Picking the next potential outperformer - MyRepublic BNP...be supported by continued data monetisation (with a further near-term boost from recent tariff increases), LTE network expansion

PREPARED AND PUBLISHED BY NON-US BROKER-DEALER(S): BNP PARIBAS - SINGAPORE (PI) THIS MATERIAL HAS BEEN APPROVED FOR U.S. DISTRIBUTION. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES CAN BE FOUND AT APPENDIX ON PAGE 57

EQUITIES RESEARCH SINGAPORE TELECOMS

Picking the next potential outperformer

■ We have a non-consensus BUY rating on Starhub, and it is our top pick for the Singapore telecom sector. We initiate coverage on M1 with a HOLD rating on valuation grounds. We recommend HOLD for SingTel, given the absence of significant near-term catalysts.

■ We see substantial scope for Starhub to reverse its previous relative underperformance, following recent mobile tariff increases and accelerated LTE network deployment over the course of 2014. We are optimistic this will drive above-industry growth in 2015 and provide a re-rating catalyst for the stock.

■ We believe M1 will continue to benefit from improving mobile sector dynamics, but the related upside potential looks largely priced in. The increasingly assertive smaller operators could encroach on M1’s addressable broadband market, constraining earnings upside. Long term, we are concerned about the competitive impact of potential new mobile entrants.

Wei Shi Wu [email protected] +65 6210 1925

Our research is available on Thomson One, Bloomberg, TheMarkets.com, Factset and on http://eqresearch.bnpparibas.com/index. Please contact your salesperson for authorisation. Please see the important notice on the inside back cover.

10 OCTOBER 2014

Singapore Telecoms Wei Shi Wu

BNP PARIBAS 10 OCTOBER 2014

To find out more about BNP Paribas Equities Research:

Visit : http://eqresearch.bnpparibas.com/ For ipad users : http://appstore.apple.com/BNPP-equities/

2

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http://appstore.apple.com/BNPP-equities/

Picking the next potential outperformer

n Non-consensus BUY rating on Starhub (STH); initiate coverage of M1 at HOLD; SingTel HOLD

Recent weak operational trends have caused STH to be the worst performing Singapore telco ytd. We

think the market is still focusing on muted mobile trends and competitive pressures in broadband, and

that scope for an operational turnaround has been overlooked. The recent re-alignment of STH’s

businesses could reverse its operational underperformance, accelerate earnings growth and support

a re-rating. Our forecasts are up to 13% above consensus. We see limited upside potential for M1,

given emerging competition risks, and recommend HOLD for the yield. We also rate SingTel HOLD.

n Market expectations for STH seem low, but we see opportunities for a turnaround

We see significant opportunities from sector-wide mobile tariff increases, particularly STH’s most

aggressive re-pricing. With STH likely to catch up with competitors on LTE coverage by end-2014, we

believe a timely tariff increase could drive above-industry mobile gains in 2015. While M1 should

continue to benefit from improving mobile sector dynamics, intensifying broadband competition could

weigh on incremental growth. We anticipate relative stability for SingTel’s domestic operations, but

view competition in Australia as a persistent pressure point for Optus.

n STH is our top pick for its strong 2015 growth outlook and subsequent re-rating potential

While 2014 results will likely be fairly flat for STH, we expect an operational turnaround to drive the

fastest 2015 earnings growth in the sector and provide a re-rating catalyst. At about 10x 1-year

forward EV/EBITDA, STH is trading in line with M1 and at a slight premium to SingTel. But we view

STH’s improved near-term earnings profile as a differentiator. With expectations for M1 already fairly

high, we see limited scope for positive surprises and see further share price upside being constrained

by emerging competition risks. We rate SingTel a HOLD given a lack of near-term catalysts.

BNPP recommendations

Company BBG code Rating Share price Target price Upside/downside

StarHub Ltd STH SP BUY 4.09 4.75 +16.1%

M1 M1 SP HOLD 3.53 3.75 +6.1%

SingTel ST SP HOLD 3.80 3.94 +3.7%

Source: BNP Paribas

10 OCTOBER 2014

SECTOR REPORT

SINGAPORE TELECOMS

Wei Shi [email protected]+65 6210 1925

3



Investment thesis

The Singapore mobile sector should continue to be buoyed

by improving data monetisation and moderating handset

subsidies. The recent sector-wide tariff increases, coupled

with ongoing LTE network expansion, should support ARPU

gains. STH could deliver above-industry growth in 2015,

having addressed both pricing and network deployment.

While residential broadband competition has been intense,

we see indications that pressure could ease in 2015,

potentially resulting in a slight sector recovery. On the other

hand, we expect competitive pressure to accelerate, in

particular, constraining the upside potential on M1.

Longer term, we have concerns about escalating mobile

competition, with smaller operators potentially entering the

market. Clearly, the success of new entrants is predicated

upon a number of regulatory/ commercial conditions being

met and the related challenges are well documented.

However, we think it would be hasty to dismiss the threat of

new operators from the outset. In the scenario of a more

crowded mobile market, we would favour operators with

established bundling strategies (e.g. SingTel, STH).

Stock recommendations

We have a non-consensus BUY rating on STH and it is our

top pick in the sector. Following a period of relative

operational underperformance, we believe growth could

accelerate in 2015, with the company having re-aligned its

mobile and fixed businesses.

With expectations for M1 already fairly high, we see limited

scope for positive surprises and therefore view further share

price upside as relatively constrained. We are also

concerned about potential competition risks over the longer-

term. However, we initiate coverage with a HOLD rating, for

the dividend yield.

We expect relative stability at SingTel’s Singapore

operations, but see competition as a persistent pressure

point for Optus. Associate contributions should be supported

by strong fundamentals, although FX remains a key risk. In

the absence of significant catalysts, we recommend HOLD.

Key risks

Key sector risks include more intense than expected

mobile/broadband competition, leading to margin erosion;

slower than expected data revenue gains, accelerated

competition around handset subsidies, and higher than

expected capex.

CONTENTS Executive summary ....................................................................... 5

Valuations ....................................................................................... 6

Relatively benign mobile market competition ......................... 7

Post-paid subscriber growth fairly stable; pre-paid should recover ............................................................................... 8

Strong momentum in mobile data monetisation should continue........................................................................................... 9

Roaming revenues showing signs of stabilising .................... 10

Recent tariff adjustments supportive of further ARPU expansion ...................................................................................... 11

Measured approach towards handset subsidies ................... 12

Potential longer-term competition risks in mobile .............. 13

Small players driving residential broadband competition . 15

Near-term pay-TV outlook is stable ......................................... 18

Sector revenue outlook .............................................................. 19

Sector EBITDA and margin outlook .......................................... 20

Sector capex outlook .................................................................. 21

Regional telco comps .................................................................. 22

Company reports ......................................................................... 23

STH expected to deliver fastest revenue growth in 2015

Source: BNP Paribas estimates

Accelerated revenue growth should boost EBITDA gains for STH


7

5 4

4 5

4

(1)

6

5

(2)

(1)

0

1

2

3

4

5

6

7

2014E 2015E 2016E

(%) M1 SingTel STH

10

6 5

2

5 5

(0)

8

6

(2)

0

2

4

6

8

10

12

2014E 2015E 2016E

(%) M1 SingTel STH

4



Executive summary

We are generally positive on Singapore’s mobile sector outlook and expect growth to

be supported by continued data monetisation (with a further near-term boost from

recent tariff increases), LTE network expansion and moderating handset subsidies.

Near-term competition among the major operators should remain relatively benign,

supporting continued revenue expansion and fairly stable margins. We see scope for

STH to recover from a position of relative weakness, as of the three incumbents it

has made the sharpest upward adjustments to tariffs (see Exhibit 15, p11) and has

accelerated LTE network deployment in recent months.

Following a period of relatively intense residential broadband price competition led by

smaller operators, we think things could get better. My Republic (not listed), one of

the smaller retail service providers (RSPs), is looking to expand its presence outside

of Singapore. We are cautiously optimistic that this company’s regional aspirations

could mean greater financial discipline and a more restrained pricing strategy

domestically. This would be positive for the entire sector, although it is possible any

rebound would be more pronounced for STH given its relative exposure to the

broadband (and pay-TV) sector.

However, we see enterprise broadband competition as potentially escalating, given

smaller RSPs (e.g. My Republic and Superinternet (not listed) are looking to

aggressively target the SME segment. Clearly, this would hurt SingTel, given its

relative dominance in this segment. But we believe the financial impact on SingTel

could be slight and fairly gradual. Likewise, there should be limited impact on STH,

especially given management’s recent shift in strategic focus away from SMEs

towards the corporate segment. We are, however, concerned that assertive action

from the smaller operators will limit potential upside for M1, given its greater overlap

with this group of operators.

We have slight concerns around escalating mobile competition over the longer term

(see p13-14). While we recognise the success of new entrants into a mature market

will be predicated upon a number of regulatory/commercial conditions being met, it

would be hasty to dismiss related threats from the outset. In a scenario of an

increasingly crowded mobile market, we would favour operators with strong bundling

strategies; this dovetails with our 12M relative preference for STH.

Stock recommendations

We recommend BUY on STH with a SGD4.75 TP, as our top pick in the Singapore

telecom sector, supported by our optimism that earnings growth will accelerate post

re-alignment of its businesses. We project the fastest 2015 earnings growth for STH

within the sector. Our BUY rating is a contrarian call and our FY14-16 forecasts are

up to 13% above Bloomberg consensus.

We like M1 for its nimbleness and technology focus, but rate it HOLD as we believe

related upside is largely priced in at current levels. Although M1 should deliver a

fairly strong finish to 2014, market expectations are already high and there is limited

scope for further positive surprises, in our view. We are also concerned increasing

broadband competition will crimp revenue upside for this company, while the

company’s less established bundling strategy vs peers renders it vulnerable to

longer-term mobile competition risks, in our opinion. Our TP is SGD3.75.

SingTel’s Singapore operations should continue to benefit from improving mobile

sector dynamics. However, we view competition as a persistent pressure point for

Optus and do not assume significant growth within the near term. Group underlying

net profit should be supported by robust fundamentals across SingTel’s key

associates, although FX remains a risk, with the SGD up y-y versus most associate

currencies during Apr-Sep. With SingTel’s stub PER trading in line with its long-term

average, we see few significant potential catalysts over the near term and

recommend HOLD with a SGD3.94 TP.

5



Valuations

STH has been the worst performing Singapore telco over the past 12 months. We

believe this has been a function of the company’s fairly lacklustre operational

performance in recent quarters. Expectations for this company are low, with the

market focusing on muted mobile trends and competitive pressures in broadband.

But as we argue in this report, we think STH has re-aligned its businesses, which

could potentially drive accelerated growth and a subsequent re-rating of the stock.

On the other hand, we see limited scope for M1 to operationally surprise to the

upside, especially given potential competition risks. And given M1’s share price has

outperformed peers ytd, further share price upside potential looks constrained.

At current levels, STH is trading close to M1 in terms of 1-year forward P/E and

EV/EBITDA and at a premium to SingTel. But we project the fastest 2015 earnings

growth for STH and view this as a key differentiator and potential re-rating catalyst.

At current levels, all three Singapore telcos are offering fairly undifferentiated

dividend yields of approximately 5%. We flag SingTel and STH as having larger

headroom than M1 for potential dividend increases, relative to projected FCF (please

see respective company sections).

EXHIBIT 1: YTD relative share price performance EXHIBIT 2: 1-year forward dividend yield, by operator

Sources: Bloomberg; BNP Paribas Sources: Bloomberg; BNP Paribas

90

95

100

105

110

115

120

Ja

n-1

4

Fe

b-1

4

Ma

r-1

4

Ap

r-1

4

Ma

y-1

4

Ju

n-1

4

Ju

l-1

4

Au

g-1

4

Se

p-1

4

Oc

t-1

4

M1 ST STH FSSTI

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0J

an

-11

Ap

r-1

1

Ju

l-1

1

Oc

t-1

1

Ja

n-1

2

Ap

r-1

2

Ju

l-1

2

Oc

t-1

2

Ja

n-1

3

Ap

r-1

3

Ju

l-1

3

Oc

t-1

3

Ja

n-1

4

Ap

r-1

4

Ju

l-1

4

(%) M1 ST STH

6



Relatively benign mobile market competition

At 154% penetration (as at Jun 2014), the Singapore mobile sector is relatively

saturated. Singapore’s three-player structure in an addressable market of 5.5m

means it has one of the lowest populations per operator within the region, although

this is still above the ratio for Hong Kong.

EXHIBIT 3: Mobile population penetration, selected markets EXHIBIT 4: Population per operator, selected markets

As at June 2014 Sources: Telegeography; BNP Paribas

Note: Population as at 2013. Sources: Telegeography; BNP Paribas

Despite this, the competitive environment in Singapore is stable and fairly benign.

While growth has slowed with narrowing margins in recent years, this is more a

function of reduced profitability from data substitution than punitive price competition.

In fact, EBITDA margins are showing signs of improvements as the industry moves

towards more sustainable data pricing models.

EXHIBIT 5: Mobile subscriber share, by operator EXHIBIT 6: Sector EBITDA and EBITDA margin trends

Sources: Company data; BNP Paribas Sources: Company data; BNP Paribas

0

20

40

60

80

100

120

140

160

180

Ho

ng

Ko

ng

Sin

ga

po

re

Ma

lay

sia

Th

aila

nd

Ta

iwa

n

Ind

on

es

ia

Ja

pa

n

Ko

rea

(%)

0

5

10

15

20

25

30

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Ho

ng

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ng

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ga

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re

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iwa

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rea

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pa

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Ind

on

es

ia

(m)

20

25

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35

40

45

50

2008 2009 2010 2011 2012 2013

(%) M1 SingTel STH

32

33

34

35

36

37

38

39

40

2,900

2,950

3,000

3,050

3,100

3,150

3,200

3,250

3,300

2008 2009 2010 2011 2012 2013

(%)(SGD m) EBITDA (LHS) EBITDA margin (RHS)

7



Post-paid subscriber growth fairly stable; pre-paid should recover

While post-paid subscriber growth has generally slowed, quarterly net adds remain

healthy, supported by increasing penetration of multiple/secondary SIMs. We expect

2H14 to be stronger than 1H14, driven by seasonality and the recent iPhone 6

launch. The pre-paid subscriber base has been impacted by regulatory reduction of

SIMs per user to three, from 10, effective Apr 2014. In response, some operators

have undertaken voluntary rationalisation of their pre-paid bases. We expect pre-

paid net adds to have remained weak in 3Q14, before stabilising or slightly

recovering in 4Q14.

EXHIBIT 7: Sector post-paid mobile net adds EXHIBIT 8: Sector pre-paid mobile net adds


0

10

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40

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100

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('000)

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(50)

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13

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13

1Q

14

2Q

14

('000)

8



Strong momentum in mobile data monetisation should continue

Following a general deceleration in revenue growth over the past few years, the

Singapore mobile sector is experiencing a slight revival, as better data monetisation

drives re-accelerated growth. With data economics now well understood by

operators, the relatively benign competitive landscape has provided scope for a

reduction in data allowances over the years and, more recently, an upward

adjustment in tariffs.

EXHIBIT 9: Sector mobile service revenue y-y chg EXHIBIT 10: Sector voice and data revenue split


At the same time, increasing smartphone penetration, coupled with expanding LTE

network coverage, has driven accelerated data usage growth. For example, we

estimate 12% of post-paid subscribers in the sector exceeded their data allowances

in 2Q14, up significantly from 3% a year ago. For reference, excess data is charged

at SGD10.70 per GB, up from SGD5.35 per GB a year ago. As such, advanced data

revenue growth has been robust. We expect this trend will continue, supported by

operators’ rollout of LTE Advanced networks and associated demand for data

services. As an aside, it is worth noting that, over the past 12 months, STH appears

to have caught up with its competitors in terms of the proportion of subscribers

exceeding data allowances.

EXHIBIT 11: Data usage trends over past 12M EXHIBIT 12: Advanced data revenue trends

Sources: Company data; BNP Paribas Sources: Company data; BNP Paribas estimates

0

2

4

6

8

10

12

14

2006 2007 2008 2009 2010 2011 2012 2013

(%)

0

10

20

30

40

50

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90

100

1Q

09

2Q

09

3Q

09

4Q

09

1Q

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10

3Q

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10

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2Q

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3Q

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4Q

11

1Q

12

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12

3Q

12

4Q

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13

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13

3Q

13

4Q

13

1Q

14

2Q

14

(%) Voice Data

0

10

20

30

40

50

60

70

M1 SingTel STH M1 SingTel STH

(%) % post-paid subscribers on tiered plans

% post-paid subscribers exceeding data allowance

2Q13 2Q14

0

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25

30

35

0

50

100

150

200

250

300

350

2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

(y-y %)(SGD m) Advanced data revenues (LHS)

Change (RHS)

9



Roaming revenues showing signs of stabilising

So far, M1 has been the most successful in driving post-paid ARPU growth among

the Singapore telcos. Specifically, it is the only operator that has consistently grown

quarterly ARPUs over the past year. In our view, M1’s technology focus has been a

contributing factor to this trend – for instance, it was the first operator in Singapore to

roll out a nationwide 4G network.

