Singapore Telecom

Singapore Industry Focus
Singapore Telecom Companies

DBS Group Research . Equity 19 Aug 2011
Sector offers >6% yield, 2Q11 Review

M1s higher gearing and weak free cash flow may limit earnings payout to 80%, below last years 100%. SingTel continues to gain mobile revenue share while StarHub is gaining non-mobile subscribers despite absence of English Premier League rights. StarHub is our top pick, trading at 7.4% yield (fixed 20 Scts DPS) versus 6% for M1 & SingTel.
A quick recap of 2Q2011 results. M1 & StarHub reported inline earnings while SingTels earnings were 5% below our expectations. SingTel disappointed on lower than expected earnings contribution from Bharti and Optus. Bharti was hit by 3G rollout costs and higher tax rate in India. Optus, on the other hand, witnessed higher mobile competition as smaller player VHA joined market share battle with incumbent Telstra. StarHub (Buy, TP: S$3.05) is our top pick. StarHubs free cash flow is likely to be ~120% of FY11F earnings, as the company pays minimal cash tax due to its deferred tax assets. StarHub has a fixed dividend policy of 5 Scts per quarter for FY11F. We believe this will be maintained in the coming years. StarHub impressed in the non-mobile segment. Despite loss of EPL and ESPN rights, StarHub continued to gain pay TV subscribers with sequentially stable ARPU. Moderate subscriber growth in the broadband segment and stable ARPU also demonstrated solid execution. M1 (Hold, TP: S$2.60) may not gear up significantly above its peers. At the end of 2Q11, M1 had net debt to annualized EBITDA of 1.1x versus 0.7x for StarHub and SingTel each as shown in the chart on the side. M1s gearing spiked from borrowing S$81m to partly pay for FY10 dividends, as its free cash flow was very weak. Even FY11F free cash flow may be ~70% of FY11F earnings due to fair value accounting for handsets. In our view, investor should expect 80% earnings payout ratio. SingTel (Hold, TP: S$3.20) continued to gain mobile revenue share in Singapore. This was driven by more attractive lineup of handsets and devices offered slightly ahead of peers, focus on pushing data SIM cards by bundling them with fixed broadband service and attractive discounts to subscribers on re-contracting. Peers do not emulate these tactics lest market should become more competitive.
STI :
2,824.96
Analyst Sachin MITTAL +65 6398 7950 sachin@dbsvickers.com TOP PICKS

Price S$ Mkt Cap US$m Target Price S$ Rating
SingTel StarHub M1
2.90 2.69 2.49
38,499 3,842 1,882
3.20 3.05 2.60
HOLD BUY HOLD
Source: DBS Vickers
StarHub BUY for (i) ~7% yield based on annual 20 Scts DPS, official policy is 5 Scts each quarter for 2011 (ii) low to mid-single digit earnings growth from potentially lower handset subsidy burden in FY12F. SingTel HOLD for (i) 6% yield based on 70% payout ratio, official policy is 55-70% payout ratio and (ii) Midsingle digit earnings growth prospects in FY13F (March YE) mainly from growth at Bharti and Telkomsel M1 HOLD for 6% yield based on 80% payout ratio, official policy is min 80% payout ratio (ii) Stable earnings prospects in FY12F as fair value accounting for handsets may offset benefits from National Broadband Network.
Net Debt to annualized EBITDA at the end of 2Q11

1 .40 1 .20 1 .00 0.80 0.60 0.40 0.20 0.00 2008 SingTel 2009 StarHub 201 0 M1 1 201 H 1 0.92 0.74 0.76 0.74 0.74 1 .22 1 .04 0.98 1 .06 0.93 0.750.74
Source: DBS Vickers, quarterly results of companies
www.dbsvickers.com Refer to important disclosures at the end of this report ed: MY / sa: TW
Industry Focus Singapore Telecom Companies
Trends in the Mobile segment

Due to Singapore telcos selling data-only SIM cards (with much lower ARPU), mobile ARPU is diluted and may not convey meaningful information. We prefer to look at mobile revenue instead. SingTel continues to gain mobile revenue share (%)
120% 100% 19.4% 80% 60% 40% 20% 45.7% 48.0% 49.7% 50.8% 51.2% 34.9% 34.3% 33.8% 33.0% 32.8% 17.7% 16.6% 16.2% 16.0%
Handset subsidy share between StarHub and M1

120% 100% 80% 60% 40% 20% 0% 2008 68.4% 71.0% 81.2% 86.3% 80.0% 31.6% 29.0% 18.8% 13.7%
20.0%
2009 StarHub
2010 M1
1Q11
2Q11
Source: Companies, DBS Vickers
0% 2008
2009 SingTel
2010 StarHub
1Q11 M1
2Q11
As shown in the charts above, M1s share of handset subsidy is far lower compared to its mobile revenue share. This can be attributed to its adoption of fair value accounting policy in 2010. M1 recognizes handset revenue at the cost of future service revenue, leading to lower handset subsidy costs. This practice boosted M1s past earnings at the cost of future earnings. With potentially slower smartphone sales in 2012F, we are afraid that M1s share of mobile revenue may decline while its share of handset subsidy may increase.
SingTel continued to gain revenue share in both postpaid and prepaid segments. This was driven by more attractive line of handsets and devices offered slightly earlier than peers, its key focus on pushing data-only SIM cards by bundling them with fixed broadband service and attractive discounts to existing subscribers on re-contracting.
Trends in the Fixed Broadband Segment

SingTel & StarHub continue to add fixed broadband customers as fibre has reached only 40% of households despite being rolled out to 70% of households. A big majority of consumers are locked into their existing contracts and also do not want to pay extra for higher speeds on fibre. On top of this, SingTel and StarHub offer their own fiber solutions to customers who want to switch to higher speeds. SingTel & StarHub added fixed broadband subscribers (K)
1000
Divergence between revenue & subsidy share

