Singtel faces stiff competition in Australia

Impact from device repayment plan a major revenue drag.

While Singtel's mobile business is outperforming peers in Singapore, it is bracing for more competitive headwinds in Australia on the back of pricing aggression, especially from the mobile virtual network operators (MVNO), said RHB.

This, it said, should further exert pressure on prepaid ARPUs in a slowing market.

Telstra recently upped the ante with a AUD10 prepaid starter pack offering 6GB data (including 5GB bonus data) while Vodafone (VOD LN, NR) is dishing-out 3GB
data for every AUD30 recharge.

RHB also notes that postpaid revenue would also be crimped by the service credits on its device repayment plan (DRP) – implemented in Feb 2015 – until the impact washes through its postpaid base.

"We expect the strong postpaid net-additions in 2QFY17 to also manifest in ARPU pressure in 2HFY17 as the DRP impact is magnified," it said.

Optus said it would align the increase in cost with revenue trends, noting the benefits from the exclusive English Premier League (EPL) content.

Management said it is keen on the 700MHz spectrum which would be put up for auction in 2017.

After factoring in lower revenue growth for Optus, RHB trimmed its FY17-FY19 core earnings forecasts by 1-3%.

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