On the other hand, we believe the impact of roaming revenue decline (a function of

both decreasing volumes and tariffs) has been more pronounced for SingTel and

STH, reflecting their relative exposures to higher-end/corporate customers. We

estimate roaming accounts for 25-27% of SingTel’s mobile revenues and up to 15%

of STH’s mobile revenues. In comparison, M1’s roaming contribution is

approximately 10%. Coupled with generally decreasing voice and SMS, the roaming

revenue decline has effectively negated any positive impact from rising data usage

on SingTel’s and STH’s ARPUs.

EXHIBIT 13: Post-paid ARPU y-y chg, by operator EXHIBIT 14: Roaming contribution to mobile revenues

Sources: Company data; BNP Paribas Note: Estimated as at 2014 Sources: Company data; BNP Paribas estimates

Positively, recent management commentary across the three telcos suggests

roaming revenues could stabilise. There have been various initiatives to address

roaming usage decline – for example, through the introduction of daily cap plans. A

slight positive to the declining roaming trend is that inter-operator costs have also

come down, effectively holding associated margins steady.

(12)

(10)

(8)

(6)

(4)

(2)

0

2

4

6

8

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(%) M1 SingTel STH

0

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10

15

20

25

30

M1 STH SingTel

(%)

10



Recent tariff adjustments supportive of further ARPU expansion

A significant positive is the recent upward tariff adjustments introduced by the telcos.

Specifically, post-paid mobile tariffs were raised by an average 3-5% across the

sector, effective September. This should support post-paid ARPU expansion over the

coming quarters.

STH has introduced the sharpest percentage tariff increases in the lower price plans

– a move we view positively. For instance, its new entry-level plan is priced 13%

above the previous plan. This compares with 5% and 8% price increases by M1 and

SingTel, respectively. Given the relative maturity of this market segment and the fact

that the new pricing levels are fairly comparable across all operators, the likelihood of

resulting subscriber churn from STH is low, in our view. In fact, we believe this could

drive faster near-term ARPU growth for STH versus its competitors.

EXHIBIT 15: Change in entry-level post-paid mobile tariffs EXHIBIT 16: Comparison of new entry-level post-paid plans

M1 SingTel STH

Price (SGD) 41 42.9 42.9

Talktime (mins) 200 200 150

SMS/MMS 1,000 1,000 1,000

Data (GB) 3 2 3

Wi-Fi (GB) n/a 2 n/a

Note: Slight adjustments in voice/SMS/data allowances in new price plans Sources: Company data; BNP Paribas

Note: SingTel also has a SGD27.90 plan, while M1 has a SGD28 plan Sources: Company data; BNP Paribas

Potential for STH to play catch up

In tandem with the price adjustments above, STH has also been addressing its

previous network issues. Specifically, the operator initially lagged competitors with its

LTE network rollout. We believe this could have contributed to STH’s less impressive

ARPU performance, especially versus M1. Recent feedback from management

suggests this issue could soon be resolved, with the company accelerating LTE

network deployment over the course of 2014. The company is targeting nationwide

LTE network coverage, offering 300Mbps, by end 2014. This would bring STH’s

network on a par with competitors, effectively eliminating STH’s previous

technological disadvantage. When considered within the context of higher tariffs, we

are optimistic this could accelerate ARPU gains for STH.

35

36

37

38

39

40

41

42

43

44

M1 SingTel STH

(SGD) Old New

+8% +13%

+5%

11



Measured approach towards handset subsidies

We continue to see operator discipline around handset subsidies. The telcos have

selectively cut iPhone 6 handset subsidies, although the reductions are generally

slight. Regardless, we view this as indication that operators are taking an

increasingly measured approach towards subsidy-based competition, which should

be supportive of sector margins.

EXHIBIT 17: Average change in iPhone subsidies in past 12M, by price plans

Note: Tier 1 plans: SGD41-42.90; Tier 2 plans: SGD61-62.90; Tier 3 plans: SGD101-102.90; Tier 4 plans: SGD208-239.90; comprison based on iPhone 5S and iPhone 6 models Sources: Company data; Channelnewsasia, BNP Paribas

(8)

(6)

(4)

(2)

0

2

4

6

Tier 1 Tier 2 Tier 3 Tier 4

(%) 16GB 64GB

12



Potential longer-term competition risks in mobile

The Infocomm Development Authority’s eagerness to facilitate greater competition in

mobile is well demonstrated. For example, spectrum was specifically set aside for

potential new entrants in the past two spectrum auctions, although there were

eventually no takers. Earlier this year, the IDA initiated a public consultation on the

potential entry of Mobile Virtual Network Operators (MVNOs). In response,

broadband retail service providers, My Republic and Superinternet, indicated their

interest in entering the mobile space.

The challenges surrounding the MVNO business case are well documented. Any

scepticism around a late new entrant into a highly penetrated mobile market with

three established players is also valid. However, we think it may be hasty to dismiss

the MVNO threat from the outset.

Market may not be too small to accommodate a fourth player

It is possible to construct an argument that the addressable market in Singapore is

too small to support four operators. After all, the launch of Virgin Mobile Singapore in

2001 and its subsequent exit from the market a year later may still be fresh in some

investors’ minds. But given the current landscape, we think there is merit in

considering the potential for a data-only fourth operator.

My Republic has indicated plans to offer basic mobile data access, subject to certain

commercial/regulatory conditions being met. Under this model, content and

applications (including voice) will be offered via third-party OTT platforms.

Management believes the company can realistically achieve 10% mobile market

share based on this framework.

In our view, it could be relatively easy for My Republic to cross-sell a mobile data

offering to its existing fixed broadband subscribers. A competitively-priced pure

access product could be attractive to an IT savvy, price sensitive user – a profile we

believe may be well represented in My Republic’s existing base.

Issues around wholesale access and spectrum

Clearly, any new entrant into the market would require some form of wholesale

access from incumbents, at least in the initial stages. The key issue is whether

mobile wholesale access should be regulated (as proposed by some of the smaller

operators), given the significant investments already made by the three incumbents.

In its response to the IDA’s consultation paper, My Republic indicated a wish to

acquire spectrum of its own. The 800 MHz and 900 MHz spectrum will be up for

renewal in March 2017. We do not rule out the possibility of My Republic obtaining

some spectrum when these become available. In the table below, we summarise the

status of selected spectrum bands that could become available within the next five

years.

EXHIBIT 18: Status of selected spectrum bands

Spectrum band Current assignments Amount of spectrum available Expiry of existing assigned uses

700 MHz Terrestrial broadcasting 90 MHz After Analogue Switch Off

800 MHz Trunked radio / short range devices / 2G To be determined 31 Mar 2017 (10 MHz for 2G)

900 MHz 2G / 3G / 4G Up to 50 MHz 31 Mar 2017

2.3 GHz Unassigned 50 MHz No existing uses

2.5 GHz (TDD) Partially assigned for WBA/4G 50 MHz 30 Jun 2015

Source: IDA

13



Differentiated strategy and favourable regulations are key to MVNO success

There are few examples of successful MVNOs globally. Tesco Mobile (UK), Lyca

Mobile (UK), Virgin Mobile (UK and US) and TracFone (US) (all not listed) are among

those. The critical success factor for these MVNOs has been a differentiated and

niche strategy. For example, Lyca Mobile has a SIM-only product, offering the lowest

international calling rates to the Asian community. Similarly, TracFone has achieved

success in offering national/international calls at local rates.

Favourable regulatory conditions have also been a significant factor in the success of

MVNOs. For instance, the regulator in the EU (which hosts two-thirds of the world’s

MVNOs) closely monitors wholesale pricing offered by network providers to MVNOs.

Regulators in France and Hong Kong have facilitated MVNO entry by regulating

wholesale pricing, setting aside minimum network capacity for MVNOs and offering

incentives for network operators to host MVNOs. In line with global precedents, the

IDA has proposed that regulatory, spectrum, licence and voluntary conditions could

be introduced to encourage MVNO-hosting in Singapore.

14



Small players driving residential broadband competition

Unlike the mobile market, where competition has remained relatively benign so far,

the broadband sector has experienced deteriorating competition in recent years. The

emergence of new entrant retail service providers (RSPs) over the National

Broadband Network (NBN) has contributed to declining ARPUs across the sector.

My Republic noticeably disruptive

My Republic is a fibre broadband operator riding on the NBN. The company recently

secured SGD34m of funding from the telecommunications arm of Sinar Mas Group

(not listed) and Iliad (ILD FP; NR) founder, Xavier Niel, and has ambitions to enter

the mobile market in Singapore (we discuss this later in this report).

According to My Republic’s management, the company’s uniquely lean cost structure

has allowed it to be significantly competitive in its fibre broadband pricing. For

example, My Republic’s 1Gbps fibre plan, priced at SGD49.99, is at an almost 30%

discount to comparable plans offered by SingTel and STH. M1 recently launched a

SGD49 1Gbps plan in response, although this is for a limited promotional period. My

Republic’s pricing strategy has contributed to significant declines in broadband

ARPUs across the sector.

EXHIBIT 19: Selected fibre broadband plans (SGD), by operator

100Mbps 200Mbps 300Mbps 500Mbps 800Mbps 1Gbps

M1 29

39

49

My Republic

49.99

SingTel

49.9 59.9 79.9 69.9

STH 39.9

49.9 69.9

ViewQwest

65 89.95

149.95

Note: Shaded cells denote promotional pricing for limited period; ViewQwest (not listed) plans include Apple TV or ViewQwest TV Source: Company data

EXHIBIT 20: Broadband ARPU declines, by operator EXHIBIT 21: Sector broadband revenue trends


STH more impacted by disruptive pricing so far

Disruptive pricing led by the smaller RSPs has disproportionately impacted STH. The

operator’s 2Q14 broadband revenues plunged 17% y-y, compared with a 9% decline

for SingTel and 14% increase for M1. We believe STH has had to respond to the

competition, in order to defend its legacy businesses. Consumer broadband

accounts for 10% of STH’s total revenues – the highest among the incumbents.

Furthermore, there is a need for STH to protect its pay-TV business, which is linked

to its broadband business by virtue of its hubbing strategy. It is not difficult to

understand STH’s broadband competitive strategy when we consider that broadband

and pay-TV together account for 26% of its revenues.

(25)

(20)

(15)

(10)

(5)

0

M1 SingTel STH

(%) ARPU decline vs 1 year ago ARPU decline vs 2 years ago

(12)

(10)

(8)

(6)

(4)

(2)

0

2

4

6

110

115

120

125

130

135

2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

(y-y %)(SGD m) Broadband revenues (LHS)

Change (RHS)

15



EXHIBIT 22: Broadband revenues, by operator EXHIBIT 23: Revenue breakdown, by operator

Note: Comparable data not available for ST before 2Q12 Sources: Company data; BNP Paribas

Note: Broadband refers to consumer broadband revenues Sources: Company data; BNP Paribas

Near-term residential broadband competition could ease

We are cautiously optimistic that broadband competition could stabilise within the

near term and potentially ease going into 2015. Our recent checks with management

across the incumbents and smaller RSPs suggest limited near-term downside from

current pricing levels. In fact, we believe there may be attempts by operators to move

to a less competitive pricing regime, although this may not necessarily result in an

absolute tariff increase. Importantly, My Republic’s stated ambitions to expand its

business outside of Singapore (e.g. planned launches in New Zealand and Malaysia

over the next two years) could mean a less aggressive pricing strategy domestically.

Clearly, this would be positive for all three major operators. And just as disruptive

price competition has disproportionately impacted STH to the downside, it could be

argued that less aggressive pricing would have the greatest positive impact on STH.

Slight optimism around SME fibre take-up

The structural issues around enterprise access over the NBN are well flagged. But

we believe there is cause for some optimism. As part of the 2014 budget, the

government announced a number of initiatives targeted at accelerating ICT adoption

amongst SMEs. For example, there are plans to provide SMEs that tap qualifying

ICT-based productivity solutions with a 50% subsidy on their NBN subscriptions for

up to two years. In addition, the government will offer subsidies of up to SGD200k

per building to commercial building owners, as an offset to NBN installation charges.

While we are still not expecting a significant acceleration in SME fibre adoption within

the near term, the government’s initiatives are clearly a positive development.

SME competition likely to intensify

Building on its relative success in the residential broadband space, My Republic

launched an enterprise offering, aimed at the SME segment, earlier this year. The

company is targeting to grow enterprise to the current size of its residential business

within two years. This could potentially involve aggressive pricing, aimed at basic

users and value segments. Elsewhere, Superinternet is also looking to penetrate the

SME segment. The operator recently acquired an FBO licence and is selectively

rolling out its own fibre network to target SME customers.

Near-term impact on ST and STH may be relatively limited

Clearly, increased competition in the SME segment would hurt SingTel, given its

current dominance in this space. But given the relative complexity of enterprise

services, customer churn tends to be lower in this segment (versus residential) – a

point acknowledged by the challenger telcos. Even within the more price-sensitive

SME space, we expect market share erosion of incumbents’ bases will take time. In

addition, given the relatively low telco spend by SMEs, any negative financial impact

on SingTel is unlikely to be significant near term.

0

10

20

30

40

50

60

70

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(SGD m) M1 SingTel STH

0

10

20

30

40

50

60

70

80

90

100

M1 SingTel STH

(%) Mobile Broadband Pay-TV Others

16



In view of intensifying competition, STH is shifting its focus away from SMEs (a

segment it initially identified as an opportunity), towards corporates. While there will

clearly be challenges targeting the corporate segment, there are indications STH has

gained some traction within this space in recent months. In any case, STH’s growing

focus on the corporate segment suggests competitive action by the smaller operators

should have a relatively subdued impact on the company.

We view M1 as most vulnerable in terms of potentially constrained upside

We do have concerns that increased assertiveness from the smaller RSPs could

potentially limit upside for M1. We recognise that M1 has the ability to offer enterprise

services of relative sophistication. But as a new entrant in the enterprise segment,

there could be a meaningful overlap between M1’s addressable market and that of

the other smaller operators. For this reason, among others, we do not share the

market’s optimism around M1.

17



Near-term pay-TV outlook is stable

We have concerns around the long-term structural outlook of the pay-TV business.

The increasing emergence of OTT content sources suggests cord-trimming or cord-

cutting could become a growing threat to traditional pay-TV operators. But while our

projections do not assume meaningful near-term growth for this business, neither are

we expecting any significant revenue erosion over the next two to three years. In

reality, the pay-TV market in Singapore is flat, but signs of significant deterioration

are also absent. Recent ARPU trends have been, to some extent, supported by tariff

adjustments.

EXHIBIT 24: Pay-TV subscriber trends EXHIBIT 25: Pay-TV ARPU trends, by operator

Note: We believe subscriber growth in initial periods was boosted by take-up of dual STBs Sources: Company data; BNP Paribas

Sources: Company data; BNP Paribas

Important element of a strong bundling strategy

For major operators, pay-TV could be a competitive differentiator in an increasingly

crowded market. We view it as a retention strategy by incumbents to defend their

broadband businesses. As such, the bundling strategies adopted by STH and

SingTel should cushion the impact of aggressive price competition – a move

generally favoured by smaller new entrants. For this reason, M1 has also launched a

content service, branded MiBox, although this remains very niche.

Looking ahead, we believe a strong integrated/bundling strategy will become

increasingly important, especially if smaller operators enter the mobile market. From

this perspective and based on this measure, we favour STH and SingTel over M1 on

a medium-term horizon.

0

2

4

6

8

10

12

14

16

760

780

800

820

840

860

880

900

920

940

960

980

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(y-y %)('000) Pay-TV subscribers (LHS) Change (RHS)

0

10

20

30

40

50

60

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(SGD) STH SingTel

18



Sector revenue outlook

Overall, we forecast accelerating sector revenue growth over 2014-15, supported by

growing mobile data usage, expanding LTE network coverage and further boosted by

the recent tariff increases. As highlighted above, we are optimistic STH will be able to

deliver above-industry growth in 2015, supported by its sharper mobile tariff

adjustments and accelerated LTE network expansion.