Mobile revenue share between StarHub and M1
120% 100% 80% 60% 40% 20% 0% 2008 64.2% 65.9% 67.1% 67.0% 67.1% 35.8% 34.1% 32.9% 33.0% 32.8%
800 600 400 200
373
400
422
425
431
495
512
522
533
537
2009
StarHub
2010
M1
1Q11
2Q11
0 2008
2009
2010 SingTel StarHub
1Q11
2Q11
Source: Companies, DBS Vickers Source: Companies, DBS Vickers
Page 2
Broadband ARPU stabilized

StarHub stabilized its broadband ARPU by focusing on selling lower speed plans and offering multiservice discounts. The strategy seems to work, as new users are highly price sensitive users. Fixed broadband ARPU (S$) stabilized for StarHub
70 60 50 40 30 20 10 0 2008 2009 2010 StarHub 1Q11 2Q11 58
Pay TV ARPU stabilized for StarHub

Most importantly, StarHub was able to stabilize pay TV ARPU in the absence of EPL content. SingTel & StarHub added fixed broadband subscribers (K)
60 50 40 30 20 57 56 52 49
49
51
47
45
45
10 0 2008 2009 2010 StarHub 1Q11 2Q11
Trends in the Corporate Data Segment

Due to pricing pressure from M1 and other new entrants, corporate data business showed some revenue weakness. As expected, SingTel witnessed the most adverse impact, being a major player in the segment. We see this as a structural trend due to new entrants through National Broadband Network.
Trends in the Pay TV Segment

Despite losing English Premier League (EPL) rights for 2010-12 season, StarHub was able to grow its pay TV subscriber base by offering price discounts and newer content. Pay TV subscriber base (K) on rise for StarHub & SingTel
1000 800 600 400 200 0 2008 2009
SingTel
Corporate data revenue (S$m) declined sequentially

1600 1400 1200 1000 800 600 400 200 0
247
269
278
538 539 524 155 264 2010

StarHub
542 292
544
1174
1211
1226
70 316
313
69 301 2Q11
1Q11
2Q11
2008
2009 SingTel
2010
1Q11 StarHub
Source: Companies, DBS Vickers Source: Companies, DBS Vickers
Page 3
Regional Valuations
Company FYE Mkt Cap (US$m) Price (S$) 17-Aug 23,668 75.60 4.60 14.60 1,503 30.04 5.36 4.05 4.98 2,829 2.49 2.97 2.76 925 115.00 68.25 4.12 3,953 5,450 7,200 5,300 11,550 2,175 Target Price (S$) % Upside Rcmd Avg 6-mth Vol (m) CAGR 10-12 (%) PE (x) 11F 12F Dividend Yield (%) 11F 12F P/BV 10A EV/EBITDA 11F 12F
China / Hong Kong China Mobile China Telecom China Unicom Malaysia Digi.Com Maxis Bhd Telekom Axiata Group Singapore M1 SingTel Starhub
Dec Dec Dec
194,754 8,195 44,162
74.00 5.20 18.00
-2% 13% 23%
Hold Buy Buy
21.4 63.7 40.0
3 20 66 7 -2 6 4 15 8 3 5 10 5 4 5 nm 5 28 7 20 na 89
10.0 18.0 52.6 10.8 22.1 16.5 25.7 14.1 17.1 13.3 11.9 15.3 12.3 14.8 13.6 98.2 42.2 24.2 11.4 11.8 72.2 23.3
9.8 13.8 28.0 9.9 21.0 15.6 23.9 12.4 15.6 13.4 11.2 14.7 11.5 14.3 14.1 70.8 33.0 17.0 10.8 10.3 29.7 17.0
4.3% 1.9% 0.7%
4.4% 1.9% 0.7%
2.1x 1.3x 1.4x
3.7x 4.3x 5.2x
3.4x 3.7x 4.3x
Dec Dec Dec Dec
7,856 13,522 4,873 14,177
30.80 5.10 3.90 5.60
3% -5% -4% 12%
Hold Hold Hold Buy
0.6 2.8 6.9 15.6
5.4% 6.0% 4.8% 2.5%
5.4% 6.4% 4.8% 2.8%
17.3x 4.6x 1.9x 2.2x
8.8x 9.6x 6.3x 5.5x
8.1x 9.3x 6.2x 4.8x
Dec Mar Dec
1,882 39,428 3,941
2.60 3.20 3.05
4% 8% 11%
Hold Hold Buy
1.0 23.6 2.0
6.0% 6.3% 7.2%
6.0% 6.3% 7.5%
7.7x 2.0x 87.3x
8.2x 6.9x 7.9x
8.1x 6.7x 7.6x
Thailand Advanced Info Service Dec Total Access CommunicationsDec Dec True Corporation Indonesia Indosat PT Telekom XL Axiata PT Sarana Menara Tower Bersama
11,450 5,412 2,001
121.71 75.07 4.51
6% 10% 9%
Buy Buy Fully Valued
6.0 7.5 100.5
6.5% 7.4% 0.0%
6.8% 7.1% 0.0%
8.3x 2.3x 3.9x
6.6x 5.7x 5.6x
6.2x 5.7x 5.7x
Dec Dec Dec Dec Dec
3,477 17,041 5,300 1,383 1,164
7,000 7,700 7,100 15,000 2,700
28% 7% 34% 30% 24%
Buy Hold Buy Buy Buy
2.2 17.8 4.8 0.0 3.3
2.1% 4.8% 4.2% 0.0% 0.0%
2.9% 5.1% 4.9% 0.0% 0.0%
1.7x 3.5x 3.9x 9.1x 4.6x
5.1x 4.4x 5.0x 12.0x 15.1x
4.5x 4.2x 4.4x 9.8x 12.0x
* PT Telkom is adjusted for SingTel's 35% stake in Telkomsel
Singapore Telecom 11 & 12 earnings respectively Source: DBS Vickers
Page 4
Singapore Company Focus
StarHub
Bloomberg: STH SP
Reuters: STAR.SI
BUY S$2.69 STI : 2,824.96

