3 big headwinds haunting Singapore's telco giants

Mobile roaming woes linger.

According to CIMB, from a country strategist perspective, it upgrades the telecom sector from underweight to Neutral, after its recent upgrade of SingTel to join M1 in the Add list.

CIMB noted that headwinds in international mobile roaming and stiff competition in fixed broadband and pay TV remain, but a more optimistic stance on SingTel is warranted, after the stabilisation of the Australian dollar, rupee and rupiah.

Here's more:

Negative trends

 Stiff competition in broadband. The entry of newcomers riding on theNGNBN continues to be a bane for incumbent Starhub. Both its FY13 ARPU and revenue fell 4%.

 Starhub-SingTel rivalry in pay TV. While the government’s ruling that the Barclays Premier League should be cross-carried is a victory for Starhub, Starhub and SingTel are still locked in bitter rivalry.

Content costs will remain under intense upward pressure because we believe SingTel will continue its aggressive content acquisition drive to build up a compelling proposition, even to the detriment of margins in the short term.

 Headwinds in mobile roaming. Inbound and outbound roaming revenues, which make up 10-20% of mobile revenues, continue to be under pressure and are offsetting gains made in monetising data.

Consumers are switching to prepaid SIM, which are convenient and affordable, in their destination countries instead of using voice and data roaming.

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