This month, we are conducting our tutorial on two telecoms which are likely to be affected by the fourth entrant into the telcom scene. If we look at SingTel (SGX:Z74), it has a huge market capitalisation of over S$60 billion and 29% of its revenue are derived from Singapore. It is least affected by fourth entrant. Ideally, our MIP graduates want to know whether the share price decline by M1 and Starhub are overly pessimistic and whether value is surfacing as a result.
On 4th December 2016, IMDA announced TPG Telecom made winning bid in new entrant spectrum auction. Our MIP graduates who are analysing this sector are not surprised.
A quick cursory on Google revealed MyRepublic balance sheet casts pall over fourth telco bid:
The financial statement of the unlisted fibre services company, a copy of which TODAY obtained, showed that it made losses of S$9.36 million in Singapore last year. With 35,252 active fibre broadband subscribers in Singapore, it had revenue of S$21.49 million.
In its bid to gather steam for its bid, MyRepublic unveiled its proposed mobile data plans and invited consumers to register their interest. It also enlisted DBS Group Holdings and Goldman Sachs to raise S$250 million in funds to roll out the mobile network — the amount it said is needed to roll out a network.
But no funds have been raised so far, TODAY has learnt. MyRepublic is also losing money on its New Zealand operations — losses were NZ$5.45 million (S$5.22) last year, according to the financial statement.
Mr Rodrigues also conceded that MyRepublic’s fledging operations in Indonesia are “burning millions” but was upbeat about prospects. “Yes, DBS and Goldman Sachs have been working hard, and they have been struggling to some extent. But we’re meeting some companies, and we are confident that we will get S$150 million in private equity by the time of the auction,” he said.
According to IMDA’s Information Memorandum:
The timeline for the new entrant is….
By 30 September 2018, nationwide outdoor service coverage;
By 30 September 2019, road tunnels and in-building service coverage;
By 30 September 2021, underground MRT stations / lines service coverage.
This means that winning the auction is just the first step. The new player needs to be financially sound and be ready to invest for any new infrastructure to meet IMDA’s timeline. To us, it is more probable that TPG Telecom (ASX:TPM) with equity base of A$1.78 billion will clinch the IMDA auction.
In an ASX release, TPG mentioned that it is likely to spend S$200m to S$300m to establish the mobile network.
In the coming days, we will meet our MIP graduates to discuss further about the growth strategies, risks, competitive advantages and valuations of the two companies. We also celebrated our 81th MIP batch over last weekend.
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Disclaimer: All facts and opinions presented are for educational purposes only. This is not a recommendation to buy or to sell. The author(s) involved in the writing of this piece does not have any current vested interest of the companies mentioned. If you require expert financial or other assistance or legal advice, a competent professional should be consulted. We are not affiliated to any of the companies mentioned except for a commercial relationship with ShareInvestor.