Price Target : 12-Month S$ 3.05 Reason for Report : Sector Report Potential Catalyst: Quarterly dividends Analyst Sachin MITTAL +65 6398 7950 sachin@dbsvickers.com
7% plus yield, not ex-growth

R e la tiv e In d e x 211 191 171 151 131 111 91 71 2011
Annual DPS of 20 Scts (over 7% yield) can be sustained over the next three years Revised monthly subscription fee for pay TV to benefit 2H11F earnings Maintain BUY with DCF-based TP of S$3.05.
Price Relative
S$ 3 .4 0 3 .2 0 3 .0 0 2 .8 0 2 .6 0 2 .4 0 2 .2 0 2 .0 0 1 .8 0 1 .6 0 2007 2008 2009 2010
Management does not rule out upside potential to 20 Scts DPS. Management does not rule out further capital
management over the next 18 months in addition to 20 Scts DPS. StarHubs free cash flow is likely to be ~120% of FY11F earnings, as the company pays minimal cash tax due to its deferred tax assets. Besides healthy free cash flow generation of S$40m-S$350 from operations in FY11F-12F, StarHub may receive total cash payment of of S$40-60m from the regulator over the next three years on achieving certain milestones as OpCo for National Broadband Network. StarHub received its first payment of S$60m from the regulator last year.
Sta rH u b (LH S)
Re la tive ST I IN D E X (R H S)
Forecasts and Valuation

FY Dec (S$ m) 2009A 2010A 2011F 2012F
Turnover EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) EPS (S cts) EPS Pre Ex. (S cts) EPS Gth Pre Ex (%) Diluted EPS (S cts) Net DPS (S cts) BV Per Share (S cts) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): Consensus EPS (S cts): Other Broker Recs:
2,150 654 385 320 320 18.6 18.6 1 18.6 18.4 7.0 14.4 14.4 6.9 8.1 6.9 38.3 5.6 278.1
2,238 601 318 264 264 15.4 15.4 (17) 15.4 20.0 3.2 17.5 17.5 7.1 8.7 7.4 85.0 10.8 302.1
2,333 669 373 309 309 18.0 18.0 17 18.0 19.9 1.4 14.9 14.9 7.5 7.7 7.4 194.7 23.3 793.6 17.7 S: 5
2,384 693 388 322 322 18.8 18.8 4 18.8 20.8 0.5 14.3 14.3 7.5 7.4 7.7 509.3 59.3 1,964.9 19.0 H: 10
Revised monthly subscription fee from Aug onwards.

StarHub has revised up its residential cable TV monthly subscription by $2 from Aug 1 onwards. The revised rate applies to both existing subscribers (including those on contracts) and new subscribers. With close to 542K pay TV subscribers; this should generate additional revenue of S$6m & S$13m in 2H11F & FY12F revenue respectively.
Over 7% yield & mid-single digit earnings growth in FY12F. While there is not much clarity on the cross-carriage of
content, it should help to lower the content cost over the long run benefiting pay TV players. BUY with S$3.05 TP based on DCF (WACC 7.6%, terminal growth 0%), implying potential returns of 18% including 7% yield.
B: 7
ICB Industry : Telecommunications ICB Sector: Mobile Telecommunications Principal Business: Spore-based integrated information, communications and entertainment company, providing a broad range of mobile, cable TV, broadband and fixed network services.
Source of all data: Company, DBS Vickers, Bloomberg
At A Glance Issued Capital (m shrs) Mkt. Cap (S$m/US$m) Major Shareholders Asia Mobile Holdings (%) Nippon Telegraph (%) Mediacorp (%) Free Float (%) Avg. Daily Vol.(000)
1,715 4,613 / 3,791 49.1 10.0 7.5 33.5 2,334
Page 5
www.dbsvickers.com Refer to important disclosures at the end of this report ed: JS / sa: TAT
Company Focus StarHub
Segmental Breakdown
FY Dec 2008A 2009A 2010A 2011F 2012F
Revenues (S$ m) Mobile Cable TV & Broadband Fixed Network Equipment sale Others Total EBITDA (S$ m) Mobile Cable TV & Broadband Fixed Network Equipment sale Others Total EBITDA Margins (%) Mobile Cable TV & Broadband Fixed Network Equipment sale Others Total Income Statement (S$ m)
FY Dec
1,080 656 299 98 2,133 398 145 104
1,094 646 317 92 2,150 395 137 122
1,182 631 332 93 2,238 352 126 123
1,290 595 354 94 2,333 422 119 127
1,324 596 370 95 2,384 436 122 135
Higher pay TV fee may boost EBITDA slightly
647 36.8 22.1 34.7
654 36.1 21.2 38.4
601 29.8 20.0 37.0
669 32.8 20.0 36.0
693 32.9 20.5 36.5
StarHub to gain in this segment from launch of NBN
30.3
30.4
26.9
28.7
29.1 Margins Trend
2008A
2009A
2010A
2011F
2012F
20.0% 19.0% 18.0% 17.0% 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 2009A 2010A 2011F
N Incom M et e argin%
Revenue Other Opng (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Preference Dividend Net Profit Net Profit before Except. EBITDA Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Margins & Ratio Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x)
2,133 0 413 0 0 (26) 0 387 (72) 0 0 316 316 648 6.0 0.8 (1.8) (4.9) 19.4 14.8 291.1 18.7 31.3 97.8 16.2
2,150 0 408 0 0 (23) 0 385 (65) 0 0 320 320 654 0.8 0.9 (1.1) 1.2 19.0 14.9 278.1 18.9 31.6 99.0 17.7
2,238 6 340 0 0 (22) 0 318 (54) 0 0 264 264 601 4.1 (8.1) (16.8) (17.5) 15.2 11.8 302.1 15.0 26.8 130.0 15.5
2,333 6 394 0 0 (21) 0 373 (63) 0 0 309 309 669 4.3 11.4 15.8 17.3 16.9 13.3 793.6 17.1 30.7 110.4 18.9
2,384 6 409 0 0 (21) 0 388 (66) 0 0 322 322 693 2.2 3.7 3.8 4.1 17.1 13.5 1,964.9 17.5 31.1 111.0 19.8
2012F
O peratingM argin%
Adversely impacted by high iPhone subsidy costs in the first year of iPhone rights
Source: Company, DBS Vickers
Page 6