EXHIBIT 26: Sector revenue trends EXHIBIT 27: Total revenue y-y chg, by operator

Note: 2014E refers to FY15E for SingTel; refers to domestic operations for SingTel Sources: Company data; BNP Paribas estimates


(1)

0

1

2

3

4

5

6

7,800

8,000

8,200

8,400

8,600

8,800

9,000

9,200

9,400

9,600

9,800

2011 2012 2013 2014E 2015E 2016E

(y-y %)(SGD m) Sector revenues (LHS) Change (RHS)

(8)

(6)

(4)

(2)

0

2

4

6

8

10

2011 2012 2013 2014E 2015E 2016E

(%) M1 SingTel STH

19



Sector EBITDA and margin outlook

We expect gradual expansion in the sector’s EBITDA margin beyond 2014, driven by

continued improvements in data monetisation and moderating handset subsidies. A

potential downside risk to our margin assumptions is a spike in mobile and/or

broadband competition, leading to escalated marketing costs across the sector.

EXHIBIT 28: Sector EBITDA trends EXHIBIT 29: EBITDA y-y chg, by operator

Note: 2014E refers to FY15E for SingTel; refers to domestic operations for SingTel. Sources: Company data; BNP Paribas estimates

Note: 2014E refers to FY15e for SingTel; refers to domestic operations for SingTel. Sources: Company data; BNP Paribas estimates

36.0

36.5

37.0

37.5

38.0

38.5

39.0

39.5

2,000

2,200

2,400

2,600

2,800

3,000

3,200

3,400

3,600

3,800

4,000

2011 2012 2013 2014E 2015E 2016E

(%)(SGD m)Sector EBITDA (LHS)

Sector EBITDA margin (RHS)

(6)

(4)

(2)

0

2

4

6

8

10

12

14

2011 2012 2013 2014E 2015E 2016E

(%) M1 SingTel STH

20



Sector capex outlook

We project sustained increases in sector capex over 2014-15, driven by operators’

LTE network expansion and spectrum payments due end-2014. Beyond 2015, we

forecast a slight dip in sector capex, although this should generally remain at

relatively elevated levels.

EXHIBIT 30: Sector capex outlook


13.0

13.5

14.0

14.5

15.0

15.5

0

200

400

600

800

1,000

1,200

1,400

1,600

2011 2012 2013 2014E 2015E 2016E

(%)(SGD m) Sector capex (LHS) Capex/sales (RHS)

21



Regional telco comps

EXHIBIT 31: Regional telco comps

Name BBG code Price Mkt cap ----------- P/E ----------- ------ EV/EBITDA ------ ----------- P/BV ----------- -------- Div yield --------

FY14E FY15E FY14E FY15E FY14E FY15E FY14E FY15E

(LC) (USD m) (x) (x) (x) (x) (x) (x) (%) (%)

China Mobile* 941 HK 94.95 249,495 14.3 14.0 4.5 4.1 1.8 1.7 3.0 3.1

China Telecom* 728 HK 4.70 49,045 16.0 13.7 3.9 3.7 1.0 1.0 2.2 2.5

China Unicom* 762 HK 11.70 36,073 18.2 15.8 3.5 3.4 1.0 0.9 2.2 2.5

Taiwan Mobile* 3045 HK 93.60 10,541 17.0 18.8 9.7 9.3 4.5 4.7 5.9 5.3

Chunghwa* 2412 TT 91.40 23,342 19.3 19.3 8.8 8.6 2.0 2.0 4.9 4.7

Far Eastone* 4904 TT 60.60 6,501 17.5 17.8 7.5 7.1 2.7 2.8 6.2 6.2

Hutchison* 215 HK 3.04 1,889 18.7 17.2 7.6 7.5 1.3 1.3 4.0 4.4

SmarTone* 315 HK 10.40 1,403 20.4 19.7 4.2 4.6 3.4 3.3 2.9 4.3

HKT Trust* 6823 HK 9.31 9,089 24.1 20.0 8.5 7.6 1.8 1.8 5.2 5.8

CITIC Telecom* 1883 HK 2.99 1,291 13.3 11.3 8.0 7.4 1.4 1.3 4.5 5.1

SingTel* ST SP 3.80 47,739 16.4 15.3 8.8 8.3 2.4 2.3 4.6 4.9

StarHub* STH SP 4.09 5,557 19.5 17.4 10.2 9.4 71.5 44.2 4.9 4.9

M1* M1 SP 3.53 2,589 18.2 17.1 10.1 9.6 7.6 7.0 4.4 4.7

Advanced Info ADVANC TB 226.00 20,732 16.3 13.9 9.1 8.3 13.8 12.9 6.1 7.3

DTAC DTAC TB 103.50 7,562 16.0 14.0 6.9 6.2 7.5 7.4 6.6 7.5

Axiata Group AXIATA MK 7.04 18,612 20.3 18.4 8.8 8.3 2.8 2.7 3.8 4.3

DiGi.Com DIGI MK 5.85 14,020 22.3 21.1 13.6 12.9 63.6 61.6 4.4 4.7

Maxis Bhd MAXIS MK 6.47 14,969 23.1 21.9 12.3 12.0 10.8 11.8 4.9 5.1

TM T MK 6.83 7,720 25.1 22.8 7.4 7.1 3.4 3.3 3.7 3.9

Indosat ISAT IJ 3,850 1,719 19.1 17.0 3.8 3.7 1.2 1.2 2.5 2.8

Telkom Indonesia TLKM IJ 2,800 23,186 16.4 15.2 6.2 5.9 3.7 3.4 4.3 4.8

XL Axiata EXCL IJ 6,075 4,259 38.5 22.3 7.3 6.4 3.2 2.9 1.0 2.0

Globe Telecom* GLO PM 1,650 4,898 18.1 15.3 7.0 6.6 5.2 5.0 5.4 5.9

PLDT* TEL PM 3,044 14,709 17.5 16.3 8.9 8.7 4.8 4.8 5.7 6.1

Bharti Airtel* BHARTI IN 404.95 26,526 30.5 23.6 7.2 6.4 2.5 2.3 0.2 0.5

Idea Cellular* IDEA IN 160.40 9,453 21.3 23.2 7.9 7.3 2.6 2.3 - -

Reliance Comm* RCOM IN 104.85 4,128 25.2 24.9 8.1 7.1 0.8 0.8 - -

KT Corp* 030200 KS 35,250 8,532 (19.2) 11.1 5.8 4.0 0.8 0.7 - 1.4

LG Uplus* 032640 KS 11,950 4,837 20.7 11.5 4.6 4.0 1.2 1.2 2.5 2.9

SK TELECOM* 017670 KS 281,000 21,033 11.5 9.4 4.9 4.3 1.5 1.3 3.3 3.3

NTT Docomo* 9437 JP 1,717.50 69,544 13.1 12.2 4.8 4.7 1.2 1.1 3.7 3.9

KDDI* 9433 JP 6,549.00 54,492 11.4 10.7 5.1 4.9 1.6 1.5 2.8 3.0

Softbank* 9984 JP 7,233.00 80,560 13.6 11.4 7.2 6.6 2.8 2.2 0.6 0.7

Note: As at 9 October 2014 close Sources * BNP Paribas estimates; all others (Not rated) are Bloomberg consensus estimates

22

Risks emerging n Potential upside largely priced in – initiate at HOLD, SGD3.75 TP

We like M1 for its nimbleness and technology focus, and expect

healthy mobile gains on the back of data growth. However, we view

related upside as largely priced in at current levels. Longer term, we

see vulnerabilities as smaller operators encroach on M1’s

addressable market in broadband and potentially mobile.

n Mobile momentum may taper; potential competition risks

Operationally, M1 has been the best performing Singapore telco over

the last year, as its mobile focus positions it well to ride the data

wave. But, after several quarters of robust mobile gains, we believe

incremental growth could start to taper. We view M1 as potentially

the most vulnerable to intensifying mobile competition, given its less-

established bundling strategy.

n Assertive smaller operators could limit broadband upside

We accept that the NBN offers significant fixed-line opportunities for

M1. However, we are concerned the increasingly assertive behaviour

of smaller new entrants could limit the upside for M1. With My

Republic (not listed) and Superinternet (not listed) looking to

aggressively target the SME market, we have reservations about

growth momentum for M1 in this segment.

n Relative share price outperformance likely to narrow

M1 has been the best performing Singapore telco stock in the past 12

months, reflecting its strong mobile operational performance in recent

quarters. With mobile momentum potentially tapering and emerging

competition risks, we see limited upside potential from current levels,

and M1’s relative outperformance to peers may narrow.

M1 fibre broadband ARPU

Source: M1 Ltd

40

42

44

46

48

50

52

54

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

(SGD)

10 OCTOBER 2014

INITIATION 10 SINGAPORE SINGAPORE / WIRELESS TELECOMMUNICATION SERVICES

M1 LTD M1 SP

HOLD

TARGET PRICE SGD3.75

CLOSE SGD3.53

UP/DOWNSIDE +6.1%

SGD %

HOW WE DIFFER FROM CONSENSUS MARKET RECS

TARGET PRICE (%) (0.3) POSITIVE 11

EPS 2014 (%) 3.9 NEUTRAL 10

EPS 2015 (%) 3.7 NEGATIVE 3


KEY STOCK DATA

YE Dec (SGD m) 2013A 2014E 2015E 2016E

Revenue 1,008 1,074 1,126 1,172

Rec. net profit 160 180 192 203

Recurring EPS (SGD) 0.17 0.19 0.21 0.22

EPS growth (%) 8.3 11.4 6.3 5.9

Recurring P/E (x) 20.3 18.2 17.1 16.2

Dividend yield (%) 5.9 4.4 4.7 5.0

EV/EBITDA (x) 11.1 10.1 9.6 9.1

Price/book (x) 8.3 7.6 7.0 6.5

Net debt/Equity (%) 49.4 50.9 39.0 39.8

ROE (%) 43.1 43.5 42.7 41.6

Share price performance 1 Month 3 Month 12 Month

Absolute (%) (4.6) (0.8) 3.5

Relative to country (%) (2.1) (0.4) 0.2

Next results October 2014

Mkt cap (USD m) 2,583

3m avg daily turnover (USD m) 2.3

Free float (%) 39

Major shareholder Axiata Investments (29%)

12m high/low (SGD) 3.83/3.17

3m historic vol. (%) 16.6

ADR ticker -

ADR closing price (USD) -

Issued shares (m) 930

Sources: Bloomberg consensus; BNP Paribas estimates

(2)

3

8

13

3.00

3.20

3.40

3.60

3.80

4.00

Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

(%)(SGD) M1 Ltd Rel to Straits Times Index

23

M1 Ltd M1 SP Wei Shi Wu


Investment thesis

M1’s mobile focus suggests it is most sensitive to improving mobile sector dynamics, including better data monetisation and declining handset subsidies. This has supported the company’s recent operational outperformance. While we are still generally positive on the sector’s near-term mobile outlook, it is possible incremental growth for M1 could start to taper, following several quarters of robust gains.

Within broadband, we have concerns that increasingly assertive smaller operators will encroach upon M1’s addressable market, effectively limiting potential upside for this company. We recognise M1’s scale and service sophistication offer some differentiation from the smaller operators, but among the major telcos, its competitive positioning would be closest to the smaller operators.

Over the longer term, M1’s less established bundling strategy vs peers increases its vulnerability to potential new mobile entrants, in our view.

Catalyst

Expected near-term robust mobile performance and the dividend yield should provide share price support. But over the longer-term, competition risks could narrow the relative share price performance versus peers.

Risks to our call

Key downside risks: Accelerated mobile competition, leading

to market share and/or ARPU erosion; more intense than

expected broadband competition, leading to slower revenue

gains; accelerated handset costs, leading to lower margins;

higher than expected capex.

Key upside risks: More benign than expected competition,

leading to accelerated revenue growth; faster than expected

data usage increase, driving mobile ARPU gains; lower than

expected capex; accelerated shareholder returns.

Company background Key assumptions

M1 is a Singapore telecoms company, offering mobile,

broadband and IDD services.

FY13 FY14E FY15E FY16E

(%) (%) (%) (%)

Mobile revenue growth 6.1 4.9 6.4 5.4

EBITDA margin 31.0 32.0 32.3 32.6

Source: M1 Ltd; BNP Paribas estimates

Principal activities, revenue split FY14 Earnings sensitivity

----------- FY14E ----------- ----------- FY15E -----------

Bear Base Bull Bear Base Bull

(%) (%) (%) (%) (%) (%)

Mobile revenue growth 3.9 4.9 5.9 5.4 6.4 7.4

EPS change (1)

2 (3)

3

EBITDA margin 30.0 32.0 33.0 30.3 32.3 33.3

EPS change (10)

5 (10)

5

Key executives Source: BNP Paribas estimates

Title

Karen Kooi Lee Wah CEO

Raymond Yeo Eng Ann CFO

Lee Kok Chew CCO

Patrick Michael Scodeller COO and CTO

http://www.m1.com.sg

Key earnings drivers include mobile revenue growth and

EBITDA margin.

We estimate a 1ppt change in mobile revenue growth rate

changes our FY15E EPS by 3%.

We estimate a 1ppt change in our EBITDA margin

projection changes our FY15E EPS by 5%.

Mobile (62.88%)

International call services(8.76%)

Fixed services (6.59%)

Handset sales (21.77%)

24

http://www.m1.com.sg/



Initiate coverage with a HOLD rating and TP of SGD3.75

We like M1 for its technological focus and ability to respond quickly to competition.

We also recognise M1’s mobile focus positions it well to ride the mobile data wave.

However, we think related upside has largely been priced in. We do not share the

market’s apparent enthusiasm around M1’s fixed broadband opportunities, as

accelerated competitive pressures in the SME segment could limit incremental gains

for this company, in our view. Furthermore, we do not think the market has fully

accounted for the potential risks of increased competition in the mobile segment.

M1 has been the best performing Singapore telco ytd. With market expectations

already fairly high, we see limited scope for further upside at current valuations.

However, the supportive dividend yield limits the downside risk.

Mobile: Riding the data wave, but longer-term risks loom

M1 has been the best performing Singapore telco in the mobile sector. It is the only

operator in the market that has consistently grown post-paid ARPU in the past few

quarters. This could be attributed to the company’s technological focus. In addition,

the operator has been relatively cushioned from the impact of reduced roaming, as

this has always been a small part of M1’s business. Increasing data demand

(supported by ongoing LTE Advanced network rollout) and better data monetisation

should continue to drive healthy ARPU gains for M1. This should offset the negative

impact of M1’s post-paid subscriber share erosion.

EXHIBIT 1: M1 post-paid net adds and sub share EXHIBIT 2: M1 post-paid ARPU trends

Sources: M1 Ltd; BNP Paribas Sources: M1 Ltd; BNP Paribas

We expect the pre-paid segment will continue to be impacted by rationalisation of the

base, following the regulator’s reduction of SIMs per user. Furthermore, industry-

wide issues such as increasing Wi-Fi offload, reduced IDD volumes and relatively

weak tourist arrivals could limit pre-paid revenue gains near term.

24.5

25.0

25.5

26.0

26.5

27.0

0

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10

12

14

16

18

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13

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13

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13

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13

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14

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14

(%)('000)Post-paid net adds (LHS)

Post-paid sub share (RHS)

(12)

(10)

(8)

(6)

(4)

(2)

0

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4

6

8

49

50

51

52

53

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55

56

57

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(y-y %)(SGD) Post-paid ARPU (LHS) Change (RHS)

25



EXHIBIT 3: M1 pre-paid net adds and sub share EXHIBIT 4: M1 pre-paid ARPU trends

Sources: M1 Ltd; BNP Paribas Sources: M1 Ltd; BNP Paribas

Longer-term competition risks to consider

We are not convinced the market has fully considered the potential longer-term risks

of increased mobile sector competition. Clearly, there are significant challenges for a

new mobile operator in a mature market, but in our view, these are not

insurmountable. Should the mobile market become more crowded, we would favour

operators with strong bundling strategies. Based on this measure alone, M1 appears

potentially the most vulnerable of the incumbents.

Broadband: Smaller new entrants may limit upside

The market has been excited about M1’s potential broadband opportunities on the

back of the National Broadband Network (NBN). We recognise that the potential

upside is material, given this represents a new revenue stream for M1. In addition,

the ability to offer fixed-line services significantly enhances M1’s long-term

competitive positioning. The company has been registering robust growth in fixed

network services, albeit from a low base.

