Telecommunications Sector Apr 2007 Update

Broadband segment – income and public households are significant drivers. For 2006, the public housing Internet penetration rate saw an increase of 7% pts to 66%, which was partly offset by a decline of 3% pts to 87% in private housing Internet penetration. The proportion of households in public housing with access to 2 or more computers increased by 11% pts yoy to 31% in 2006, while that for private housing increased by 5% pts to 61%.

Mobile prepaid segment – the influx of tourists and non-residents is a significant growth driver. In 2006, the number of non-residents saw an increase of 9.7%, or 0.078m non-residents to 0.876m. In addition, the F1 event and upcoming IR projects will attract more visitors to Singapore, which will spur the influx of tourists and non-residents, and hence the prepaid net additions.

Mobile postpaid segment - the growth rate of residents is a key driver, albeit at a slower pace than non-residents. In 2006, the number of residents saw a growth rate of 1.8% yoy or 0.065m residents to 3.61m. In early Feb 07, MND announced a planning parameter of 6.5 million people for its new concept plan. The encouragement of migrants by MND will see more non-residents taking up residency, and hence the postpaid leases.

Fixed line segment – a matured segment with marginal growth. As at Apr 07, the fixed line household penetration rate is 98.3%, up 0.5% pt yoy or 0.01m subscribers, to 1.86m. The increase was due to both residential (+0.6%) and corporate (+0.5%) growth, albeit marginal. We think that both the residential and corporate segments have reached their maturity stages. Nevertheless, we expect to see marginal growth rates in both residential and corporate fixed lines.

In conclusion, we expect growth for the broadband market, which will be fuelled by more affluent people and public households in 2007. Also, we can expect further growth for the mobile market, with prepaid leading the way. We think that fixed line has reached its maturity stage. Nevertheless, we expect marginal growth in the fixed line segment.

Broadband Segment
Broadband segment – income and public households are significant drivers. For Apr 07, broadband growth was 20.3% yoy to 0.8m subscribers. Both the residential (+20.6%) and corporate (+17.0%) showed significant growth, albeit a decline in the rate of growth since Jun 05. This is due to a higher penetration rate of 66.1% as at end Apr 07.
For 2006, the public housing Internet penetration rate saw an increase of 7% pts to 66%, which was partly offset by a decline of 3% pts to 87% in private housing Internet penetration. Household Internet penetration may not be a suitable indicator of broadband growth rate as it does not measure the number of computers, and hence Internet connections, per household.
The proportion of households in public housing with access to 2 or more computers increased by 11% pts yoy to 31% in 2006, while that for private housing increased by 5% pts to 61%. The number of computers per household, which is dependent on the income per household, is the appropriate measure of broadband growth since it will increase as household income increases, and more importantly there is an increasing number of households with 2 or more computers, and hence Internet connections per household.

Mobile Segment
Mobile prepaid segment – the influx of tourists and non-residents is a significant growth driver. We think that one of the growth drivers of prepaid lines is the number of non-residents. For 2006, non-residents saw a growth rate of 9.7% yoy or 0.078m non-residents from 2005, to 0.88m.
In addition, the F1 event and upcoming IR projects will attract more visitors to Singapore, which will spur the influx of tourists and non-residents, and hence the prepaid net additions.
As at 30 Apr 07, Singapore’s mobile penetration stands at 108.1%, up 6.6ppts yoy or 0.43m subscribers from Apr 07, to 4.85m. The increase was due to growth in both postpaid (+3.6% yoy) – buoyed by 3G – and prepaid segments (+20.4%).
Mobile postpaid segment - the growth rate of residents, on the other hand, is a driver for the postpaid market. This is because the postpaid lines, which typically have a 24-month contract term and penalty rates for termination, are leased mainly to residents. In 2006, it saw a growth rate of 1.8% yoy or 0.065m residents to 3.61m. In early Feb 07, MND announced a planning parameter of 6.5 million people for its new concept plan. The encouragement of migrants by MND will see more non-residents taking up residency, and hence the postpaid leases.

Fixed Line Segment
Fixed line segment – a matured segment with marginal growth. As at Apr 07, the fixed line household penetration rate is 98.3%, up 0.5% pt yoy or 0.01m subscribers, to 1.86m. The increase was due to both residential (+0.6%) and corporate (+0.5%) growth, albeit marginal. We think that both the residential and corporate segments have reached their maturity stages. Nevertheless, we expect to see marginal growth in both residential and corporate fixed lines.