Balance Sheet (S$ m)
FY Dec 2008A 2009A 2010A 2011F 2012F
Asset Breakdown 896 0 356 126 18 133 132 1,661 219 588 694 51 110 0 1,662 (305) (787) 22.2 100.9 4.2 1.3 0.5 0.3 7.2 7.2 24.3 3.6 883 0 356 234 18 107 132 1,730 219 658 694 39 120 0 1,730 (400) (679) 20.4 92.5 4.4 1.3 0.6 0.4 5.6 5.6 25.4 3.5 894 0 356 237 28 149 132 1,796 219 760 604 159 54 0 1,796 (451) (586) 20.9 97.9 5.1 1.3 0.6 0.4 10.8 10.8 33.0 3.1 898 0 356 270 29 146 132 1,830 219 738 604 245 24 0 1,830 (431) (553) 23.1 105.3 6.2 1.3 0.6 0.4 23.3 23.3 34.0 3.2 878 0 356 285 30 159 132 1,840 219 751 604 256 9 0 1,840 (431) (538) 23.3 101.5 6.3 1.3 0.6 0.5 59.3 59.3 32.2 3.2
Inventory 2.2%ebtors - 11.1% D
Net Fixed Assets Invts in Associates & JVs Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets ST Debt Other Current Liab LT Debt Other LT Liabilities Shareholders Equity Minority Interests Total Cap. & Liab. Non-Cash Wkg. Capital Net Cash/(Debt) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Asset Turnover (x) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X)
Bank, Cashand LiquidA ssets 18.1% N FixedA et ssets - 68.6% A ssociates'/JVs 0.0%
Net debt was reduced due to S$60m cash payment from the regulator for achieving certain OpCo milestones
Cash Flow Statement (S$ m)

FY Dec 2008A 2009A 2010A 2011F 2012F
Capital Expenditure
300
Pre-Tax Profit Dep. & Amort. Tax Paid Assoc. & JV Inc/(loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Capital Exp.(net) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF Div Paid Chg in Gross Debt Capital Issues Other Financing CF Net Financing CF Currency Adjustments Chg in Cash Opg CFPS (S cts) Free CFPS (S cts)
387 235 11 0 (35) 0 598 (222) 0 0 0 3 (219) (308) (54) 2 (29) (388) 0 (10) 36.9 21.9
385 245 (6) 0 35 10 670 (232) 0 0 0 0 (232) (309) 0 0 (24) (333) 2 108 37.0 25.6
318 261 0 0 62 6 646 (272) 0 0 0 4 (268) (343) (90) 0 58 (375) 0 3 34.1 21.8
373 275 (11) 0 (29) 6 615 (280) 0 0 0 0 (280) (343) 0 0 40 (303) 0 32 37.5 19.5
388 285 (63) 0 (4) 6 612 (265) 0 0 0 0 (265) (342) 0 0 10 (332) 0 16 35.9 20.2
250 200 150 100 50 0 2009A 2010A 2011F 2012F
Capital Expenditure (-)
Second cash payment from the regulator. May be delayed to 2012F but should not be a matter of concern
Page 7

Quarterly / Interim Income Statement (S$ m)
FY Dec 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011
Margins Trend
25% 20%
Revenue Other Oper. (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Net Profit Net profit bef Except. EBITDA Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Margins Opg Profit Margins (%) Net Profit Margins (%)
569 (62) 78 0 0 (6) 0 71 (14) 0 58 58 107
552 (65) 107 0 0 (6) 0 101 (19) 0 82 82 107
559 (67) 100 0 0 (7) 0 93 (12) 0 81 81 100
559 (66) 91 0 0 (5) 0 86 (17) 0 69 69 91
569 (64) 96 0 0 (4) 0 92 (14) 0 78 78 96
15%
10%
5%
0% 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
O peratingM argin %
N Incom M et e argin %
Due to high equipment and marketing cost. High equipment cost is a concern due to slow adoption of Android phones
2.2 35.0 35.0 35.8 13.7 10.2
(3.0) 37.7 37.7 42.1 19.4 14.9
1.2 (7.1) (7.1) (2.3) 17.8 14.4
(0.1) (9.0) (9.0) (14.2) 16.2 12.4
1.8 5.4 5.4 12.9 16.8 13.7 Adversely impacted by higher equipment and marketing costs in 1Q11
Page 8
SingTel
Bloomberg: ST SP
Reuters: STEL.SI
HOLD S$2.90 STI : 2,824.96

Price Target : 12-month S$ 3.20 Reason for Report : Sector report Potential Catalyst: half yearly dividends DBSV vs Consensus: 2% below consensus as Singapore earnings can decline despite stable EBITDA Analyst Sachin MITTAL +65 6398 7950 sachin@dbsvickers.com
Too much optimism on Bharti