EXHIBIT 5: M1 fibre broadband subscriber trends EXHIBIT 6: M1 fixed network services revenue trends

Note: Subscriber share based on SingTel’s and STH’s reported broadband subscribers. Sources: M1 Ltd; BNP Paribas

Sources: M1 Ltd; BNP Paribas

However, we are concerned that the increasingly assertive smaller new entrants will

limit further upside for M1. Clearly, M1’s scale and integrated suite of offerings

represent a material differentiator from smaller operators. But positioning-wise, it

would be closest amongst the incumbents to the challenger telcos. My Republic and

Superinternet have stated their intention to aggressively penetrate SMEs – a

segment previously identified by M1’s management as a key opportunity area. We

believe this could erode M1’s addressable market, with any related price competition

limiting revenue upside.

23.0

23.5

24.0

24.5

25.0

25.5

26.0

26.5

27.0

(120)

(100)

(80)

(60)

(40)

(20)

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40

60

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3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(%)('000) Pre-paid net adds (LHS)

Pre-paid sub share (RHS)

(25)

(20)

(15)

(10)

(5)

0

5

10

15

20

25

0

2

4

6

8

10

12

14

16

18

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(y-y %)(SGD) Pre-paid ARPU (LHS) Change (RHS)

0

1

2

3

4

5

6

7

8

9

0

10

20

30

40

50

60

70

80

90

100

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(%)('000) Fibre broadband subs (LHS)

Broadband sub share (RHS)

0

10

20

30

40

50

60

70

80

90

0

2

4

6

8

10

12

14

16

18

20

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(y-y %)(SGD m) Fixed network services revenues (LHS)

Change (RHS)

26



Revenue forecasts

We expect robust FY14 revenue growth, supported by mobile and reflecting recent

trends. The deceleration in FY15 revenue growth is mainly due to our anticipation of

lower handset sales.

EXHIBIT 7: Revenue forecasts

FY11 FY12 FY13 FY14E FY15E FY16E

(SGD m) (SGD m) (SGD m) (SGD m) (SGD m) (SGD m)

Mobile 587 607 644 676 719 758

International call services 125 116 114 94 87 80

Fixed services 38 48 62 71 82 91

Handset sales 314 305 188 234 238 243

Total revenues 1,065 1,077 1,008 1,074 1,126 1,172

Change (y-y %)

1.1 (6.4) 6.6 4.8 4.1

Sources: M1 Ltd; BNP Paribas estimates

Opex forecasts

We forecast FY14 opex growth of 5%, driven largely by handset costs. The opex

outlook is largely predicated on M1’s ability to manage handset costs/subsidies.

EXHIBIT 8: Opex forecasts



Handset costs 366 385 284 309 318 325

Traffic expenses 65 64 70 66 67 67

Wholesale costs of fixed services 21 25 31 35 41 46

Other cost of sales 41 41 39 40 44 46

Staff costs 97 97 109 113 119 124

Advertising and promotion 27 22 25 27 29 32

Others 142 143 140 142 146 151

Total opex 757 778 697 732 764 791

Change (y-y %)

2.7 (10.3) 5.0 4.3 3.6


Key financial forecasts

We anticipate M1 will deliver robust EBITDA gains in FY14, supported by strong

mobile momentum and sustained margin improvements. But while we believe further

margin expansion beyond FY14 is possible, we project a deceleration in such gains,

reflecting greater competitive intensity in the enterprise broadband segment.

FY14 and FY16 capex will be impacted by spectrum payments (for the spectrum

acquired in the 2013 auction). But otherwise, we see few reasons for any significant

capex spike within the foreseeable future.

27



EXHIBIT 9: Key financial forecasts



Revenues 1,065 1,077 1,008 1,074 1,126 1,172

Change (y-y %)

1.1 (6.4) 6.6 4.8 4.1

EBITDA 310 300 312 344 364 382

Change (y-y %)

(3.3) 4.2 10.2 5.7 5.1

EBITDA margin 29.1 27.8 31.0 32.0 32.3 32.6

Net profit 164 146 160 180 192 203

Change (y-y %)

(10.6) 9.4 12.2 6.8 5.9

Capex 124 123 125 170 129 193

Change (y-y %)

(1.4) 2.0 36.0 (23.8) 49.0

Capex/sales 11.7 11.4 12.4 15.8 11.5 16.5


BNP Paribas versus consensus

We are slightly ahead of Bloomberg consensus in our forecasts; we believe, due to

our more optimistic mobile assumptions.

EXHIBIT 10: BNPP versus consensus estimates

---------------- FY14E ------------- --------------- FY15E------------- ---------------- FY16E -------------

BNPP Cons Var BNPP Cons Var BNPP Cons Var

(SGD m) (SGD m) (%) (SGD m) (SGD m) (%) (SGD m) (SGD m) (%)

Revenues 1,074 1,040 3 1,126 1,076 5 1,172 1,100 7

EBITDA 344 332 4 364 350 4 382 362 6

EBITDA margin (%) 32.0 31.9

32.3 32.5

32.6 32.9

Net profit 180 173 4 192 185 4 203 195 4

Sources: Bloomberg consensus estimates; BNP Paribas estimates

Dividend outlook

We assume an 80% dividend payout over FY14-16, in line with management

guidance. Based on our current projections, dividend/FCF increases sharply in FY16,

due to the expected spectrum payments.

EXHIBIT 11: M1 dividend outlook


70

80

90

100

110

120

130

15

15

16

16

17

17

18

18

FY14E FY15E FY16E

(%)(SGD cents/share) DPS (c/share) (LHS) Div/FCF (RHS)

28



Valuations

At current levels, M1 is trading >1SD above its five-year historical average P/E and

EV/EBITDA. We think there is limited scope for significant share price upside,

especially in view of potential competition risks.

EXHIBIT 12: P/E EXHIBIT 13: EV/EBITDA


We value M1 using DCF analysis, based on 7.4% WACC (2.4% risk free rate, 5.6%

equity risk premium, 5% cost of debt) and 0% terminal growth rate to reflect the long-

term growth nature of the Singapore telecoms market. Our SGD3.75 TP implies

about 18x FY15 P/E and 10x FY15 EV/EBITDA.

EXHIBIT 14: M1 DCF valuation

2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E

(SGD m) (SGD m) (SGD m) (SGD m) (SGD m) (SGD m) (SGD m) (SGD m) (SGD m) (SGD m)

EBIT 237 251 260 273 280 287 295 304 313 320

Less: Tax (40) (43) (44) (46) (48) (49) (50) (52) (53) (54)

Add: Depreciation 126 131 138 142 147 151 154 157 161 167

Less: Capex (129) (193) (128) (126) (123) (119) (122) (125) (128) (131)

Less: Chg in WC (1) (1) (0) (1) (1) (0) (0) (0) (1) (1)

FCF 193 146 225 242 256 270 277 284 292 301

NPV FCF 1,657

NPV TV 2,010

EV 3,667

FY15E net debt (183)

Equity value 3,485

Target price (SGD) 3.75

Note: We use outstanding share base of 930m shares Source: BNP Paribas estimates

Risks to our recommendation and estimates

Key downside risks: Accelerated mobile competition, leading to market share and/or

ARPU erosion; more intense than expected broadband competition, leading to

slower revenue gains; accelerated handset costs, leading to lower margins; higher

than expected capex.

Key upside risks: More benign than expected competition, leading to accelerated

revenue growth; faster than expected data usage increase, driving mobile ARPU

gains; lower than expected capex; accelerated shareholder returns.

7

9

11

13

15

17

19

21

Se

p-0

9

Ja

n-1

0

Ma

y-1

0

Se

p-1

0

Ja

n-1

1

Ma

y-1

1

Se

p-1

1

Ja

n-1

2

Ma

y-1

2

Se

p-1

2

Ja

n-1

3

Ma

y-1

3

Se

p-1

3

Ja

n-1

4

Ma

y-1

4

(x)

+1 SD

+2 SD

-1 SD

-2 SD

5-yr avg.

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

Se

p-0

9

Ja

n-1

0

Ma

y-1

0

Se

p-1

0

Ja

n-1

1

Ma

y-1

1

Se

p-1

1

Ja

n-1

2

Ma

y-1

2

Se

p-1

2

Ja

n-1

3

Ma

y-1

3

Se

p-1

3

Ja

n-1

4

Ma

y-1

4

(x)

+1 SD

+2 SD

-1 SD

-2 SD

5-yr avg.

29



Financial statements M1 Ltd

Profit and Loss (SGD m) Year Ending Dec 2012A 2013A 2014E 2015E 2016E

Revenue 1,077 1,008 1,074 1,126 1,172

Cost of sales ex depreciation (778) (697) (732) (764) (791)

Gross profit ex depreciation 299 311 342 362 380

Other operating income 1 2 2 2 2

Operating costs 0 0 0 0 0

Operating EBITDA 300 312 344 364 382

Depreciation (111) (115) (121) (126) (131)

Goodwill amortisation 0 0 0 0 0

Operating EBIT 189 197 223 237 251

Net financing costs (6) (5) (6) (6) (6)

Associates 0 0 0 0 0

Recurring non operating income 0 0 0 0 0

Non recurring items 0 0 0 0 0

Profit before tax 183 193 216 231 245

Tax (37) (33) (37) (39) (42)

Profit after tax 146 160 180 192 203

Minority interests 0 0 0 0 0

Preferred dividends 0 0 0 0 0

Other items 0 0 0 0 0

Reported net profit 146 160 180 192 203

Non recurring items & goodwill (net) 0 0 0 0 0

Recurring net profit 146 160 180 192 203

Per share (SGD)

Recurring EPS * 0.16 0.17 0.19 0.21 0.22

Reported EPS 0.16 0.17 0.19 0.21 0.22

DPS 0.15 0.21 0.16 0.17 0.17

Growth

Revenue (%) 1.1 (6.4) 6.6 4.8 4.1

Operating EBITDA (%) (3.3) 4.2 10.2 5.7 5.1

Operating EBIT (%) (7.0) 4.5 12.8 6.6 5.7

Recurring EPS (%) (11.1) 8.3 11.4 6.3 5.9

Reported EPS (%) (11.1) 8.3 11.4 6.3 5.9

Operating performance

Gross margin inc depreciation (%) 17.5 19.4 20.5 20.9 21.2

Operating EBITDA margin (%) 27.8 31.0 32.0 32.3 32.6

Operating EBIT margin (%) 17.5 19.6 20.7 21.1 21.4

Net margin (%) 13.6 15.9 16.7 17.0 17.3

Effective tax rate (%) 20.1 16.9 17.0 17.0 17.0

Dividend payout on recurring profit (%) 90.9 120.7 80.1 80.1 80.1

Interest cover (x) 34.3 43.8 36.6 38.5 41.5

Inventory days 16.2 16.2 15.3 15.9 15.9

Debtor days 62.4 58.8 54.1 57.5 57.7

Creditor days 106.3 112.3 107.5 109.9 110.3

Operating ROIC (%) 25.6 26.5 28.9 29.4 29.7

ROIC (%) 21.8 23.0 25.4 26.0 26.4

ROE (%) 43.6 43.1 43.5 42.7 41.6

ROA (%) 15.4 16.7 18.2 18.4 18.6

*Pre exceptional, pre-goodwill and fully diluted

Revenue By Division (SGD m) 2012A 2013A 2014E 2015E 2016E

Mobile 607 644 676 719 758

International call services 116 114 94 87 80

Fixed services 48 62 71 82 91

Handset sales 305 188 234 238 243


30



Financial statements M1 Ltd

Cash Flow (SGD m) Year Ending Dec 2012A 2013A 2014E 2015E 2016E


Depreciation 111 115 121 126 131

Associates & minorities 0 0 0 0 0

Other non-cash items 10 3 4 2 2

Recurring cash flow 267 278 305 321 337

Change in working capital 8 24 (15) (1) (1)

Capex - maintenance (123) (126) (170) (129) (193)

Capex - new investment 0 0 0 0 0

Free cash flow to equity 152 176 120 190 143

Net acquisitions & disposals 0 0 0 0 0

Dividends paid (132) (136) (144) (154) (163)

Non recurring cash flows 1 4 0 0 0

Net cash flow 21 43 (24) 37 (20)

Equity finance 10 22 0 0 0

Debt finance (31) (22) 0 0 0

Movement in cash (1) 43 (24) 37 (20)

Per share (SGD)

Recurring cash flow per share 0.29 0.30 0.33 0.34 0.36

FCF to equity per share 0.17 0.19 0.13 0.20 0.15

Balance Sheet (SGD m) Year Ending Dec 2012A 2013A 2014E 2015E 2016E

Working capital assets 235 195 228 239 249

Working capital liabilities (253) (235) (257) (270) (280)

Net working capital (18) (40) (29) (31) (32)

Tangible fixed assets 630 649 698 701 762

Operating invested capital 612 609 668 670 730

Goodwill 0 0 0 0 0

Other intangible assets 99 88 88 88 88

Investments 0 0 0 0 0

Other assets 0 0 0 0 0

Invested capital 711 697 756 758 818

Cash & equivalents (12) (55) (31) (67) (48)

Short term debt 272 0 0 0 0

Long term debt * 0 250 250 250 250

Net debt 260 195 219 183 202

Deferred tax 103 107 107 107 107

Other liabilities 0 0 0 0 0

Total equity 348 395 430 468 509



* includes convertibles and preferred stock which is being treated as debt

Per share (SGD)

Book value per share 0.38 0.43 0.46 0.50 0.55

Tangible book value per share 0.27 0.33 0.37 0.41 0.45

Financial strength

Net debt/equity (%) 74.7 49.4 50.9 39.0 39.8

Net debt/total assets (%) 26.6 19.8 21.0 16.7 17.7

Current ratio (x) 0.5 1.1 1.0 1.1 1.1

CF interest cover (x) 28.7 40.1 20.8 31.9 24.6

Valuation 2012A 2013A 2014E 2015E 2016E

Recurring P/E (x) * 22.0 20.3 18.2 17.1 16.2

Recurring P/E @ target price (x) * 23.3 21.5 19.3 18.2 17.2

Reported P/E (x) 22.0 20.3 18.2 17.1 16.2

Dividend yield (%) 4.1 5.9 4.4 4.7 5.0

P/CF (x) 12.0 11.7 10.7 10.2 9.7

P/FCF (x) 21.1 18.5 27.2 17.3 23.0

Price/book (x) 9.3 8.3 7.6 7.0 6.5

Price/tangible book (x) 12.9 10.6 9.6 8.6 7.8

EV/EBITDA (x) ** 11.6 11.1 10.1 9.6 9.1

EV/EBITDA @ target price (x) ** 12.3 11.7 10.7 10.1 9.6

EV/invested capital (x) 4.9 5.0 4.6 4.6 4.3

* Pre exceptional, pre-goodwill and fully diluted ** EBITDA includes associate income and recurring non-operating income


31

No significant near-term catalysts n Transfer coverage and maintain HOLD on limited catalysts

We expect relative stability in SingTel’s Singapore operations,

supported by improving mobile sector dynamics. However, sustained

competitive pressures in Australia could limit near-term upside for

Optus. While the fundamental outlook for associates is strong, FX

remains a key risk. We see few significant catalysts in either direction

and given the small upside to our SGD3.94 TP, we maintain HOLD.

n Stable fundamentals in Singapore and key associates

Positive mobile sector dynamics in Singapore (recent tariff increases,

improving data pricing, declining handset subsidies) should support

relative stability in domestic operations. Associate fundamentals are

strong, with Bharti and Globe our India Telecom analyst Kunal Vora’s

preferred picks in their respective sectors.

n Optus remains a key pressure point near term

Competition remains a key near-term risk in Australia and we project

muted growth at Optus. We recognise the operator’s efforts to

accelerate mobile subscriber acquisitions, but believe the impact will

take time to materialise. The broadband outlook is subdued ahead of

greater visibility around the national broadband network.

n Stub PER at long-term average; stock should trade sideways

SingTel has performed in-line with the local benchmark index YTD

while its stub (at 13.8x PE) is trading in-line with its own long-term

average. With limited significant catalysts in either direction, we

expect the stock will continue to trade sideways over the near term. 1-year forward stub P/E

Sources: Bloomberg; BNP Paribas estimates

68101214161820

Apr-05

Sep-05

Feb-06

Jul-06

Dec-06

May-07

Oct-07

Mar-08

Aug-08

Jan-09

Jun-09

Nov-09

Apr-10

Sep-10

Feb-11

Jul-11

Dec-11

May-12

Oct-12

Mar-13

Aug-13

Jan-14

Jun-14

(x)

Avg+1 SD

-1 SD

10 OCTOBER 2014

TRANSFER OF COVERAGE 14 SINGAPORE SINGAPORE / DIVERSIFIED TELECOMMUNICATION

SINGAPORE TELECOM ST SP

HOLD UNCHANGED


CLOSE SGD3.80

UP/DOWNSIDE +3.7%

PRIOR TP SGD3.80

CHANGE IN TP +3.7%


TARGET PRICE (%) (3.7) POSITIVE 12

EPS 2015 (%) (2.6) NEUTRAL 16

EPS 2016 (%) (2.4) NEGATIVE 1


KEY STOCK DATA

YE Mar (SGD m) 2014A 2015E 2016E 2017E

Revenue 16,848 17,068 17,530 18,154

Rec. net profit 3,653 3,685 3,947 4,422


EPS growth (%) 4.1 0.9 7.1 12.0

Recurring P/E (x) 16.6 16.5 15.4 13.7

Dividend yield (%) 4.4 4.6 4.9 5.5

EV/EBITDA (x) 9.2 8.8 8.3 7.5

Price/book (x) 2.5 2.4 2.3 2.2

Net debt/Equity (%) 31.0 27.3 22.9 18.2

ROE (%) 15.3 15.1 15.5 16.5


Absolute (%) (2.6) (1.6) 1.3

Relative to country (%) (0.1) (1.1) (2.0)

Next results November 2014



Free float (%) 48

Major shareholder Temasek Holdings (52%)

12m high/low (SGD) 4.07/3.44


ADR ticker SGAPY US

ADR closing price (USD; 9 Oct 2014) 29.76

Issued shares (m) 15,944


(10)

(5)

0

5

3.00

3.20

3.40

3.60

3.80

4.00

4.20Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

(%)(SGD) Singapore Telecom Rel to Straits Times Index

32

Singapore Telecom ST SP Wei Shi Wu


Investment thesis

We expect SingTel’s Singapore operations to deliver a stable operational performance over the near term, supported by the company’s strong market position and positive dynamics in the mobile sector. While the emergence of smaller new entrants in the broadband sector should assert long-term pressure on SingTel, we believe the near-term financial impact will be relatively contained. In our view, there is scope for slight margin expansion beyond FY15.

