Maybank has “buy” calls on both StarHub and Netlink, with target prices of 93 cents and $2.18, respectively.
In a Friday report, analyst Luis Hilado says a privately-held M1 would have room to be more disruptive – in theory, at least. However, the initial indications from Konnectivity’s post VGO disclosure suggested a tilt towards internal business restructuring.
“We believe that initially this (the restructuring) could involve a right sizing exercise similar to StarHub on the cost side,” Hilado says.
Meanwhile, on the revenue side, farming more enterprise contracts from the relationships with its two major shareholders could be unlocked.
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However, the analyst sees this as a neutral/positive event, which will not escalate the current state of competition.
“We may get more colour on M1’s plans during the Keppel or SPH post results analyst briefings this coming quarter. With this note we drop coverage of M1 given its imminent de-listing,” says Hilado.
Another question to ponder is: Will there still be a need for mobile virtual network operator (MVNO) deals?
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Given that the current state of competition was catalysed by M1’s launch of the first commercially successful MVNO deal with Circles.Life, Konnectivity’s views about whether such deals remain relevant are key to the industry’s medium-long term outlook.
Hilado also questions whether there is still a need for MNVO deals, especially with the incumbents slugging it out in the cheap data, SIM only segment, which used to be MVNO territory.
“The wireless telco companies have de-rated with M1’s share performance salvaged by the VGO. We anticipate earnings declines over the next two years given continued revenue erosion from the wireless segment,” Hilado adds.
The analyst believes that the de-rating reflects a significant amount of risk, but the catalysts for a sustainable re-rating will only come after TPG’s commercial launch is revealed and digested.
