Transfer Protocol NGN Next Generation Network y-o-y year-on-yearGbps gigabits per second Mbps megabits per second© Business Monitor International Ltd Page 80
  • 82. Singapore Telecommunications Report Q4 2012BMI MethodologyHow We Generate Our Industry Forecasts BMI’s telecommunications industry forecasts are generated using a number of principal criteria, and differ from the regression and/or time-series modelling used in other industries.Table: Key Indicators For Telecommunications Industry ForecastsEmerging markets WeightingAverage market growth 80%Subjective indicators– Real GDP growth 25%– Inflation -5%Developed marketsAverage market growth 90%Subjective indicators– Real GDP growth 15%– Inflation -5%Telecommunications business environment ratings– Telecommunications ratings na– Country risk short-term ratings na– Country risk long-term ratings nana = not applicable. Source: BMI Average Market Growth Indicator takes into consideration the historical growth patterns of the fixed-line, internet, broadband and mobile markets, providing a basis from which to forecast. Using historical data is often the most desirable method of analysis. In most cases, subscriber data is derived from individual operators and/or national regulators.© Business Monitor International Ltd Page 81
  • 83. Singapore Telecommunications Report Q4 2012 Subjective Indicators Indicators look at a number of factors, such as: Neighbouring/similar states. These types of markets often share similar telecoms markets. For example, Japan and South Korea are highly developed technophile markets where growth prospects are high in 3G. Meanwhile, China and India offer high growth in successfully emerging markets. Tracking growth. High growth may be more likely to be repeated in the near future, and is unlikely to turn into a significant decline in the short term, although there may be exceptions to this rule. Market maturity. Where markets have reached saturation they are not likely to expand as fast as those that are less developed. Competition from alternative technologies, such as VoIP versus fixed-line, ADSL versus WiMAX Operator behaviour. Operators’ corporate strategies and investment behaviour may dictate changes in the telecommunications market. This is similarly the case for regulatory developments, which have been accounted for in our integration of the Telecommunications Business Environment Ratings. The remaining weighting of real GDP represents the health of the economy, and the inflationary weighting represents investment confidence. For example, high inflation distorts investment confidence in the telecoms market. The indicators are adjusted by BMI’s independent benchmark ratings, which look at a significantly higher number of indicators, and involve our: Telecommunications Business Environment Ratings. A more comprehensive assessment of the Risk/Return trade-off for the industry (see Telecoms Business Environment Ratings below for greater explanation); as well as, Country Risk Ratings. For short-term (one-year to two-year period) and long-term (three years and more) economic and political ratings.© Business Monitor International Ltd Page 82
  • 84. Singapore Telecommunications Report Q4 2012Telecoms Business Environment RatingsRisk/Reward Ratings Methodology BMI’s approach in assessing the risk/reward balance for Telecoms Industry investors globally is fourfold. First, we identify factors (in terms of current industry/country trends and forecast industry/country growth) that represent opportunities to would-be investors. Second, we identify country and industry-specific traits that pose or could pose operational risks to would-be investors. Third, we attempt, where possible, to identify objective indicators that may serve as proxies for issues/trends to avoid subjectivity. Finally, we use BMI’s proprietary Country Risk Ratings (CRR) in a nuanced manner to ensure that only the aspects most relevant to the Telecoms Industry are incorporated. Overall, the system offers an industry-leading, comparative insight into the opportunities/risks for companies across the globe. Ratings System Conceptually, the ratings system divides into two distinct areas: Rewards: evaluation of sector’s size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development, such as the broader economic/socio-demographic environment. Risks: evaluation of industry-specific dangers (regulatory and competitive issues) and those emanating from the state’s political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. Indicators The following indicators have been used. Overall, the rating uses three subjectively measured indicators, and around 20 separate indicators/datasets.© Business Monitor International Ltd Page 83
  • 85. Singapore Telecommunications Report Q4 2012Table: Ratings IndicatorsIndicator RationaleRewardsIndustry rewardsARPU Denotes depth of telecoms market. High-value markets score better than low-value ones.No. of subscribers Denotes breadth of telecoms market. Large markets score higher than smaller ones.Subscriber growth, Denotes sector dynamism. Scores based on annual average growth over our five-year forecast% y-o-y period and also take into account the penetration rate. Subjective evaluation against BMI-defined criteria. Evaluates market openness andNo. of operators competitiveness.Overall market structure score also affected by telecoms sector tax rate and, where relevant, broader security issues.Country rewards A highly urbanised state facilitates network roll-out and implies higher wealth. Pre-dominantlyUrban/rural split rural states score lower, with overall score also affected by country size. Proportion of population under 24-years-old. States with young populations tend to be moreAge range attractive markets.GDP per capita, US$ A proxy for wealth. High income states receive better scores than low income states.The overall score for country structure is also affected by the power transmission network’s national coverage.RisksIndustry risksRegulatory Subjective evaluation against BMI-defined criteria. Evaluates predictability of operatingindependence environment.Country risksShort-term external Rating from BMI’s Country Risk Ratings (CRR). Denotes state’s vulnerability to externallyrisk induced economic shock, which tend to be the principal triggers of economic crises.Policy continuity From CRR. Evaluates the risk of a sharp change in the broad direction of government policy. From CRR. Denotes strength of legal institutions in each state – security of investment can beLegal framework a key risk in some emerging markets. From CRR. Denotes risk of additional illegal costs/possibility of opacity in tendering/businessCorruption operations affecting companies’ ability to compete.Source: BMI© Business Monitor International Ltd Page 84
  • 86. Singapore Telecommunications Report Q4 2012Weighting Given the number of indicators/datasets used, it would be inappropriate to give all sub- components equal weight. Consequently, the following weighting has been adopted.Table: Weighting Of IndicatorsComponent Weighting, %Rewards 70, of which– Industry rewards 65– Country rewards 35Risks 30, of which– Industry risks 40– Country risks 60Source: BMISources Sources used in telecoms reports include national ministries and media/telecoms regulatory bodies, officially released company results and figures, national and international industry organisations, such as the CTIA, the GSM Association and the International Telecommunication Union (ITU) and international and national news agencies.© Business Monitor International Ltd Page 85