Netlink cashes in on Singapore's 5G bid: analyst

Even without being a spectrum holder, Netlink can still enjoy growth in its fibre backhaul business.

Netlink NBN Trust will emerge as a clear beneficiary of Singapore’s 5G plans as the company benefits from higher connections and installation related revenues from telcos setting aside funds ahead of the 2020 roll-out, according to UOB Kay Hian.

Even if Netlink doesn’t receive appointment to become a 5G spectrum holder, Netlink is still a “key enabler of 5G” as it offers a more affordable opportunity for telcos.

“NetLink plays a key role in supporting IMDA’s 5G aspiration as its fibre backhaul will help lessen a telco’s capital expenditure (capex) burden based on a regulated wholesale pricing fixed under the Incentive Based Regulation (IBR) for five years (up to 2022),” the report read.

The government’s plan to deploy a standalone 5G network architecture is expected to push telcos’ capex in 2020-21, according to an earlier report from Fitch Ratings. "Standalone 5G networks are costly, as the technology requires an entirely new core infrastructure," the firm said, adding that early adopters like South Korea have been deploying 5G based on non-standalone specifications, which support migration to 5G on existing 4G networks.

Chong expects a two-network framework that includes Singtel and service providers like Starhub or M1 which will collaborate with NetLink for fibre backhaul services. This is expected to push potential capex between $1b-$2b as the higher spectrum band requires more sites as mobile networks become denser. A 1% change in residential connections will affect Netlink’s FY2022 net profits by 1.25%, added UOB Kay Hian.

Meanwhile, good earnings visibility and cash flow prowess paved the way for Netlink’s sustainable dividend yield of 5.6% for FY20-21.

Infocomm Media Development Authority (IMDA) received a total of 64 submissions for in answer to its calls for proposals to deploy a standalone 5G network in the island, and is currently in closed door consultations with industry players to facilitate a two-network 5G framework.

Netlink’s submission to IMDA calls for a Single Wholesale network to leverage on existing fibre backhaul infrastructure to prevent duplicate network investments, and more importantly, to enable a faster roll-out of 5G coverage.