We view competitive pressures in Australia as intense but not escalating. While we view Optus’ recent efforts to accelerate subscriber acquisitions as positive, related positive impacts will take time to materialise. Our current projections do not assume any significant revenue growth over the near term. The positive offset is sustained cost management efforts, which could drive gradual margin expansion.

Associate contributions should remain robust, supported by strong fundamentals at SingTel’s key associates. However, FX remains a key risk.

Catalyst

Limited significant near-term catalysts are likely to cause the stock to trade sideways over the near term.

Risks to our call

Key downside risks: Adverse FX movements (especially

SGD appreciation versus the AUD/IDR/INR); significant

emerging market sell-offs; deteriorating macro-economic

outlooks in SingTel's markets; political and regulatory risks

across SingTel's markets; greater than expected competition

in Singapore and Australia; potential negative impact from

the Singapore and Australia NBNs; and the potential risk of

overpaying for assets.

Key upside risks: Favourable FX; less intense than expected

competition; better than expected macro-economic outlook;

and lower than expected capex.


SingTel is a regional integrated telecoms operator, offering

mobile, broadband, fixed-line, ICT and digital services. It has

operations across the region, including Singapore, Australia,

India, Indonesia, Philippines, Thailand.


(%) (%) (%) (%)

Singapore EBITDA margin 32.2 31.6 31.7 32.0

Optus EBITDA margin 29.5 30.0 30.3 30.7

Sources: SingTel; BNP Paribas estimates

Principal activities, revenue split FY15E Earnings sensitivity

------------ FY15E ---------- ------------ FY16E ----------


(%) (%) (%) (%) (%) (%)

Singapore EBITDA margin 30.6 31.6 32.1 30.7 31.7 32.2

EPS change (2)

1 (2)

1

Optus EBITDA margin 29.0 30.0 30.5 29.3 30.3 30.8

EPS change (3)

1 (3)

1


Title

Chua Sock Koong Group CEO

Bill Chang CEO, Group Enterprise

Allen Lew CEO, Consumer Australia

Jonathan Auerbach CEO, Group Digital Life

Jeann Low Group CFO

http://info.singtel.com

Key earnings drivers include Singapore and Optus

EBITDA margin assumptions.

We estimate a 1ppt change in our Singapore EBITDA

margin forecast would change our FY15E EPS by 2%.

We estimate a 1ppt change in our Optus EBITDA margin

forecast would change our FY15E EPS by c.3%.

Singapore (42.21%)

Optus (57.79%)

33

http://info.singtel.com/



Assume coverage with HOLD rating and SGD3.94 SOTP-based TP

We expect revenue growth for the Singapore operations to accelerate slightly in

FY15, to 4% from 3% in FY14, reflecting strength in the mobile business. However,

marketing costs for the iPhone 6 could impact and we project slight EBITDA margin

compression in FY15 to 31.6% from 32.2%, followed by mild margin expansion over

the next two years.

Sustained market competition will continue to be a near-term pressure point for

Optus, in our view. We project a marginal FY15 revenue decline of 1% at Optus,

followed by slight revenue expansion over the next two years. Positively, ongoing

cost management efforts should support, leading to small EBITDA gains over the

next three years.

SingTel’s key associates should continue to deliver strong contributions. In particular,

we expect Bharti contributions to be supported by market share gains, data revenue

expansion and margin improvements. Recent operational performance at Globe

(GLO PM, BUY) has also been robust, with the operator gaining subscriber and

revenue shares. We would flag FX as a key risk, with the SGD having appreciated y-

y versus most associate currencies over the Apr-Sep period.

Singapore operations: Relative stability

Expect stable mobile operations

We anticipate SingTel’s Singapore operations will be supported by healthy mobile

gains. While roaming revenue declines may persist, there are signs that related

incremental impacts could start to stabilise. Furthermore, recent tariff increases,

coupled with continued LTE network expansion, should offer some positive offsets.

As such, we are optimistic post-paid ARPUs could tick up in the coming quarters.

SingTel has been relatively successful in growing pre-paid ARPUs; we believe

supported by growing data usage. This trend should continue.

Overall, we expect fairly robust near-term mobile revenue gains.

EXHIBIT 1: SingTel post-paid ARPU trends EXHIBIT 2: SingTel pre-paid ARPU trends

Sources: SingTel; BNP Paribas Sources: SingTel; BNP Paribas

Limited near-term competitive impact in data and internet

As highlighted in this report, we expect increased competitive intensity in the

broadband segment, largely driven by smaller new entrant operators. While this will

clearly assert long-term pressure on SingTel, we believe the near-term impact may

be relatively contained.

Firstly, it is worth noting residential broadband accounts for only 3% of SingTel’s

domestic revenues. Although there may be greater reasons for SingTel to defend the

SME segment from encroaching new entrants, we believe its focus is still very much

(10)

(8)

(6)

(4)

(2)

0

2

68

70

72

74

76

78

80

82

84

86

88

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

(%)(SGD) Post-paid ARPU (LHS) Change (RHS)

0

1

2

3

4

5

6

7

8

8

9

10

11

12

13

14

15

16

17

18

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

(%)(SGD) Pre-paid ARPU (LHS) Change (RHS)

34



on the large corporate accounts, which should stay fairly stable. Overall, we expect

data and internet revenues to grow at 1-3% over the next few years.

Other businesses

Elsewhere, we expect relative stability in the ICT business, while national and

international telephone revenues are anticipated to register sustained declines, in

line with industry trends. We project fairly robust gains in SingTel’s digital business

(albeit from a low base), reflecting management’s continued efforts in this area.


Overall, we project a slight acceleration in FY15 revenues, supported by healthy

mobile gains and by sales of equipment (reflecting iPhone 6 launch), pay-TV (recent

tariff adjustments) and digital businesses. We forecast slight compression in FY15

EBITDA margin, reflecting higher handset costs related to the iPhone 6 launch and

accelerated cost of sales. However, we expect slight margin improvements beyond

FY15, supported by continued expansion of data scale and hence, better data

economics.

EXHIBIT 3: Historical and projected Singapore revenues EXHIBIT 4: Historical and projected EBITDA and margins

Sources: SingTel; BNP Paribas estimates Sources: SingTel; BNP Paribas estimates

0

1

2

3

4

5

6

7

8

9

3,000

4,000

5,000

6,000

7,000

8,000

9,000

FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E

(%)(SGD m) Total revenues (LHS) Change (RHS)

28

29

30

31

32

33

34

35

36

37

38

1,900

2,000

2,100

2,200

2,300

2,400

2,500

2,600

FY10 FY11 FY12 FY13 FY14 FY15EFY16EFY17E

(%)(SGD m) EBITDA (LHS) EBITDA margin (RHS)

35



Optus operations: Near-term outlook still tough

Mobile competition still intense, although not escalating for now

We view the competitive environment in Australia as intense but not escalating.

Pricing remains competitive, although there are indications operators are taking a

more measured approach towards handset subsidies – one key proxy for competitive

intensity in this market.

Telstra (TLS AU, NR) has been the net winner in a generally slowing market,

supported by its superior network. The operator has added almost 200k net

subscribers since the beginning of 2014. On the other hand, Optus and Vodafone

Hutchison Australia (not listed) have been losing mobile subscribers in recent

quarters, allowing Telstra to make significant strides in subscriber share gains.

EXHIBIT 5: Mobile net adds, by operator EXHIBIT 6: Mobile subscriber share, by operator

Sources: SingTel; BNP Paribas Sources: SingTel; BNP Paribas

Optus is seeking to accelerate subscriber acquisitions through ongoing network

upgrades and competitive pricing. For example, the company’s iPhone 6 plans are

generally priced below those of competitors. As a retention strategy, Optus has also

waived the early cancellation fee for subscribers who have been on contract for three

months, seeking to upgrade to a new handset. In addition, the company recently

announced an AUD450 credit to prospective customers switching from competitor

networks, although the switching credit was subsequently matched by Telstra.

EXHIBIT 7: Total monthly charge for selected iPhone 6 plans

Note: For iPhone 6 16GB handsets; includes monthly subscription and monthly handset repayments; tier 1 plans include 500MB data, tier 2 plans include 1-1.5GB data, tier 3 plans include 2-2.5GB data. Sources: SingTel; BNP Paribas

(600)

(400)

(200)

0

200

400

600

800

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

('000) Telstra Optus VHA

0

10

20

30

40

50

60

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

(%) Telstra Optus VHA

0

10

20

30

40

50

60

70

80

90

100

Tier 1 Tier 2 Tier 3

(AUD) Telstra Optus

36



Muted broadband trends ahead of NBN visibility

The key theme in the Australia broadband market remains developments around the

National Broadband Network (NBN). The 2013 Federal election, and subsequent

change of government to the Liberal National Coalition from Labour, brought about a

renewed infrastructure/technology approach for the NBN. The new government

proposed a combination of technologies (including fibre-to-the-premise, fibre-to-the-

node, existing Hybrid Fibre Coaxial, satellite, LTE fixed wireless, etc.), which would

bring the cost of the redesigned network down to AUD29.5b, from the previously-

proposed AUD43b fibre-to-the-premise network.

As part of the agreements with NBN Co, both Telstra and Optus will move their

customers to the NBN from their existing networks. However, there are now

significant uncertainties, with the government currently undertaking a strategic review

of the NBN. Pending visibility around the NBN, Optus has ceased deployment of its

Unbundled Local Loop (ULL) and Hybrid Fibre Coaxial (HFC) networks – we believe

this has contributed to the operator’s flat broadband performance in recent quarters.

Ahead of greater certainty, we expect current trends will persist.

EXHIBIT 8: Optus broadband subs and ARPU trends EXHIBIT 9: Retail broadband subscriber shares

Sources: SingTel; BNP Paribas Note: As at Jun 2014 Source: Telegeography


We expect slight revenue regression in FY15, reflecting flat mobile revenues and

sustained declines in Optus’ fixed-line businesses. While the recently launched My

Plan Plus should strengthen mobile subscriber acquisitions, we think this will take

time. In the meantime, sustained pressure on the fixed-line businesses could

continue to impact. We project a mild FY16 total revenue increase of 1% and slight

acceleration in growth beyond that. Positively, continued cost management efforts

should drive sustained (slight) margin improvements, leading to marginal FY15

EBITDA gain of 1% and further increases beyond that.

EXHIBIT 10: Historical and projected Optus revenues EXHIBIT 11: Historical and projected EBITDA and margins

Sources: SingTel; BNP Paribas estimates Sources: SingTel; BNP Paribas estimates

40

42

44

46

48

50

52

0

200

400

600

800

1,000

1,200

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

(AUD)('000)

Business grade broadband subs (LHS)

ULL subs (LHS)

HFC subs (LHS)

Broadband ARPU (RHS)

Telstra47.0%

Optus15.6%

iiNet15.1%

TPG11.7%

M2 4.5%

Others6.1%

(15)

(10)

(5)

0

5

10

15

20

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

FY10

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

(y-y %)(AUD m) Total revenues (LHS) Change (RHS)

0

5

10

15

20

25

30

35

0

500

1,000

1,500

2,000

2,500

3,000

FY10

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

(%)(AUD m) EBITDA (LHS) EBITDA margin (RHS)

37



Associates: Robust fundamentals, but FX presents risks

Our views and estimates on Bharti and Globe below reflect those of BNP Paribas

analyst Kunal Vora. We take Bloomberg consensus estimates for non-BNP Paribas

covered associates, AIS and Telkomsel.

We project robust growth in share of associates over FY15-17, supported by

continued gains across SingTel’s key associates.

We have a BUY rating on Bharti (BHARTI IN), as our top pick for the India telecom

sector. Bharti’s India operational performance has improved with double-digit

revenue growth and EBITDA margin improvement, driven by increases in voice

revenue per minute and strong data growth. A large part of Bharti’s spectrum

payments is behind us and we expect strong FCF generation. We further expect

sustained voice price increase across the sector, given the weak financial position of

many operators, exacerbated by rising spectrum costs. While data realisation will

trend down, we see a low likelihood of a data price war, given the limited availability

and high cost of spectrum in India. Bharti’s Africa operations have disappointed, but

we believe the market’s expectations have been toned down, suggesting limited

downside surprise from here. We expect Bharti to be one of the fastest growing

regional Telco’s, with an EBITDA CAGR of 16% over FY13-FY16.

Globe is our preferred pick in the Philippines Telco sector. From a top down

perspective, the Philippines is an attractive market with strong GDP growth,

presence of only two operators, low regulatory risks and attractive dividend yields.

On the operator level, Globe has been consistently gaining subscriber and revenue

market share in the mobile and fixed-line segments. We prefer Globe’s strategy of

collaboration versus PLDT’s (TEL PM, BUY) strategy of buying out stakes in various

businesses (Meralco, Rocket). We expect Globe to report a relatively strong 7%

EBITDA CAGR over FY13-16.

EXHIBIT 12: SingTel share of associates


FX presents a key risk to associate contributions

FX presents a key risk to our SingTel estimates. As at Sep-14, the SGD has

appreciated y-y against most of SingTel’s associate currencies, namely the AUD,

IDR, PHP and THB. In general, this will likely crimp associate translations at the

group level. The slight positive is that the extent of SGD appreciation against these

currencies has narrowed since Apr-14 (start of SingTel’s FY15). In addition, as at

Sep, the SGD has depreciated slightly y-y versus the INR, which should boost FX-

translated Bharti contributions.

(15)

(10)

(5)

0

5

10

15

20

0

500

1,000

1,500

2,000

2,500

3,000

3,500

FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E

(y-y %)(SGD m) Share of associates (LHS) Change (RHS)

38



EXHIBIT 13: SGD y-y change versus SingTel's key associate currencies

Source: Bloomberg

% (15)

% (10)

% (5)

0

5

% 10

% 15

% 20

% 25

% 30

Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14

(%) AUD IDR INR PHP THB

39



Group financial forecasts

Overall, we forecast mild increases in revenues and operational EBITDA in FY15,

followed by slight accelerated growth in FY16-17. In Singapore, we expect improving

data economics and moderating handset subsidies will be positive for margins, while

in Australia, growing traction around Optus’ My Plan Plus and cost management

efforts should support. We project fairly robust Associate contributions over FY14-16,

which should drive healthy group EBITDA and underlying net profit gains.

EXHIBIT 14: Key financial forecasts FY12 FY13 FY14 FY15E FY16E FY17E


Revenues 18,825 18,184 16,848 17,068 17,530 18,154

Change (y-y %)

(3.4) (7.3) 1.3 2.7 3.6

Operational EBITDA 5,219 5,200 5,155 5,234 5,415 5,674

Change (y-y %)

(0.4) (0.9) 1.5 3.5 4.8

EBITDA margin 27.7 28.6 30.6 30.7 30.9 31.3

Group EBITDA 7,223 7,306 7,356 7,679 8,112 8,803

Change (y-y %)

1.1 0.7 4.4 5.6 8.5

Underlying net profit 3,676 3,611 3,610 3,685 3,947 4,422

Change (y-y %)

(1.8) 0.0 2.1 7.1 12.0


BNP Paribas versus consensus estimates

We are not significantly differentiated from consensus in our FY15-17 forecasts. We

do, however, project slightly better margins, supported by our anticipation that

improving data economics in Singapore and sustained cost management efforts at

Optus.

