The shares of Singtel (Singapore Telecommunications) surged by up to 7.5% on the 23rd of August, Thursday. The rally followed reports indicating the potential merger between two telecom rivals in Australia, Vodafone and TPG. Both TPG Telecom Ltd. and Vodafone Hutchison Australia Pty. are major competitors of Singtel in Australia. The two merging could mean less competition for the Singaporean conglomerate. It should be noted that Australia is a significant market for Singtel as it generates more than half of the revenues for the telecom. It is hence unsurprising why the surge in the stock prices of Singtel was the starkest since the global recession in the last decade. Singtel had not witnessed such a surge in its share prices since May 2009.
The reports of the merger are quite reliable if one goes by how the stock market has reacted. There are apparently exploratory discussions between Vodafone and TPG to merge their telecom operations. Singtel is the largest telecom in Southeast Asia and it has been recording stagnating revenues in many of its markets. In some cases, the revenues have dipped, albeit Singtel has managed to keep up the treasure-troves courtesy its other interests including television. Australia is definitely the most important market for Singtel in its telecom division. Optus, owned by Singtel and which is a behemoth down under, will definitely have a smoother run following the merger.
As TPG makes headway into the Singaporean market, now that it has the license to be the fourth telecom company operating mobile phone networks in the city state, but it is unlikely to embark on a disruptive journey. Analysts do not see TPG taking any approach that would disrupt the market, either by predatory pricing or any overly aggressive promotions that could threaten the market share of Singtel. The entry of TPG is being estimated to be rational and more driven by returns than trying to usurp a large share of the consumer or business segment.
Following the reports of the merger and the anticipations of how TPG may mark its foray into Singapore, Daiwa Capital Markets Singapore and Citigroup Global Markets have estimated gains for Singtel. Analyst Ramakrishna Maruvada of Daiwa Capital Markets Singapore has upgraded Singtel and he expects the company to outperform following the actual merger. Singtel is also exploring an opportunity and assessing possibilities of bidding for Amaysim Australia. This would further strengthen the company and help it expand its base of mobile subscribers by over a million numbers. If the merger happens and Singtel does end up acquiring Amaysim Australia, then it could be double whammy for the Singaporean giant. It would indeed consolidate its market down under and share prices would rally further. People are already willing to hold on to its stocks with gumption that it would outperform the prevailing prices, despite the noteworthy surge a few days back.
How TPG makes its presence felt in Singapore will be closely watched and Singtel may already have a response ready to take on the merged brand in Australia and deal with the singleton fourth operator in the island nation.
About the Author
Morris Edwards is a content writer at CompanyRegistrationinSingapore.com.sg, he writes different topics like DBS and Singtel launch digital resources for Singapore SMEs, Price war in Singapore over mobile data and all topics related to Singapore Business and Tech. If you want to Register a Singapore Company visit our website for more info.
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