Why analysts are still 'cautiously positive' on Singapore telco firms

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According to Phillip Capital, analysts remain cautiously positive on the sector, as they remain attractive due to high dividend yields and stable earnings growth. 

M1 replaces SingTel as the most preferred stock in the sector, as M1 stands to gain the most from improving mobile dynamics in Singapore.

Here's more from Phillip Capital:

M1 also benefits from fibre broadband growth on increasing broadband customer base. M1 had guided for FY14E capex to be around current FY13 capex level at S$130 million.

We think this may lead tohigher free cash flows in FY14E, improving its ability to increase dividends in the near term. SingTel reported stable earnings in the last quarter despite lower revenue, due to better EBITDA margin on effective cost management.

It continues to have strong growth in its associates’ earnings on constant currency terms. However, weakening foreign currencies outlook remain a challenge for SingTel, which may lead to earnings growth being eroded.

On StarHub, key concerns would be on increasing Pay TV content costs and competition with SingTel’s mio TV. Management continues to guide its Pay TV as a viable business as it seeks to improve its value proposition to customers on content differentiation.