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UOB Kay Hian has downgraded its take on the telecommunications sector from "overweight" to "market weight", just a day after RHB stuck to its "neutral" stance.
The move comes on the back of a growing crowd in the Singapore telco market - not least the impending debut of TPG Telecom as the fourth mobile network operator here - according to a report out on Friday by analyst Jonathan Koh.
But Singtel and NetLink NBN Trust were Mr Koh's two stock picks, as well as his only "buy" calls in the sector.
"We have turned defensive on the telco sector as our channel checks indicate TPG's network deployment has progressed smoothly and it is on track for the launch of commercial services" by the year's end, Mr Koh wrote.
While the Australian entrant faces what he called "daunting challenges on the ground" as it rolls out its own infrastructure, he noted that TPG has managed to tap NetLink's non-building access points at a regulated price of S$73.80 a month for its backhaul transmission network.
The second-largest fixed broadband player on its home turf, TPG also has healthy earnings, strong cash flow and low gearing, said Mr Koh, calling the telco "able to weather a protracted battle" on arrival.
The UOB Kay Hian analyst also touched on the rise of the mobile virtual network operator (MVNO) model, where companies lease the use of an infrastructure incumbent's network.
Although MVNOs tend to target specific consumer niches, Mr Koh said that the cumulative impact of three new MVNOs "could create some headaches and headwinds for the incumbents".
He was referring to Circles.Life, which has been hosted by M1 since 2016, as well as the newly launched Zero Mobile and the planned expansion of fibre broadband company MyRepublic.
Singtel escaped Mr Koh's sector downgrade, with a "buy" rating and a target price of S$4.53, thanks to the growth of its associates outside Singapore.
With its Singapore mobile business making up just 7 per cent of revenue, Mr Koh said that "Singtel provides a defensive shelter (owing) to its geographical diversification".
He also put a "buy" call on NetLink, with a S$0.93 target price, citing its monopoly on home wholesale fibre connections and its potential to benefit from the upcoming TPG launch.
"Yield-oriented investors should also consider NetLink, which provides a resilient dividend yield of 5.8 per cent," Mr Koh wrote.
As for StarHub and M1, the analyst said that their share prices have come a good way down from a peak in 2015, "which already reflected the expected damage caused by the entry of TPG to some extent".
StarHub's rating was maintained at "hold" on the back of its enterprise business, where it has invested in acquisitions and seen revenue pick up, at a target price of S$2.90.
M1, meanwhile, was downgraded from "buy" to "hold", with a S$1.75 target, because Mr Koh deemed its focus on a mobile business and younger customers "more susceptible to competition from TPG" and lowered its growth assumption.
A catalyst to the sector could come from StarHub and M1 collaborating on network sharing, Mr Koh noted, but there is the risk that they do not close the deal, or that the network sharing does not give the desired cost savings.
The entry of TPG might also worsen competition and price erosion in the telco sector more than expected.
Singtel was flat at S$3.61 as at 10.25am, while StarHub dipped by one Singapore cent to S$2.92 and M1 was down by the same to S$1.78.