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Telecom & Internet

Staff Reporter

, Singapore

Published:

14 years ago

According to UOB, increasing adoption of cloud computing leads to four mega trends

Cloud computing pose positive impacts on Singapore telcos

SingTel is well positioned to provide end-to-end cloud-based IT systems for corporate customers, says UOB Kayhian.

According to UOB, increasing adoption of cloud computing leads to four mega trends:

TREND #1: NETWORK CONNECTIVITY BECOMES A CENTRAL COMPONENT OF CORPORATE IT SYSTEMS
Cloud services are hosted at data centres located off premises and huge quantities of data are transferred between users’ computers and the data centres via the internet. Cloud computing, thus, requires secured high-speed network connectivity to the internet provided by telcos.

TREND #2: SMARTPHONES, LAPTOPS AND TABLETS DIRECTLY ACCESS CLOUD SERVICES VIA WIRELESS BROADBAND, BYPASSING DESKTOP PCS
High-speed packet access (HSPA) and long-term evolution (LTE) technologies make martphones, laptops and tablets ideal platforms to directly access cloud services while on the move. They will be able to access cloud-based enterprise applications, such as customer relationship anagement (CRM), enterprise resource planning (ERP) and human resource management (HRM).

TREND #3: GROWTH OF MOBILE DATA AND RISE OF TIERED DATA PLANS
Many telcos have phased out unlimited data plans and have introduced tiered data plans to manage and monetise the explosive growth in mobile data traffic. In Singapore, SingTel has introduced premium priority mobile broadband plans that give priority to customers when its network is heavily loaded. Differentiated services and imposition of data caps will have a positive impact on post-paid ARPU.

Trend #4: CLOUD COMPUTING CREATES A BUOYANT SME MARKET
Cloud services are affordable and available to all companies regardless of size. SMEs could access powerful enterprise applications that were previously under the purview of larger competitors, leading to increased demand for fixed and wireless broadband services.

Cloud computing has a positive impact on telcos’ mobile communications and wireless broadband businesses. Imposition of data caps and differentiated services, such as premium priority pass, will enhance post-paid mobile ARPU. Cloud computing boosts demand for hosting, fixed broadband and internet protocol virtual private network (IP VPN) services.

However, IP VPN services are affordably priced and could cannibalise traditional international and local leased circuits. Thus, the overall impact on fixed network services is only marginally positive. Our preferred picks for telcos are SingTel and M1, which provide greater upside.

• SingTel (BUY/S$3.16/Target: S$3.48) offers the widest array of building blocks for cloud computing and is well positioned to provide end-to-end cloud-based IT systems for corporate customers.
• M1 (BUY/S$2.53/Target: S$2.89) benefits the most from the uplift in post-paid ARPU created by
increased usage of wireless broadband as mobile accounted for 79.1% of operating revenue in 2010.
• We maintain a BUY recommendation for StarHub (BUY/S$2.79/Target: S$3.06) but feel that upside
from expansion in fixed network services has been partially factored into its current share price.

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