Bharti may grow slower than expected, eroding SingTels appeal as a cheap proxy to Bharti SingTel faces challenges from National Broadband Network in Singapore while competition is a concern in Australia HOLD for 6% yield; SOP-based TP of S$3.20 implies 12x FY12F PE (historical average: 13.4x) Bharti may grow slower than expected. While improved competitiveness in India and margin improvement in Africa bode well for Bharti, the street underestimated the cost pressure from 3G rollout and higher tax rate in India, in our view. Keeping in mind that Bhartis 1Q11 earnings declined 28% y-o-y, there are downside risks to Bhartis earnings growth of 15% in FY12F. Face challenges in Singapore and Australia. SingTel faces challenges in Singapore from new entrants using the National Broadband Network (NBN), especially in the corporate data segment. SingTel is keen to offset these challenges with growth in cloud computing and IT revenue. Meanwhile, competition is getting more intense in Australia, where smaller player VHA joined the market share battle with incumbent Telstra. With 3% earning growth, investors might appreciate regular yield exceeding 6%. We are projecting a 70% payout ratio for FY11F/12F, towards the top end of SingTels guidance of 55%-70%. Given lacklustre growth prospects, SingTel needs to (i) increase its earnings payout ratio to ~80% to formulate an attractive (~6.5%) dividend yield; or (ii) perform capital management proactively on top of its 70% payout ratio. HOLD with SOP-based TP of S$3.20.
Price Relative
S$ 4 .4 0 3 .9 0 3 .4 0 2 .9 0 124 2 .4 0 1 .9 0 2007 104 84 2011 R e la tiv e In d e x
204 184 164 144
2008
2009
2010
Sing a p ore T e le com (LH S)
Re la tive ST I IN D E X (R H S)

FY Mar (S$ m) 2010A 2011A 2012F 2013F
Turnover EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) EPS (S cts) EPS Pre Ex. (S cts) EPS Gth Pre Ex (%) Diluted EPS (S cts) Net DPS (S cts) BV Per Share (S cts) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): Consensus EPS (S cts): Other Broker Recs:
16,871 7,275 5,043 3,907 3,907 24.6 24.6 13 24.6 14.3 140.8 11.8 11.8 10.3 7.1 4.9 2.1 0.2 18.2
18,139 7,290 5,021 3,822 3,822 24.1 24.1 (2) 24.1 16.8 150.6 12.1 12.1 11.0 7.1 5.8 1.9 0.2 16.5
18,617 7,557 5,203 3,954 3,954 24.9 24.9 3 24.9 18.7 158.7 11.7 11.7 11.1 6.8 6.4 1.8 0.2 16.1 24.7 S: 1
19,236 7,835 5,539 4,218 4,218 26.6 26.6 7 26.6 18.6 166.5 10.9 10.9 11.0 6.5 6.4 1.7 0.2 16.3 26.6 H: 12
B: 11
ICB Industry : Telecommunications ICB Sector: Telecommunications Principal Business: SingTel operates and provides telecommunication systems and services and engages in investment holdings.
At A Glance Issued Capital (m shrs) Mkt. Cap (S$m/US$m) Major Shareholders Temasek Holdings Pte Ltd (%) Free Float (%) Avg. Daily Vol.(000)
15,940 46,225 / 38,499 54.4 45.6 26,712
Page 9
Company Focus SingTel
Sum of the parts valuation based on target prices of associates

Company Basis SingTel's Stake Value of Stake 28533 10488 Contribution per share 1.82 0.59 Percentage Contribution 57% 19%
SingTel + Optus Bharti
DCF based target price assuming 8% WACC and Terminal growth rate of 0% Rs 310 per share based on 16x FY12F PER
100% 32%
Telkomsel Globe AIS Others SingTel's SOTP Price
Based on 12x FY12F (March YE) earnings Consensus Target price of PHP 841 DBS Vickers Target price of THB 122 Includes Singpost and others 10% holding company discount in light of strong SGD versus regional currencies
35% 47% 22% 30%
8051 1549 3371 833
0.46 0.09 0.19 0.05 3.20
14% 3% 6% 1%
Source: DBS Vickers
Page 10
Key Assumptions
FY Mar 2009A 2010A 2011A 2012F 2013F
Singapore Revenue Singapore EBITDA Optus Revenue (A$m) Optus EBITDA Margin Associate pre-tax Segmental Breakdown Income Statement (S$ m)
FY Mar
5,546.6 39.0 8,320.6 24.8 2,051.1
5,995.1 38.2 8,948.8 24.1 2,410.2
6,393.4 34.8 9,396.2 23.9 2,166.4
6,597.1 34.5 9,772.1 23.8 2,363.0
6,855.7 34.3 10,065.2 23.6 2,557.2
Margins Trend
2009A 2010A 2011A 2012F 2013F
25.0% 24.0%
14,933 (1,641) 2,697 (24) 2,051 (288) (6) 4,429 (982) 0 0 3,448 3,454 6,458 0.6 (7.6) 1.9 (13.0) 18.1 23.1 16.6 10.1 7.0 58.0 9.4
16,871 (1,783) 2,969 0 2,410 (336) 0 5,043 (1,136) 0 0 3,907 3,907 7,275 13.0 12.7 10.1 13.3 17.6 23.2 18.2 11.4 7.6 58.0 8.8
18,139 (1,892) 3,137 0 2,166 (283) 0 5,021 (1,199) 0 0 3,822 3,822 7,290 7.5 0.2 5.7 (2.2) 17.3 21.1 16.5 10.5 7.5 70.0 11.1
18,617 (1,979) 3,120 0 2,363 (281) 0 5,203 (1,249) 0 0 3,954 3,954 7,557 2.6 3.7 (0.5) 3.5 16.8 21.2 16.1 10.5 7.1 75.0 11.1
19,236 (1,927) 3,256 0 2,557 (274) 0 5,539 (1,321) 0 0 4,218 4,218 7,835 3.3 3.7 4.3 6.7 16.9 21.9 16.3 10.8 7.2 70.0 11.9
23.0% 22.0% 21.0% 20.0% 19.0% 18.0% 17.0% 16.0% 2009A 2010A 2011F 2012F 2013F
O peratingM argin% N Incom M et e argin%
Singapore and Australia may face margin pressure due to NG-NBN and aggressive Telstra respectively
Page 11

