Telcos to take a hit from decline in travellers

Roaming revenue may be cut in half due to a decline in tourists.

A substantial and prolonged decline in inbound and outbound travel, which plunged due to the COVID-19 pandemic prompting travel restrictions, is likely to drag earnings for Singapore’s telecom sector, according to a report by DBS Group Research.

In particular, the drop in travel is expected to cause a significant fall in the usage of roaming facilities, with roaming revenue most affected followed by prepaid revenue. Roaming revenue took up 12-20% of mobile revenue in the city, whilst prepaid mobile revenue comprised 15-20%.

Roaming revenue might likely be cut into half in 2020 due to the sharp decline in the number of business and leisure tourists, whilst prepaid mobile revenue might record about a 20% drop due to a lower number of foreign workers.

Already, the World Travel and Tourism Council has expressed that once the COVID-19 outbreak is over, it could take up to 10 months for the tourism industry to recover.

In Singapore, the Ministry of Health (MOH) recently announced that the Multi-Ministry Taskforce has disbarred all short-term visitors from entering or transiting through the city, and has also further curtailed the entry of work pass holders.

This is expected to cut earnings for the sector by 9-10%, assuming that the impact of the pandemic lingers throughout 2020.

On top of this, Singtel could also be impacted by the 10% slump in Australian dollar, as well as a drop in roaming revenue in Australia, which accounts for around 5-6% of Optus’s mobile revenue. With this, its core (EBITDA) is projected to fall 12% in FY2021.

Meanwhile, StarHub could still benefit from potential consolidation in the telecom sector after the awarding of the 5G licence. The decline in its mobile revenue is expected to accelerate to 10% in FY2020, then moderate to 5% in FY2021, as roaming recovers and stabilises by FY2022 amidst the possible consolidation.