Is Singtel's recent deal with InTouch and Bharti Telecom ill-timed?

Dividend payout cuts, price wars loom over the two telcos.

InTouch Holdings Public Company Limited (InTouch) and Bharti Telecom Limited (Bharti Telecom) may not have been in their best position for the Singapore Telecommunications Limited (Singtel)'s S2.47 billion stakes boost.

According to a report by Maybank Kim Eng, the Advanced Info Services Public Limited (AIS), whose biggest shareholder is InTouch, still faces uncertainties around its dividend policy beyond 2016.

"The timing of the acquisitions is not the most desirable. AIS, for instance, faces a huge spectrum bill over the next few years which could lead to a cut in dividend," the report explained.

Maybank Kim Eng's research team in Thailand expects AIS to have to defray at least $310 million (THB8 billion) a year from now until it triggers the big bullet of $2.3 billion (THB60 billion) in 2020.

With this, dividend payout is expected to be slashed from around 99% to 65% in the next two years.

Bharti Airtel is also not at its soundest, as voice and data yields continue to erode in the face of a potential return or price wars as a new competitor, Reliance Jio, is set to enter the market later this year.

"Both Airtel, Vodafone and Idea Cellular recently slashed data prices and added value to their voice plans following Jio’s pre-startup offer of free voice and data plans," the report said.