FY Mar 2009A 2010A 2011A 2012F 2013F
Asset Breakdown 9,784 7,931 11,746 1,076 107 2,575 37 33,255 1,427 3,676 5,668 1,984 20,464 24 33,243 (958) (6,019) 62.7 122.7 4.4 0.4 0.7 0.7 0.3 0.3 26.0 4.0 9,838 8,830 11,971 1,613 121 2,909 37 35,317 1,427 4,043 5,668 1,784 22,372 24 35,318 (977) (5,482) 59.3 113.5 4.1 0.5 0.9 0.8 0.2 0.2 25.5 4.2 10,117 9,517 12,586 1,697 130 3,127 37 37,210 1,427 4,383 5,668 1,784 23,928 24 37,213 (1,089) (5,398) 60.7 114.9 4.1 0.5 0.9 0.8 0.2 0.2 29.5 4.1 10,333 10,324 12,398 1,946 133 3,210 37 38,379 1,427 4,480 5,668 1,577 25,206 24 38,382 (1,101) (5,150) 62.1 117.2 4.2 0.5 0.9 0.9 0.2 0.2 29.4 4.2 10,449 11,174 12,375 2,081 137 3,317 37 39,570 1,427 4,615 5,668 1,387 26,459 24 39,580 (1,124) (5,015) 61.9 114.8 4.1 0.5 0.9 0.9 0.2 0.2 29.0 NA
Inventory D 0.5%ebtors - 12.5%
Bank, Cashand LiquidA ssets 6.6%
N FixedA et ssets - 41.3%
A ssociates'/JVs 39.0%

FY Mar 2009A 2010A 2011A 2012F 2013F
Capital Expenditure
2100 2050 2000 1950 1900 1850 1800 1750 1700 1650 2009A 2010A 2011F
4,429 1,734 (335) (2,051) 441 (124) 4,094 (1,847) 0 (194) 1,068 (349) (1,322) (1,999) (466) 0 (553) (3,018) (50) (296) 23.0 14.1
5,043 1,897 (503) (2,410) 602 (158) 4,470 (1,807) 0 0 858 (372) (1,321) (2,000) 0 0 (634) (2,634) 23 538 24.3 16.8
5,021 1,989 (483) (2,166) 26 (192) 4,194 (2,091) (600) 0 849 0 (1,842) (2,266) 0 0 0 (2,266) 0 86 26.2 13.2
5,203 2,077 (568) (2,363) 10 (222) 4,136 (2,087) 0 0 877 0 (1,209) (2,675) 0 0 0 (2,675) 0 252 26.0 12.9
5,539 2,026 (570) (2,557) 13 (253) 4,197 (2,061) 0 0 968 0 (1,093) (2,965) 0 0 0 (2,965) 0 139 26.3 13.4
2012F
2013F
Operating cash minus investing cash flow likely to remain comfortably above S$3 bn without any acquisitions
Page 12

FY Mar 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012
Margins Trend
35% 30%
4,289 (460) 771 0 541 (79) 0 1,233 (292) 0 942 941 1,756
4,436 (455) 708 0 567 (88) 0 1,187 (296) 0 891 891 1,756
4,706 (454) 784 0 518 (66) 30 1,266 (266) 0 1,000 970 1,805
4,643 (468) 893 0 514 (92) (6) 1,309 (317) 0 992 998 1,907
4,605 (470) 783 0 508 (93) 60 1,258 (342) 0 916 856 1,792
25% 20% 15% 10% 5% 0% 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
O peratingM argin %
N Incom M et e argin %
(4.1) (5.5) (9.2) (7.2) 18.0 22.0
3.4 (2.2) (8.2) (5.4) 16.0 20.1
6.1 2.8 10.7 12.2 16.7 21.2
(1.3) 5.7 13.9 (0.8) 19.2 21.4
(0.8) (6.0) (12.3) (7.7) 17.0 19.9
Higher operating profit from rebound in Singapore
Page 13
M1
Bloomberg: M1 SP
Reuters: MONE.SI
HOLD S$2.49 STI : 2,824.96

Price Target : 12-Month S$ 2.60 Reason for Report : Sector Report Potential Catalyst: Gaining share in the broadband market DBSV vs Consensus : Street is too optimistic on FY12F earnings, disregrading the impact of fair value accounting perhaps Analyst Sachin MITTAL +65 6398 7950 sachin@dbsvickers.com
Fair value accounting versus NBN

Fair value accounting for handsets may offset benefit from National Broadband Network in FY12F Project 80% payout ratio versus 100% earlier as its net debt to EBITDA is much higher than peers Maintain HOLD, TP unchanged at S$2.60 based on DCF (WACC 8.4%, terminal growth 0%) FY12F mobile earnings at risk. Under fair value accounting (FVA), additional service revenue over the contract period attributed to the smartphone is recognized upfront as handset revenue a practice unique to M1. This boosted M1s past earnings at the cost of future earnings. Investors should keep in mind that FY11F benefits from: (i) reduction of S$15-18m in operating costs due to lower depreciation and leased circuit costs; and (ii) significant handset revenue due to high demand for smartphones. With smartphone penetration exceeding 60% in Singapore, smartphone sale is likely to slowdown in FY12F. This may have an adverse impact on M1s handset revenue and no major cost savings are expected either. Non-mobile contribution may not be significant in FY12F. Overall, broadband may contribute S$15-16m of earnings by FY15F. However, it may take over 2 years to reap significant profit from the broadband business. M1 needs to offer higher price discounts for its broadband service due to the lack of pay TV offering. Margins would also be affected by additional cost of leasing international bandwidth and the lack of scale. Hold for 6% yield. We project 80% payout ratio (official policy) versus 100% in 2010, as its net debt to EBITDA of 1.1x is much higher than peers and it may not gear up further for dividend payments.
At A Glance Issued Capital (m shrs) Mkt. Cap (S$m/US$m) Major Shareholders Axiata Group (%) Keppel T&T Ltd (%) Singapore Press Holdings (%) Free Float (%) Avg. Daily Vol.(000)
Price Relative
S$ 2 .7 0 2 .5 0 2 .3 0 2 .1 0 1 .9 0 1 .7 0 1 .5 0 1 .3 0 1 .1 0 2007 2008 2009 2010 R e la t iv e In d e x 218 198 178 158 138 118 98 78 2011
M 1 (L H S )
R e la t iv e S T I IN D E X ( R H S )