EXHIBIT 15: BNP Paribas versus consensus estimates

-------------- FY15E ------------- -------------- FY16E ------------- -------------- FY17E -------------

BNP Cons Var. BNP Cons Var. BNP Cons Var.


Revenues 17,068 16,941 1 17,530 17,225 2 18,154 17,324 5

Op EBITDA 5,234 5,053 4 5,415 5,154 5 5,674 5,301 7


30.9 29.9

31.3 30.6

Net profit 3,685 3,785 (3) 3,947 4,043 (2) 4,422 4,298 3


Dividend outlook

We project a 75% dividend pay-out over the next few years, in-line with SingTel’s

dividend policy of 60-75% of underlying net profit.

EXHIBIT 16: SingTel dividend outlook

Source: BNP Paribas

76

77

78

79

80

81

0

5

10

15

20

25

FY14E FY15E FY16E

(%)(SGD cents/share) DPS (c/share) (LHS) Div/FCF (RHS)

40



Valuations

Based on historical trends, there is scope for material movements in SingTel’s share

price in either direction, when the stub is trading significantly away from its long-term

average. However, at current levels, the 1-year forward stub PER of c13.9x is just

slightly above its long-term average of 13.3x, while the stock is trading at a slight

NAV discount of 3%. Furthermore, we see few fundamental catalysts on the horizon.

As such, we think SingTel will continue to trade sideways over the near term.

EXHIBIT 17: SingTel’s 1-year forward stub P/E EXHIBIT 18: SingTel’s NAV discount


We value SingTel using a sum-of-the-parts valuation, as detailed below. The

Singapore and Australia operations are valued using DCF, based on company-

specific WACC and terminal growth rates. BNP Paribas covered associates (Bharti

and Globe) are valued at our TPs. Telkomsel (part of PT Telkom (TLKM IJ)) and AIS

(ADVANC TB) are valued based on market value. We value Amobee (not listed) at

investment value. We use BNP Paribas 6M forward FX estimates.

EXHIBIT 19: SingTel SOTP

Methodology Ownership ST value Per share

(%) (SGD m) (SGD)

SingTel DCF: 7.6% WACC, 0% g 100 19,715 1.24

Optus DCF: 9% WACC, 1% g 100 20,932 1.31

Telkomsel Market value 35 7,310 0.46

AIS Market value 23 5,965 0.37

Bharti BNPP TP (INR440) 32 11,921 0.75

Globe BNPP TP (PHP1,900) 47 3,392 0.21

Amobee Investment value 100 404 0.03

Total EV

69,639 4.37

Group net (debt)/cash (FY15E) (6,793) (0.43)

Shareholder value

62,846 3.94

No of shares

15,944

BNPP SOTP

3.94

Source: BNP Paribas

6

8

10

12

14

16

18

20

Apr-05

Sep-05

Feb-06

Jul-06

Dec-06

May-07

Oct-07

Mar-08

Aug-08

Jan-09

Jun-09

Nov-09

Apr-10

Sep-10

Feb-11

Jul-11

Dec-11

May-12

Oct-12

Mar-13

Aug-13

Jan-14

Jun-14

(x)

Avg.

+1 SD

-1 SD

% (35)

% (25)

% (15)

% (5)

% 5

% 15

% 25

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

(%)

41



Risks to our recommendation and estimates

Key downside risks: Adverse FX movements (especially SGD appreciation versus

the AUD/IDR/INR); significant emerging market sell-off; deteriorating macro-

economic outlook in SingTel's markets; political and regulatory risks across SingTel's

markets; greater than expected competition in Singapore and Australia; potential

negative impact from the Singapore and Australia NBNs; potential risk of overpaying

for assets.

Key upside risks: Favourable FX; less intense than expected competition; better than

expected macro-economic outlook; lower than expected capex.

42



Financial statements Singapore Telecom

Profit and Loss (SGD m) Year Ending Mar 2013A 2014A 2015E 2016E 2017E

Revenue 18,184 16,848 17,068 17,530 18,154

Cost of sales ex depreciation (13,099) (11,800) (11,945) (12,225) (12,590)

Gross profit ex depreciation 5,085 5,049 5,123 5,305 5,564



Operating EBITDA 5,202 5,156 5,234 5,415 5,674

Depreciation (2,127) (2,132) (2,174) (2,244) (2,313)


Operating EBIT 3,075 3,024 3,059 3,172 3,361


Associates 2,106 2,201 2,446 2,696 3,129



Profit before tax 4,882 5,044 5,280 5,637 6,286

Tax (1,267) (1,428) (1,590) (1,685) (1,859)

Profit after tax 3,615 3,616 3,690 3,952 4,427

Minority interests (2) (5) (5) (5) (5)



Reported net profit 3,613 3,611 3,685 3,947 4,422

Non recurring items & goodwill (net) (103) 42 0 0 0

Recurring net profit 3,510 3,653 3,685 3,947 4,422

Per share (SGD)

Recurring EPS * 0.22 0.23 0.23 0.25 0.28

Reported EPS 0.23 0.23 0.23 0.25 0.28

DPS 0.17 0.17 0.17 0.19 0.21

Growth

Revenue (%) (3.4) (7.3) 1.3 2.7 3.6

Operating EBITDA (%) (0.3) (0.9) 1.5 3.5 4.8

Operating EBIT (%) (4.4) (1.6) 1.2 3.7 6.0

Recurring EPS (%) (10.1) 4.1 0.9 7.1 12.0

Reported EPS (%) (9.4) (0.1) 2.0 7.1 12.0





Net margin (%) 19.3 21.7 21.6 22.5 24.4



Interest cover (x) 17.4 28.8 24.4 25.4 31.8

Inventory days 5.9 5.9 5.6 5.9 5.8

Debtor days 76.3 78.4 77.2 77.3 77.0

Creditor days 138.7 144.4 140.1 142.8 142.3

Operating ROIC (%) 24.2 24.6 25.4 26.4 28.2

ROIC (%) 12.6 12.7 13.4 14.2 15.5

ROE (%) 14.8 15.3 15.1 15.5 16.5

ROA (%) 9.3 9.6 9.7 10.0 10.8



Singapore 6,733 6,912 7,204 7,556 7,890

Optus 11,451 9,936 9,864 9,974 10,264


43



Financial statements Singapore Telecom

Cash Flow (SGD m) Year Ending Mar 2013A 2014A 2015E 2016E 2017E

Recurring net profit 3,510 3,653 3,685 3,947 4,422

Depreciation 2,127 2,132 2,174 2,244 2,313

Associates & minorities (387) (340) (320) (410) (630)

Other non-cash items 665 210 0 0 0

Recurring cash flow 5,915 5,655 5,539 5,781 6,106

Change in working capital (92) (305) 153 7 4

Capex - maintenance (2,059) (2,102) (2,391) (2,203) (2,190)


Free cash flow to equity 3,764 3,249 3,301 3,585 3,920


Dividends paid (2,518) (2,678) (2,677) (2,764) (2,961)

Non recurring cash flows (503) (700) 0 0 0

Net cash flow 743 (129) 625 821 959

Equity finance 2 0 0 0 0

Debt finance (1,186) (147) 0 0 0

Movement in cash (441) (276) 625 821 959

Per share (SGD)



Balance Sheet (SGD m) Year Ending Mar 2013A 2014A 2015E 2016E 2017E

Working capital assets 3,895 3,729 3,862 3,966 4,106

Working capital liabilities (5,400) (4,877) (5,163) (5,274) (5,419)

Net working capital (1,505) (1,148) (1,301) (1,308) (1,313)

Tangible fixed assets 11,725 11,096 11,313 11,273 11,150

Operating invested capital 10,220 9,949 10,012 9,964 9,837

Goodwill 0 0 0 0 0

Other intangible assets 10,709 10,740 10,740 10,740 10,740

Investments 10,127 10,420 10,744 11,160 11,794

Other assets 2,617 2,713 2,713 2,713 2,713

Invested capital 33,673 33,821 34,209 34,577 35,084

Cash & equivalents (911) (623) (1,247) (2,068) (3,027)

Short term debt 392 814 814 814 814

Long term debt * 7,537 7,227 7,227 7,227 7,227

Net debt 7,018 7,418 6,793 5,972 5,013

Deferred tax 299 445 445 445 445


Total equity 23,965 23,868 24,876 26,060 27,521


Invested capital 33,673 33,821 34,209 34,577 35,084


Per share (SGD)


Tangible book value per share 0.83 0.82 0.89 0.96 1.05

Financial strength

Net debt/equity (%) 29.3 31.0 27.3 22.9 18.2


Current ratio (x) 0.8 0.8 0.9 1.0 1.1


Valuation 2013A 2014A 2015E 2016E 2017E

Recurring P/E (x) * 17.3 16.6 16.5 15.4 13.7


Reported P/E (x) 16.8 16.8 16.4 15.3 13.7

Dividend yield (%) 4.4 4.4 4.6 4.9 5.5

P/CF (x) 10.2 10.7 10.9 10.5 9.9

P/FCF (x) 16.1 18.6 18.4 16.9 15.5

Price/book (x) 2.5 2.5 2.4 2.3 2.2

Price/tangible book (x) 4.6 4.6 4.3 4.0 3.6

EV/EBITDA (x) ** 9.3 9.2 8.8 8.3 7.5





44

Getting back on the right frequency n Recommend non-consensus BUY, with SGD4.75 TP

Market expectations for STH seem low due to weak recent

operational trends. But our optimism lies in the recent mobile tariff

increases and STH’s accelerated LTE network deployment, which we

believe will support significant earnings improvement and potential

upside. With this note Wei Shi Wu assumes coverage of STH.

n Mobile re-pricing a potential near-term catalyst

While all the major telcos have recently raised mobile tariffs, STH

has introduced the sharpest increases, bringing its pricing level with

SingTel (ST SP, HOLD, CP: SGD3.80) and slightly ahead of M1 (M1

SP, HOLD, CP: SGD3.53). With STH likely to catch up with its

competitors in terms of LTE coverage by end-2014, we see

significant scope for mobile revenue gains.

n Better broadband outlook is supportive

We are cautiously optimistic that residential broadband competition

will ease, with a positive impact on STH’s broadband and pay-TV

businesses. STH’s shift in strategic focus away from the SME

(towards corporates) should cushion it from anticipated competitive

pressures from smaller operators.

n Accelerated earnings growth should drive a re-rating

STH’s share price has lagged YTD, underperforming the benchmark

STI by 8% during this period. While FY14 earnings will likely be

depressed, we expect EPS growth to accelerate from next year. Our

FY14-16 earnings forecasts are up to 13% above consensus.

Projected EBITDA growth, by operator


10

6 5

2

5 5

(0)

8

6

(2)

0

2

4

6

8

10

12

2014E 2015E 2016E

(%) M1 SingTel STH

10 OCTOBER 2014

TRANSFER OF COVERAGE 12 SINGAPORE SINGAPORE / DIVERSIFIED TELECOMMUNICATION

STARHUB LTD STH SP

BUY FROM HOLD


CLOSE SGD4.09

UP/DOWNSIDE +16.1%

PRIOR TP SGD4.10

CHANGE IN TP +15.9%


TARGET PRICE (%) 17.0 POSITIVE 2

EPS 2014 (%) (2.1) NEUTRAL 19

EPS 2015 (%) 4.8 NEGATIVE 6


KEY STOCK DATA

YE Dec (SGD m) 2013A 2014E 2015E 2016E

Revenue 2,359 2,338 2,484 2,607

Rec. net profit 371 361 406 442


EPS growth (%) 3.0 (2.6) 12.3 8.9

Recurring P/E (x) 19.1 19.6 17.4 16.0

Dividend yield (%) 4.9 4.9 4.9 4.9

EV/EBITDA (x) 10.1 10.2 9.4 8.8

Price/book (x) 85.9 71.5 44.2 27.5

Net debt/Equity (%) 513.4 417.7 223.7 102.8

ROE (%) 597.9 400.0 314.5 212.5


Absolute (%) (0.7) (1.2) (6.2)

Relative to country (%) 1.8 (0.7) (9.5)

Next results November 2014



Free float (%) 34

Major shareholder Asia Mobile Holdings (56%)

12m high/low (SGD) 4.49/4.03


ADR ticker -

ADR closing price (USD) -

Issued shares (m) 1,724


(21)

(11)

(1)

9

2.00

3.00

4.00

5.00

6.00

Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

(%)(SGD) StarHub Ltd Rel to Straits Times Index

45

StarHub Ltd STH SP Wei Shi Wu


Investment thesis

We expect improvements in STH’s mobile operational performance, supported by recent upward tariff adjustments and accelerated LTE network deployment. These moves, along with generally better data monetisation and moderating handset subsidies across the sector, should drive accelerated mobile revenue gains for STH.

In broadband, we are cautiously optimistic that easing residential price competition will provide relief to STH’s broadband and pay-TV businesses. While SME competition is likely to intensify, STH’s increasing focus on the corporate segment should offer some cushion from the resulting impact.

We generally view pay-TV as a structurally challenged product on a stand-alone basis. However, we recognise it is an important element in an operator’s bundling strategy. On a longer-term horizon, STH’s best-in-class hubbing strategy should offer differentiation from potential new market entrants.

Catalyst

Potential acceleration in revenue and earnings momentum could drive a re-rating of the stock.

Risks to our call

Key downside risks: More intense than expected

competition, leading to market share erosion and/or

accelerated ARPU declines; inability to grow mobile ARPU;

accelerated decline in pay-TV market share to OTT content

providers; inability to manage costs, leading to significant

margin decline; higher than expected capex; inability to

maintain shareholder returns.


Starhub is an integrated telecoms operator in Singapore,

offering mobile, broadband, pay-TV and fixed voice services.


(%) (%) (%) (%)

Mobile revenue growth 0.9 0.1 8.3 5.9

EBITDA margin 31.1 31.2 31.8 32.2

Sources: StarHub Ltd; BNP Paribas estimates

Principal activities, revenue split FY14 Earnings sensitivity

----------- FY14E ----------- ----------- FY15E -----------


(%) (%) (%) (%) (%) (%)

Mobile revenue growth 0.9 0.1 0.6 7.3 8.3 8.8

EPS chg (1)

1 (2)

1

EBITDA margin 30.2 31.2 31.7 30.8 31.8 32.3

EPS chg (5) 3 (5) 3


Title

Tan Tong Hai CEO

Nicholas Tan CFO

Kevin Lim CCO

Jeannie Ong CMO

http://www.starhub.com

Key earnings drivers include mobile revenue growth and

EBITDA margin assumptions.

We estimate a 1ppt change in mobile revenue growth rate

changes our FY15 EPS by 2%, all else being equal.

We estimate a 1ppt change in EBITDA margin assumption

changes our FY15 EPS by 5%, all else being equal.

Mobile (52.9%)

Pay-TV (16.53%)

Broadband (9.46%)

Fixed network services(15.76%)

Equipment sales (5.35%)

46

http://www.starhub.com/



Transfer coverage with non-consensus BUY rating and SGD4.75 TP

STH’s recent operational performance has been relatively lacklustre. As a result,

market expectations are fairly low. We think the market is still largely focused on the

weak recent mobile trends and competitive impact on STH’s broadband business.

But we believe the company is re-aligning its businesses and are optimistic of

accelerated growth. In mobile, we view the recent tariff adjustments as a significant

positive, which could potentially drive above-industry gains for STH. This should be

supported by the company’s accelerated LTE network deployment, which should

place it on par with competitors by end-2014. In broadband, we are cautiously

optimistic that price competition in the residential segment will ease, providing some

relief to STH’s broadband and pay-TV businesses. We view management’s shift in

focus away from the SME broadband space as a slight positive, which should shield

STH from the impact of impending competition in this space.

Mobile: Coming from behind

STH’s mobile operational performance has lagged that of its competitors in recent

years. We believe this could be attributed to various factors, including pricing and the

company’s slightly slower LTE network deployment. The industry-wide decline in

roaming revenue has also been a factor.

We see significant room for STH to catch up in terms of post-paid ARPU gains.

There are indications that roaming revenues could start to stabilise. In addition, STH

has accelerated LTE network deployment over the course of the year and should

achieve nationwide LTE Advanced coverage by end-2014 – essentially putting it on a

par with competitors. This should eliminate any technological disadvantage STH had

previously.

