Be warned, telcos: Potential fourth mobile operator is still a formidable profit threat

Complacency breeds failure, says one report.

The potential entry of a fourth telco operator used to hog the headlines, but investors of the country’s three telcos appear to have turned their attention from the potential threat once the newsflows ebbed. However, a new report by UOB Kay Hian warned that the threat has not yet passed and investors should still keep their guards up.

According to the report, complacency prevails among investors who are downplaying the threat of a fourth entrant. Share prices for M1 and StarHub, which dipped at the height of the threat in 2H14, have rebounded significantly since then.

“Investors should not take the threats from MyRepublic, ConsisTel and other potential new entrants lightly. We have to guard against complacency because the damage from the entry of a fourth mobile operator could be enormous. The impact on profitability and the destruction of values could be significant as the market is already highly penetrated,” the report said.

UOB Kay Hian also noted that M1 would be the most affected by a decline in mobile revenue from Singapore, followed by StarHub. SingTel would be the least affected due to the breadth and depth of its overseas operations across Australia, Indonesia, India, Thailand and the Philippines.

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