StarHub-M1 merger could lift ARPU amidst market consolidation: CGS

Merger could generate $70m in annual synergies.

A potential merger between StarHub and M1 could support higher average revenue per user (ARPU) by creating a more consolidated telecommunications market in Singapore, according to CGS International.

The brokerage said SIMBA's low-capex, low-ARPU business model could become increasingly difficult to sustain as capital expenditure requirements rise following the nationwide transition to 5G Standalone (5G-SA).

“Singapore's shift to 5G-Standalone (SA) is now largely complete nationwide, with Singtel and StarHub-M1 fully migrating subscribers from NSA in 2026, removing the last 4G fallback,” it noted.

CGS International added that SIMBA remains limited to 10MHz of 5G-SA spectrum in the 2.1GHz band compared with 100MHz held by its competitors.

The firm said SIMBA's investigation into unauthorised spectrum usage remains unresolved following the termination of its proposed M1 acquisition in May 2026, leaving it with no clear path to acquire additional spectrum.

“With no path to buying incremental spectrum, SIMBA's only lever to absorb subscriber growth is network densification, more base stations, small cells, backhaul, power and site maintenance structurally lifting capex per subscriber versus spectrumrich rivals,” it added.

CGS International estimated one-off cybersecurity-related capital expenditure for SIMBA at $21m to $28m, with recurring annual costs of $3m to $5m, which could push the operator into negative free cash flow.

The brokerage said either scenario would be positive for incumbent operators. If SIMBA is unable to sustain higher capex, the market could consolidate into two players, assuming a StarHub-M1 merger proceeds.

If SIMBA remains in the market, it would operate with higher capex and lower free cash flow, reinforcing expectations for ARPU growth from 2027.

CGS International estimated a StarHub-M1 merger would generate SGD70m in annual recurring synergies, equivalent to around 2% of the combined companies' FY2026 forecast revenue or 10% of forecast EBITDA.

The brokerage valued M1 at an enterprise value of $1.022b, or 7.3x FY2026 forecast EV/EBITDA, and expects a potential transaction to be announced in 2026, with the full synergy run rate achieved by 2029.

It said headquarters and staff rationalisation would generate the largest savings, followed by retail footprint consolidation, whilst network savings would be more limited due to Singapore's shared 5G network.

It also expects market consolidation to lift StarHub's mobile ARPU growth to a 6.5% CAGR from FY2027 to FY2029, up from its standalone forecast of 5%, contributing an estimated $15m in additional EBITDA by FY2029.

CGS International projected the merger would be 120% earnings-per-share (EPS) accretive in the second year after completion and 250% accretive in the third year.

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