M1, StarHub face steep profit drop as fourth telco threat looms large

M1 will be more impacted.

The possible entrance of a fourth telecommunications service provider will create a big dent in M1’s and StarHub’s bottom lines, according to a report by UOB Kay Hian.

UOB Kay Hian expects M1 and StarHub’s 2019 net profit to decline by 32% and 25.8%, respectively, if a fourth telco manages to break into the Singapore market by 2017.

“M1 and StarHub are susceptible to regulatory risks in Singapore with mobile accounting for 78.3% and 56.1% of service revenue, respectively, in 2Q15.StarHub would be relatively less affected due its ability to bundle multiple services, making its subscriber base more resilient and less likely to be poached by competing mobile operators,” said the report.

However, risks are mitigated by the fact that a potential fourth telco faces immense funding challenges.

“We started the year with many investors complacent about the impact from the potential entry of a fourth mobile operator. The recent correction has skimmed the froth of share prices,” said UOB Kay Hian.