FY Dec (S$ m) 2009A 2010A 2011F 2012F
Revenue EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) EPS (S cts) EPS Pre Ex. (S cts) EPS Gth Pre Ex (%) Diluted EPS (S cts) Net DPS (S cts) BV Per Share (S cts) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): Consensus EPS (S cts): Other Broker Recs:
781 302 181 150 145 16.9 16.3 (3) 16.8 13.5 27.5 14.7 15.3 10.0 8.1 5.4 9.1 1.0 65.6
980 309 190 158 158 17.5 17.5 7 17.5 17.5 32.2 14.3 14.3 12.0 8.2 7.0 7.7 1.0 58.9
970 313 204 170 170 18.8 18.8 8 18.7 15.0 33.5 13.3 13.3 9.1 8.2 6.0 7.4 1.0 57.2 18.7 S: 3
980 313 203 167 167 18.5 18.5 (1) 18.5 14.8 37.0 13.4 13.4 8.6 8.1 6.0 6.7 0.9 52.6 20.0 H: 7
B: 11
908 2,260 / 1,858 29.3 19.7 13.7 37.3 999
ICB Industry : Telecommunications ICB Sector: Mobile Telecommunications Principal Business: MobileOne is one of the main telecommunication operators in Singapore.
Page 14
Company Focus M1
Segmental Breakdown
FY Dec 2008A 2009A 2010A 2011F 2012F
Revenues (S$ m) Post Paid Cellular Pre Paid Cellular IDD Revenue Equipment Sales Total Income Statement (S$ m)
FY Dec
538 68 140 54 800
495 70 131 86 781
502 77 129 271 980
524 86 128 233 970
523 95 126 236 980
Surged because M1 started to apply fair value accounting from FY10 onwards
2008A
2009A
2010A
2011F
2012F
Margins Trend
25.0% 23.0% 21.0% 19.0% 17.0% 15.0% 2008A 2009A 2010A 2011F 2012F
800 (118) 192 0 0 (8) 0 184 (35) 0 0 150 150 313 (0.4) (2.0) (5.7) (13.0) 24.0 18.7 71.9 18.1 26.8 80.0 24.2
781 (119) 183 0 0 (8) 6 181 (31) 0 0 150 145 302 (2.3) (3.5) (4.7) 0.6 23.5 19.2 65.6 18.4 25.8 80.0 24.2
980 (114) 194 0 0 (4) 0 190 (32) 0 0 158 158 309 25.4 2.1 6.0 4.8 19.8 16.1 58.9 17.6 25.0 100.0 44.9
970 (105) 209 0 0 (4) 0 204 (35) 0 0 170 170 313 (1.0) 1.5 7.3 7.5 21.5 17.5 57.2 17.2 24.3 80.0 48.1
980 (105) 208 0 0 (5) 0 203 (36) 0 0 167 167 313 1.0 0.0 (0.3) (1.2) 21.2 17.1 52.6 16.2 22.6 80.0 43.0
Operating Margin %
Net Income Margin %

Official policy is minimum 80% payout
Page 15
Company Focus M1
FY Dec 2008A 2009A 2010A 2011F 2012F
Asset Breakdown (2009) 611 0 83 17 8 80 3 803 0 233 250 107 214 0 803 (141) (233) 36.8 195.4 8.3 1.0 0.5 0.4 1.1 1.1 38.0 3.5 612 0 83 7 8 120 3 834 0 224 250 115 245 0 834 (92) (243) 46.9 197.5 8.4 1.0 0.6 0.6 1.0 1.0 48.0 3.3 598 0 83 9 10 253 3 956 0 274 297 94 291 0 956 (8) (288) 69.5 142.2 6.0 1.1 1.0 1.0 1.0 1.0 33.7 4.0 609 0 83 31 10 281 3 1,018 0 274 347 94 302 0 1,018 20 (316) 100.5 158.8 6.7 1.0 1.2 1.1 1.0 1.0 33.5 4.0 617 0 83 43 10 297 3 1,053 0 278 347 94 334 0 1,053 33 (304) 107.7 156.2 6.6 0.9 1.3 1.2 0.9 0.9 32.5 4.0 Capital Expenditure
2008A 2009A 2010A 2011F 2012F
140
Debtors 29.1%
Inventory 1.2% Bank, Cash and Liquid Assets 1.0% Associates'/J Vs 0.0%
Net Fixed Assets 68.7%

FY Dec
184 121 (48) 0 0 (3) 254 (95) 0 0 0 (2) (97) (128) (35) 0 0 (163) 0 (6) 28.6 17.9
181 119 (35) 0 (44) 0 221 (120) (14) 0 0 0 (134) (120) 0 0 22 (97) 0 (10) 29.8 11.4
190 114 (31) 0 (86) 0 188 (100) (20) 0 0 0 (120) (120) 47 9 (1) (66) 0 2 30.3 9.7
204 105 (32) 0 (31) 0 246 (116) 0 0 0 0 (116) (158) 50 0 0 (108) 0 22 30.6 14.3
203 105 (35) 0 (13) 0 260 (113) 0 0 0 0 (113) (136) 0 0 0 (136) 0 12 30.3 16.3
120 100 80 60 40 20 0 2008A 2009A 2010A 2011F 2012F
Assuming S$94m capex and S$22m paid for spectrum.
Page 16
Company Focus M1
FY Dec 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011
Margins Trend
30% 25%
223 (28) 51 0 0 (2) 0 50 (9) 0 41 41 79
246 (30) 49 0 0 (1) 0 48 (8) 0 39 39 79
262 (29) 48 0 0 (1) 0 46 (8) 0 39 39 48
258 (25) 53 0 0 (1) 0 52 (9) 0 43 43 53
245 (26) 53 0 0 (2) 0 52 (9) 0 43 43 53
20% 15% 10% 5% 0%

8 0 0 2 Q 4 9 0 0 2 Q 1 9 0 0 2 Q 2 9 0 0 2 Q 3 9 0 0 2 Q 4 0 1 0 2 Q 1 0 1 0 2 Q 2 0 1 0 2 Q 3 0 1 0 2 Q 4 1 1 0 2 Q 1
Operating Margin %
Net Income Margin %
(10.4) 4.5 3.2 3.6 22.9 18.3
10.1 (0.8) (3.5) (3.4) 20.0 16.0
6.8 (39.6) (2.8) (2.0) 18.2 14.7
(1.8) 10.7 10.7 10.1 20.5 16.5
(4.7) 0.8 0.8 0.7 21.7 17.4
Benefited from lower depreciation charges as some assets were fully depreciated
Page 17
DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends

DBS Vickers Research is available on the following electronic platforms: DBS Vickers (www.dbsvresearch.com); Thomson (www.thomson.com/financial); Factset (www.factset.com); Reuters (www.rbr.reuters.com); Capital IQ (www.capitaliq.com) and Bloomberg (DBSR GO). For access, please contact your DBSV salesperson. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers Research (Singapore) Pte Ltd ("DBSVR"), a direct wholly-owned subsidiary of DBS Vickers Securities (Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVR. It is being distributed in the United States by DBSV US, which accepts responsibility for its contents. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBS Vickers Securities (USA) Inc (DBSVUSA) directly and not its affiliate. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVR, DBSVS, and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. DBSVR accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBSVR, DBSVS, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by DBSVR, DBSVS and/or DBSVH (and/or any persons associated with the aforesaid entities), that: (a) (b) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 19 Aug 2011, the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (interest includes direct or indirect ownership of securities, directorships and trustee positions).
Page 18

COMPANY-SPECIFIC / REGULATORY DISCLOSURES DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries do not have a proprietary position in the company mentioned as of 1. 17-Aug-2011 PT. DBS Vickers Securities Indonesia ("DBSVI") has a proprietary position in Indosat (ISAT),Telekomunikasi Indonesia (TLKM), AXIATA (EXCL) recommended in this report as of 19 Aug 2011. 2. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered brokerdealer, may beneficially own a total of 1% or more of any class of common equity securities of the company mentioned as of 19 Aug 2011. Compensation for investment banking services: i. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA may have received compensation, within the past 12 months, and within the next 3 months receive or intends to seek compensation for investment banking services from the company mentioned. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.
3.
ii.
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Singapore Industry Focus

Singapore Telecom Companies

Sector offers >6% yield, 2Q11 Review

Analyst Sachin MITTAL +65 6398 7950 sachin@dbsvickers.com TOP PICKS

2.90 2.69 2.49

38,499 3,842 1,882

3.20 3.05 2.60

HOLD BUY HOLD

Source: DBS Vickers

Net Debt to annualized EBITDA at the end of 2Q11

Source: DBS Vickers, quarterly results of companies

Industry Focus Singapore Telecom Companies

Trends in the Mobile segment

Handset subsidy share between StarHub and M1

Source: Companies, DBS Vickers

Source: Companies, DBS Vickers

Trends in the Fixed Broadband Segment

Divergence between revenue & subsidy share

800 600 400 200

2010 SingTel StarHub

Source: Companies, DBS Vickers Source: Companies, DBS Vickers

Industry Focus Singapore Telecom Companies

Broadband ARPU stabilized

Pay TV ARPU stabilized for StarHub

10 0 2008 2009 2010 StarHub 1Q11 2Q11

Source: Companies, DBS Vickers

Source: Companies, DBS Vickers

Trends in the Corporate Data Segment

Trends in the Pay TV Segment

Corporate data revenue (S$m) declined sequentially

538 539 524 155 264 2010

Source: Companies, DBS Vickers Source: Companies, DBS Vickers

Industry Focus Singapore Telecom Companies

Dec Dec Dec

194,754 8,195 44,162

74.00 5.20 18.00

-2% 13% 23%

Hold Buy Buy

21.4 63.7 40.0

4.3% 1.9% 0.7%

4.4% 1.9% 0.7%

2.1x 1.3x 1.4x

3.7x 4.3x 5.2x

3.4x 3.7x 4.3x

Dec Dec Dec Dec

7,856 13,522 4,873 14,177

30.80 5.10 3.90 5.60

3% -5% -4% 12%

Hold Hold Hold Buy

0.6 2.8 6.9 15.6

5.4% 6.0% 4.8% 2.5%

5.4% 6.4% 4.8% 2.8%

17.3x 4.6x 1.9x 2.2x

8.8x 9.6x 6.3x 5.5x

8.1x 9.3x 6.2x 4.8x

Dec Mar Dec

1,882 39,428 3,941

2.60 3.20 3.05

Hold Hold Buy

1.0 23.6 2.0

6.0% 6.3% 7.2%

6.0% 6.3% 7.5%

7.7x 2.0x 87.3x