We view the recent mobile tariff adjustments across the sector as a significant

positive for the company. STH has introduced the sharpest relative increases in

lower-end price plans, bringing its pricing into line with SingTel and slightly ahead of

M1. Any offset from subscriber churn should be limited, given the new tariffs are fairly

comparable across operators and the relative maturity of the market. In fact, we

believe this could support above-industry ARPU growth for STH in FY15.

Furthermore, recent feedback from management suggests a more aggressive

approach towards enterprise customer acquisitions has yielded a number of recent

corporate wins for STH. This should continue to be supportive of STH’s post-paid

subscriber share in the coming quarters.

EXHIBIT 1: STH post-paid net adds and subscriber share EXHIBIT 2: STH post-paid ARPU trends

Sources: StarHub Ltd; BNP Paribas Sources: StarHub Ltd; BNP Paribas

Near term, pre-paid net adds will likely continue to be impacted by the recent

regulatory reduction of SIMs per user and subsequent rationalisation of STH’s pre-

paid subscriber base. We expect net add trends to stabilise and potentially recover

towards end-2014. Pre-paid ARPU may remain relatively weak on sustained declines

25.6

25.8

26.0

26.2

26.4

26.6

26.8

27.0

27.2

(10)

0

10

20

30

40

50

60

70

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(%)('000) Post-paid net adds (LHS)

Post-paid sub share (RHS)

(10)

(8)

(6)

(4)

(2)

0

2

4

6

60

62

64

66

68

70

72

74

76

78

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(y-y %)(SGD) Post-paid ARPU (LHS)

Change (RHS)

47



in IDD and roaming volumes. Recent drops in tourist arrivals could be an additional

pressure point in the coming quarters.

EXHIBIT 3: STH pre-paid net adds and subscriber share EXHIBIT 4: STH pre-paid ARPU trends


27.0

27.5

28.0

28.5

29.0

29.5

30.0

30.5

31.0

31.5

(80)

(70)

(60)

(50)

(40)

(30)

(20)

(10)

0

10

20

30

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(%)('000) Pre-paid net adds (k, lhs)

Pre-paid sub share (rhs)

(20)

(15)

(10)

(5)

0

5

10

0

5

10

15

20

25

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(y-y %)(SGD) Pre-paid ARPU (LHS)

Change (RHS)

48



Broadband: Beneficiary of potentially easing residential competition

STH’s broadband business has been impacted significantly by intense price

competition, driven by smaller new entrant operators. To a large extent, this is due to

STH’s need to defend both its broadband and pay TV businesses, which combined

account for 26% of total revenues.

EXHIBIT 5: STH broadband net adds EXHIBIT 6: STH broadband ARPU trends


Positively, our recent checks with management across all the major operators and

some of the smaller RSPs suggest broadband price competition could stabilise. In

our view, My Republic’s (not listed) overseas ambitions (e.g. planned launches in

New Zealand and Malaysia), and to an extent its domestic mobile aspirations, could

potentially evoke greater financial discipline and a more measured approach towards

broadband competition. We are cautiously optimistic this could drive easing

residential broadband competition. This should be positive to the sector in general,

and especially to STH.

Shift in focus away from SME should be supportive

While we maintain our reservations around near-term enterprise fibre adoption, we

are encouraged by recent government initiatives aimed at facilitating SME ICT take-

up. Notably, the government is offering subsidies of up to SGD200k per building, to

facilitate NBN installation in non-commercial properties.

Specifically for STH, management is shifting its focus away from the increasingly

contested SME segment, towards the corporate sector. We view this as a positive

move, as we expect SME competition will increase, with both My Republic and

Superinternet (not listed) stating their intention to aggressively target this segment.

(3)

(2)

(1)

0

1

2

3

4

5

6

7

8

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

('000)

(20)

(15)

(10)

(5)

0

5

30

32

34

36

38

40

42

44

46

48

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(y-y %)(SGD) Broadband ARPU (LHS)

Change (RHS)

49



Pay-TV: Long-term outlook is challenging, but supportive of bundling strategy

While the pay-TV business remains relatively flat, subscriber acquisitions appear to

have ticked up slightly in recent quarters. We believe this could be partially attributed

to the cross-carriage of English Premier League (EPL) content, from SingTel. Pay-TV

ARPUs have stayed fairly stable, supported by a tariff increase implemented in

2H13.

EXHIBIT 7: STH pay-TV net adds EXHIBIT 8: Pay-TV ARPU trends


Over the near term, we anticipate STH’s pay-TV revenues will remain relatively flat.

While the cross-carriage rule does dis-incentivise operators from bidding for

exclusive content, we are not particularly optimistic about any significant content cost

reduction.

We are cautious about the long-term structural outlook of the pay-TV business, but

recognise that it is essential to a good bundling strategy, which will increasingly

differentiate STH from smaller new entrants. This will be particularly relevant if the

smaller broadband RSPs enter the mobile market.

(6)

(5)

(4)

(3)

(2)

(1)

0

1

2

3

4

5

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

('000)

(15)

(10)

(5)

0

5

10

15

30

35

40

45

50

55

60

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

(y-y %)(SGD) Pay-TV ARPU (LHS)

Change (RHS)

50



Revenue forecasts

We expect STH to report relatively flat FY14 revenues, reflecting the impact of

broadband market competition and slower-than-industry mobile growth. We project

accelerated revenue growth in FY15, supported by re-alignment of its mobile

business and stable-to-easing broadband competition.

EXHIBIT 9: Revenue forecasts



Mobile 1,218 1,224 1,235 1,237 1,339 1,417

Pay TV 376 396 386 386 389 390

Broadband 242 249 240 221 227 234

Fixed 337 358 368 369 393 427

Equipment sales 140 194 130 125 135 139

Total revenues 2,312 2,422 2,359 2,338 2,484 2,607

Change (y-y %)

4.7 (2.6) (0.9) 6.2 5.0


Opex forecasts

We forecast a slight decline in FY14, reflecting recent trends. Beyond this, we expect

costs will grow fairly in line with revenues. In our view, cost of services could be a

key contributor to opex increases beyond FY14, driven by content costs. Sustained

increases in content costs are a potential risk to margins.

EXHIBIT 10: Opex forecasts



Cost of equipment sold 383 441 377 350 361 369

Cost of services 298 340 364 387 416 444

Traffic expenses 247 231 201 161 168 175

Marketing and promotion 170 147 154 159 167 173

Staff costs 267 266 277 281 296 309

Others 292 304 305 305 322 333

Total opex 1,657 1,729 1,677 1,644 1,729 1,803

Change (y-y %)

4.3 (3.0) (2.0) 5.2 4.3



Our forecasts assume relatively flat EBITDA margins in FY14 and gradual margin

improvements over the next two years. This should be supported by better mobile

pricing post the recent tariff adjustments, increasing scale of data provision and

progressively moderate handset subsidies.

FY14 capex should be driven by LTE network deployment and 2.5 GHz spectrum

payments. We expect capex levels to remain elevated over the next two years,

driven by STH’s investments in new headend equipment and further spectrum

payments.

51



EXHIBIT 11: Key financial forecasts



Revenues 2,312 2,422 2,359 2,338 2,484 2,607

Change (y-y %)

4.7 (2.6) (0.9) 6.2 5.0

EBITDA 676 720 733 729 789 839

Change (y-y %)

6.5 1.8 (0.5) 8.2 6.2

EBITDA margin 29.2 29.7 31.1 31.2 31.8 32.2

Net profit 316 359 371 361 406 442

Change (y-y %)

13.9 3.2 -2.6 12.3 8.9

Capex 270 295 304 304 310 313

Change (y-y %)

9.5 3.0 0.0 2.1 0.8

Capex/sales (%) 11.7 12.2 12.9 13.0 12.5 12.0


BNP Paribas versus consensus estimates

We are marginally below Bloomberg consensus on our FY14 estimates, but are

significantly ahead in our longer-term forecasts. We believe we are more optimistic

than the market in our mobile assumptions. And while consensus projections imply

relatively flat EBITDA margins over the next few years, we believe better mobile

pricing and increasing data scale can support slight margin improvements over time.

EXHIBIT 12: BNP Paribas versus consensus estimates

------------- FY14E -------------- ------------- FY15E ------------- -------------- FY16E --------------

BNP Cons Var BNP Cons Var BNP Cons Var


Revenues 2,338 2,392 (2) 2,484 2,452 1 2,607 2,501 4

EBITDA 729 743 (2) 789 769 3 839 779 8


31.8 31.4

32.2 31.1

Net profit 361 369 (2) 406 387 5 442 392 13


Dividend outlook

Given capex intensity will likely remain relatively high over the next few years, we

conservatively assume the current annual dividend commitment of 20c/share over

our forecast period. But it is worth noting, based on our current projections, there is

some headroom for STH to potentially increase dividend payments beyond FY14.

EXHIBIT 13: STH dividend outlook


1

11

21

31

41

51

61

71

81

91

101

0

5

10

15

20

25

FY14E FY15E FY16E

(%)(SGD cents/share) DPS (LHS) Div/FCF (RHS)

52



Valuations

At current levels, STH is trading <1SD above its five-year historical average P/E and

EV/EBITDA. The significant re-rating of the stock over the past two years is in-line

with other dividend yield stocks in Singapore. It is worth noting STH’s valuations

have moderated since recent peaks in 2013.

EXHIBIT 14: STH P/E EXHIBIT 15: STH EV/EBITDA


We value STH using DCF analysis based on 7.4% WACC (2.4% risk free rate, 5.6%

equity risk premium, 5% cost of debt) and 0% terminal growth rate to reflect the long-

term growth nature of the Singapore telecoms market. Our SGD4.75 TP implies

about 20x FY15E P/E and about 11x FY15E EV/EBITDA – still below STH’s recent

peak valuations.

EXHIBIT 16: STH DCF valuation

2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E

(SGD m) (SGD m) (SGD m) (SGD m) (SGD m) (SGD m) (SGD m) (SGD m) (SGD m) (SGD m)

EBIT 507 550 588 615 635 665 691 717 743 771

Less: Tax (86) (93) (100) (105) (108) (113) (117) (122) (126) (131)

Add: Depreciation 283 289 296 303 311 319 328 338 347 354

Less: Capex (310) (313) (313) (309) (303) (299) (292) (285) (295) (305)

Less: Chg in WC 22 19 17 15 13 18 15 16 19 21

FCF 415 452 489 520 549 590 624 663 688 711

NPV FCF 3,802

NPV TV 4,746

EV 8,548

FY15E net debt (357)

Equity value 8,191

Target price (SGD) 4.75

Note: We use the outstanding share base of 1,721m shares Source: BNP Paribas estimates

Key risks to our recommendation and estimates

Key downside risks: More intense than expected competition, leading to market

share erosion and/or accelerated ARPU declines; inability to grow mobile ARPU;

accelerated decline in pay-TV market share to OTT content providers; inability to

manage costs, leading to significant margin decline; higher than expected capex;

inability to maintain shareholder returns.

9

11

13

15

17

19

21

23

Se

p-0

9

Jan

-10

May-1

0

Se

p-1

0

Jan

-11

May-1

1

Se

p-1

1

Jan

-12

May-1

2

Se

p-1

2

Jan

-13

May-1

3

Se

p-1

3

Jan

-14

May-1

4

(x)

+2 SD

+1 SD

-1 SD

-2 SD

5-yr avg

5

6

7

8

9

10

11

12

Se

p-0

9

Jan

-10

May-1

0

Se

p-1

0

Jan

-11

May-1

1

Se

p-1

1

Jan

-12

May-1

2

Se

p-1

2

Jan

-13

May-1

3

Se

p-1

3

Jan

-14

May-1

4

(x)

+2 SD

+1 SD

-1 SD

-2 SD

5-yr avg

53



Financial statements StarHub Ltd

Profit and Loss (SGD m) Year Ending Dec 2012A 2013A 2014E 2015E 2016E

Revenue 2,422 2,359 2,338 2,484 2,607

Cost of sales ex depreciation (1,729) (1,677) (1,644) (1,729) (1,803)

Gross profit ex depreciation 693 683 694 754 804



Operating EBITDA 720 733 729 789 839

Depreciation (273) (270) (276) (283) (289)


Operating EBIT 447 463 453 507 550


Associates 0 0 0 0 0



Profit before tax 431 447 435 489 532

Tax (72) (77) (74) (83) (91)

Profit after tax 359 371 361 406 442




Reported net profit 359 371 361 406 442

Non recurring items & goodwill (net) 0 0 0 0 0


Per share (SGD)

Recurring EPS * 0.21 0.21 0.21 0.23 0.26

Reported EPS 0.21 0.22 0.21 0.24 0.26

DPS 0.20 0.20 0.20 0.20 0.20

Growth

Revenue (%) 4.7 (2.6) (0.9) 6.2 5.0

Operating EBITDA (%) 6.5 1.8 (0.5) 8.2 6.3

Operating EBIT (%) 12.3 3.6 (2.2) 11.8 8.5

Recurring EPS (%) 13.8 3.0 (2.6) 12.3 8.9

Reported EPS (%) 13.8 2.9 (2.7) 12.2 8.9





Net margin (%) 14.8 15.7 15.4 16.3 17.0



Interest cover (x) 28.1 29.0 25.2 28.3 31.7

Inventory days 6.9 7.7 8.1 6.6 6.6

Debtor days 22.2 20.6 21.1 22.1 22.3

Creditor days 96.3 132.6 169.4 167.1 167.8

Operating ROIC (%) 147.0 148.7 123.8 135.3 143.8

ROIC (%) 55.7 59.2 54.9 60.8 65.3

ROE (%) 1,140.6 597.9 400.0 314.5 212.5

ROA (%) 21.1 21.0 20.1 21.7 22.2



Mobile 1,224 1,235 1,237 1,339 1,417

Pay-TV 396 386 386 389 390

Broadband 249 240 221 227 234

Fixed network services 358 368 369 393 427

Equipment sales 194 130 125 135 139


54



Financial statements StarHub Ltd

Cash Flow (SGD m) Year Ending Dec 2012A 2013A 2014E 2015E 2016E


Depreciation 273 270 276 283 289

Associates & minorities 0 0 0 0 0

Other non-cash items 15 (39) 18 18 17

Recurring cash flow 647 602 655 706 748

Change in working capital 42 (7) 20 22 19

Capex - maintenance (273) (303) (304) (310) (313)


Free cash flow to equity 416 292 372 418 455


Dividends paid (343) (344) (345) (345) (345)

Non recurring cash flows 5 4 3 3 3

Net cash flow 78 (48) 30 76 113

Equity finance (1) 1 0 0 0

Debt finance 56 3 (21) (21) (21)

Movement in cash 133 (44) 9 55 93

Per share (SGD)



Balance Sheet (SGD m) Year Ending Dec 2012A 2013A 2014E 2015E 2016E

Working capital assets 306 345 342 362 378

Working capital liabilities (880) (902) (920) (960) (994)

Net working capital (574) (557) (577) (598) (616)

Tangible fixed assets 791 857 885 912 936

Operating invested capital 217 300 307 314 320

Goodwill 0 0 0 0 0

Other intangible assets 397 381 381 381 381

Investments 0 0 0 0 0

Other assets 3 0 0 0 0


Cash & equivalents (312) (267) (276) (331) (424)

Short term debt 0 0 0 0 0

Long term debt * 688 688 688 688 688

Net debt 376 421 412 357 264

Deferred tax 119 128 128 128 128


Total equity 42 82 99 159 256




Per share (SGD)


Tangible book value per share (0.21) (0.17) (0.16) (0.13) (0.07)

Financial strength

Net debt/equity (%) 895.2 513.4 417.7 223.7 102.8


Current ratio (x) 0.7 0.7 0.7 0.7 0.8


Valuation 2012A 2013A 2014E 2015E 2016E

Recurring P/E (x) * 19.6 19.1 19.6 17.4 16.0


Reported P/E (x) 19.5 19.0 19.5 17.4 16.0

Dividend yield (%) 4.9 4.9 4.9 4.9 4.9

P/CF (x) 10.9 11.7 10.8 10.0 9.4

P/FCF (x) 16.9 24.1 19.0 16.9 15.5

Price/book (x) 167.3 85.9 71.5 44.2 27.5

Price/tangible book (x) (19.8) (23.5) (25.0) (31.8) (56.6)

EV/EBITDA (x) ** 10.4 10.1 10.2 9.4 8.8





55



Disclaimers and Disclosures APPENDIX

DISCLAIMERS AND DISCLOSURES APPLICABLE TO NON-US BROKER-DEALER(S): BNP Paribas - Singapore (PI)

ANALYST(S) CERTIFICATION

Wei Shi Wu, BNP Paribas - Singapore (PI), +65 6210 1925, [email protected]. The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately reflect the personal view of the analyst(s) with regard to any and all of the subject securities, companies or issuers mentioned in this report; and (ii) no part of the compensation of the analyst(s) was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the research analyst herein. Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp., and are not registered/ qualified pursuant to NYSE and/or FINRA regulations.

IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONS "BNP Paribas” is the marketing name for the global banking and markets business of BNP Paribas Group. No portion of this report was prepared by BNP Paribas Securities Corp (US) personnel, and it is considered Third-Party Affiliate research under NASD Rule 2711. The following disclosures relate to relationships between companies covered in this research report and the BNP entity identified on the cover of this report, BNP Securities Corp., and other entities within the BNP Paribas Group (collectively, "BNP Paribas").

The disclosure column in the following table lists the important disclosures applicable to each company that has been rated and/or recommended in this report:

Company Ticker Disclosure (as applicable)

N/A N/A N/A

BNP Paribas represents that: 1. Within the past year, it has managed or co-managed a public offering for this company, for which it received fees. 2. It had an investment banking relationship with this company in the last 12 months. 3. It received compensation for investment banking services from this company in the last 12 months. 4. It expects to receive or intends to seek compensation for investment banking services from the subject company/ies in the next 3 months. 5. It beneficially owns 1% or more of any class of common equity securities of the subject company. 6. It makes a market in securities in respect of this company. 7. The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest position in

securities issued by this company. The financial interest is in the common stock of the subject company, unless otherwise noted. 8. The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company or has received compensation from the

company.

IMPORTANT DISCLOSURES REQUIRED IN KOREA The disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated and/or recommended in this report:

Company Ticker Price (as of 09-Oct-2014 closing price) Interest

N/A N/A N/A N/A

1. The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co. Ltd (“BNPPSK”) by means of payment guarantees, endorsements, and provision of collaterals and/or taking over the obligations.

2. BNPPSK owns 1/100 or more of the total outstanding shares issued by the Company. 3. The Company is an affiliate of BNPPSK as prescribed by Item 3, Article 2 of the Monopoly Regulation and Fair Trade Act. 4. BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the

transaction does not exceed 5/100 of the total asset of the Company or the total number of outstanding shares. 5. BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year. 6. With regards to the tender offer initiated by the Company based on Item 2, Article 133 of the Financial Investment Services and Capital Market Act,

BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company, provided that this provision shall apply only where tender offer has not expired.

7. The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of entering into arrangement for public offering or underwriting-related agreement for issuance of stocks

8. The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation. 9. The Company is recognized as having considerable interests with BNPPSK in relation to No.1 to No. 8. 10. The analyst or his/her spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc. contracts) the

following securities or rights (hereinafter referred to as “Securities, etc.” in this Article) regardless of whose name is used in the trading. 1) Stocks, bond with stock certificate, and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited. 2) Stock options of the Company whose securities dealings are being solicited. 3) Individual stock future, stock option, and warrants that use the stocks specified in Item 1) as underlying.

56



History of change in investment rating and/or target price

Singapore Telecom (ST SP)

Wei Shi Wu started covering this stock from 10-Oct-2014 Price and TP are in local currency

Valuation and risks: Key downside risks to our SOTP-based TP: Adverse FX movement (especially SGD appreciation versus AUD/INR/IDR); significant emerging market sell-off; deteriorating macro-economic outlook in SingTel's markets; political and regulatory risks across SingTel's markets; greater than expected competition in Singapore and Australia; potential negative impact from the Singapore and Australia NBNs; potential risk of overpaying for assets. Key upside risks: Favourable FX; less intense than expected competition; better than expected macro-economic outlook.

Sources: Bloomberg; BNP Paribas

StarHub Ltd (STH SP)

Wei Shi Wu started covering this stock from 10-Oct-2014 Price and TP are in local currency

Valuation and risks: We value STH using DCF analysis. Key downside risks: Increased competitive intensity in mobile and broadband, leading to accelerated market share or ARPU erosion; pay-TV subscriber loss to OTT platforms; inability to manage costs; higher than expected capex; inability to sustain shareholder returns.

Sources: Bloomberg; BNP Paribas

GENERAL DISCLAIMER This report was produced by BNP Paribas - Singapore (PI), member company(ies) of the BNP Paribas Group. This report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without our prior written consent. By accepting this report, the recipient agrees to be bound by the terms and limitations set forth herein. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any trading activity. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or other investments. This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this report. Information and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without the recipient’s own independent verification, or taken in substitution for the exercise of judgment by the recipient. Additionally, the products mentioned in this report may not be available for sale in certain jurisdictions. As an investment bank with a wide range of activities, BNP Paribas may face conflicts of interest, which are resolved under applicable legal provisions and internal guidelines. You should be aware, however, that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in this document, either for its own account or for the account of its clients. Australia: This report is being distributed in Australia by BNP Paribas Sydney Branch, registered in Australia as ABN 23 000 000 117 at 60 Castlereagh Street Sydney NSW 2000. BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no. 238043 and therefore subject to regulation by the Australian Securities & Investments Commission in relation to delivery of financial services. By accepting this document you agree to be bound by the foregoing limitations, and acknowledge that information and opinions in this document relate to financial products or financial services which are delivered solely to wholesale clients (in terms of the Corporations Act 2001, sections 761G and 761GA; Corporations Regulations 2001, division 2, reg. 7.1.18 & 7.1.19) and/or professional investors (as defined in section 9 of the Corporations Act 2001). Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory

Date Reco TP

9-Oct-11 BUY 3.75

1-Aug-13 HOLD 4.00

2.71

2.91

3.11

3.31

3.51

3.71

3.91

4.11

4.31

Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14

(SGD) SingTel Target Price

Date Reco TP

9-Oct-11 HOLD 3.00

2.45

2.95

3.45

3.95

4.45

4.95

Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14

(SGD) StarHub Ltd Target Price

57



of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Hong Kong: This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whose business involves the acquisition, disposal or holding of securities, whether as principal or agent. BNP Paribas Securities (Asia) Limited, a subsidiary of BNP Paribas, is regulated by the Securities and Futures Commission for the conduct of dealing in securities, advising on securities, providing automated trading services, dealing in futures contacts and advising on corporate finance. For professional investors in Hong Kong, please contact BNP Paribas Securities (Asia) Limited for all matters and queries relating to this report. India: In India, this document is being distributed by BNP Paribas Securities India Pvt. Ltd. ("BNPPSIPL"), having its registered office at 5th floor, BNP Paribas House, 1 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 (Tel. no. +91 22 3370 4000 / 6196 4000 / Fax no. +91 22 3370 4363). BNPPSIPL is registered with the Securities and Exchange Board of India (“SEBI”) as a stockbroker in the Equities and the Futures & Options segments of National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. (SEBI Regn. Nos.: INB/INF231474835, INB/INF011474831; CIN: U74920MH2008FTC182807; Website: www.bnpparibas.co.in). Indonesia: This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by its licensed employee(s), including marketing/sales person, to its client. PT BNP Paribas Securities Indonesia, having its registered office at Menara BCA, 35th floor, Grand Indonesia, JL. M.H. Thamrin No.1, Jakarta 10310, Indonesia, is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no. 8 year 1995, a holder of broker-dealer and underwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa Keuangan/OJK). PT BNP Paribas Securities Indonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK). Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations. This report is not an offer of securities in Indonesia and may not be distributed within the territory of the Republic of Indonesia or to Indonesian citizens in circumstance which constitutes an offering within the meaning of Indonesian capital market laws and regulations. Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas not registered as a financial instruments firm in Japan, to certain financial institutions defined by article 17-3, item 1 of the Financial Instruments and Exchange Law Enforcement Order. BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments and Exchange Law of Japan and a member of the Japan Securities Dealers Association, the Financial Futures Association of Japan and the Type II Financial Instruments Firms Association. BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japan affiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited. Some of the foreign securities stated on this report are not disclosed according to the Financial Instruments and Exchange Law of Japan. Malaysia: This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd. The views and opinions in this research report are our own as of the date hereof and are subject to change. BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd. This publication is being provided to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd. Philippines: This report is being distributed in the Philippines by BNP Paribas Manila Branch, an Offshore Banking Unit (OBU) of BNP Paribas whose head office is in Paris, France. BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No. 1034 (PD 1034), and regulated by the Bangko Sentral ng Pilipinas. This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034, and is qualified in its entirety to the products and services allowed under PD 1034. Singapore: This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd ("BNPPSSL") and may be distributed in Singapore only to an Accredited or Institutional Investor, each as defined under the Financial Advisers Regulations ("FAR") and the Securities and Futures Act (Chapter 289) of Singapore, as amended from time to time. In relation to the distribution to such categories of investors, BNPPSSL and its representatives are exempted under Regulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore, regarding the disclosure of certain interests in, or certain interests in the acquisition or disposal of, securities referred to in this report. For Institutional and Accredited Investors in Singapore, please contact BNP Paribas Securities (Singapore) Ptd Ltd (company registration number: 199801966C; address: 10 Collyer Quay, 34/F Ocean Financial Centre, Singapore 049315; tel: (65) 6210 1288; fax: (65) 6210 1980) for all matters and queries relating to this report. South Africa: In South Africa, BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as “BNPP Cadiz”) are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial Services Board. BNPP Cadiz does not expressly or by implication represent, recommend or propose that the financial products referred to in this report are appropriate to the particular investment objectives, financial situation or particular needs of the recipient. South Korea: BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission. This document does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South Korea. Switzerland: This report is intended solely for customers who are “Qualified Investors” as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Act on Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22 November 2006 (CISO). “Qualified Investors” includes, among others, regulated financial intermediaries such as banks, securities dealers, fund management companies and asset managers of collective investment schemes, regulated insurance companies as well as pension funds and companies with professional treasury operations. This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to Qualified Investors. For specification purposes, a “Swiss Corporate Customer” is a Client which is a corporate entity, incorporated and existing under the laws of Switzerland and which qualifies as “Qualified Investor” as defined above." BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss Federal Market Supervisory Authority FINMA. BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No. CH-270-3000542-1. BNP Paribas (Suisse) SA is incorporated in Switzerland with limited liability. Registered Office: 2 place de Hollande, CH-1204 Geneva. Taiwan: Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co., Ltd. Such information is for your reference only. The reader should independently evaluate the investment risks and is solely responsible for their investment decision. Information on securities that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities. BNP Paribas Securities (Taiwan) Co., Ltd. may not execute transactions for clients in these securities. This publication may not be distributed to the public media or quoted or used by the public media without the express written consent of BNP Paribas. Thailand: Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (“BNPP”) and Finansia Syrus Securities Public Company Limited (“FSS”). FSS International Investment Advisory Securities Co Ltd (“FSSIA”) prepares and distributes research under the brand name “BNP PARIBAS/FSS”. BNPP is not an affiliate of FSSIA or FSS. FSS also publishes a different research product under the brand name “FINANSIA SYRUS,” which is prepared by research analysts who are not part of FSSIA and who may cover the same securities, issuers, or industries that are the subject of this report. The ratings, recommendations, and views expressed in this report may differ from the ratings, recommendations, and views expressed by other research analysts or research teams employed by FSS. This report is being distributed outside Thailand by members of BNP Paribas. Turkey: This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER A.S., Teb Kampus D Blok Saray Mah. Kucuksu Cad. Sokullu Sok., No:7 34768 Umraniye, Istanbul, Turkey, Trade register number: 358354, www.tebyatirim.com.tr) and outside Turkey jointly by TEB Investment and BNP Paribas. Information, comments and suggestions on investment given in this material are not within the scope of investment consulting. The investment consulting services are rendered tailor made for individuals by competent authorities considering the individuals’ risk and return preferences. However the comments and recommendations herein are based on general principles. These opinions may not be consistent with your financial status as well as your risk and return preferences. Therefore, making an investment decision only based on the information provided herein may not bear consequences in parallel with your expectations. This material issued by TEB Yatırım Menkul Değerler A.Ş. for information purposes only and may be changed without any prior notification. All rights reserved. No part of this material may be copied or reproduced in any manner without the written consent of TEB Yatırım Menkul Değerler A.Ş. Although TEB Yatırım Menkul Değerler A.Ş. gathers the presented material that is current as possible, it does not

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undertake that all the information is accurate or complete, nor should it be relied upon as such. TEB Yatırım Menkul Değerler A.Ş. assumes no responsibility whatsoever in respect of or arising out or in connection with the content of this material to third parties. If any third party chooses to use the content of this material as reference, he/she accepts and approves to do so entirely at his/her own risk. United States: This report may be distributed in the United States only to U.S. Persons who are “major U.S. institutional investors” (as such term is defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) and is not intended for the use of any person or entity that is not a “major U.S. institutional investor”. U.S persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp., a US-registered broker dealer and member of FINRA, SIPC, NFA, NYSE and other principal exchanges. Certain countries within the European Economic Area: This document may only be distributed in the United Kingdom to eligible counterparties and professional clients and is not intended for, and should not be circulated to, retail clients (as such terms are defined in the Markets in Financial Instruments Directive 2004/39/EC (“MiFID”)). This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas London Branch, a branch of BNP Paribas SA whose head office is in Paris, France. BNP Paribas SA is incorporated in France with limited liability with its registered office at 16 boulevard des Italiens, 75009 Paris. BNP Paribas London Branch (registered office: 10 Harewood Avenue, London NW1 6AA; tel: [44 20] 7595 2000; fax: [44 20] 7595 2555) is authorised by the Autorité de Contrôle Prudentiel and the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request.This report has been approved for publication in France by BNP Paribas, a credit institution licensed as an investment services provider by the Autorité de Contrôle Prudentiel whose head office is 16, Boulevard des Italiens 75009 Paris, France. This report is being distributed in Germany either by BNP Paribas London Branch or by BNP Paribas Niederlassung Frankfurt am Main, regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). Other Jurisdictions: The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law, and persons into whose possession this report comes should inform themselves about, and observe, any such restrictions. By accepting this report you agree to be bound by the foregoing instructions. This report is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. All research reports are disseminated and available to all clients simultaneously through our internal client websites. For all research available on a particular stock, please contact the relevant BNP Paribas research team or the author(s) of this report.

Additional Disclosures Target price history, stock price charts, valuation and risk details, and equity rating histories applicable to each company rated in this report is available in our most recently published reports available on our website: http://eqresearch.bnpparibas.com, or you can contact the analyst named on the front of this note or your BNP Paribas representative. All share prices are as at market close on 9 October 2014 unless otherwise stated.

RECOMMENDATION STRUCTURE

Stock Ratings Stock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price. BUY (B). The upside is 10% or more. HOLD (H). The upside or downside is less than 10%. REDUCE (R). The downside is 10% or more. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on market price and the formal recommendation. * In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value.

Industry Recommendations Improving (é): The analyst expects the fundamental conditions of the sector to be positive over the next 12 months. Stable (previously known as Neutral) (çè): The analyst expects the fundamental conditions of the sector to be maintained over the next 12 months. Deteriorating (ê): The analyst expects the fundamental conditions of the sector to be negative over the next 12 months. Country (Strategy) Recommendations Overweight (O). Over the next 12 months, the analyst expects the market to score positively on two or more of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Neutral (N). Over the next 12 months, the analyst expects the market to score positively on one of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Underweight (U). Over the next 12 months, the analyst does not expect the market to score positively on any of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity.

RATING DISTRIBUTION (as at 10 October 2014)

Total BNP Paribas coverage universe 679 Investment Banking Relationship (%)

Buy 347 Buy 6.60

Hold 233 Hold 5.60

Reduce 99 Reduce 2.00

Should you require additional information concerning this report please contact the relevant BNP Paribas research team or the author(s) of this report.

© 2014 BNP Paribas Group

59

.

.

HONG KONG BNP Paribas Securities (Asia) Ltd 63/F, Two International Finance Centre 8 Finance Street, Central Hong Kong SAR China Tel (852) 2825 1888 Fax (852) 2845 9411

SHANGHAI

KUALA LUMPUR

Malaysia

NEW YORK BNP Paribas The Equitable Tower 787 Seventh Avenue New York NY 10019, USA Tel (1 212) 841 3800 Fax (1 212) 841 3810

BASEL BNP Paribas Aeschengraben 26 CH 4002 Basel Switzerland Tel (41 61) 276 5555 Fax (41 61) 276 5514

FRANKFURT BNP Paribas Mainzer Landstrasse 16 60325 Frankfurt Germany Tel (49 69) 7193 6637 Fax (49 69) 7193 2520

GENEVA BNP Paribas 2 Place de Hollande 1211 Geneva 11 Switzerland Tel (41 22) 787 7377 Fax (41 22) 787 8020

LONDON BNP Paribas 10 Harewood Avenue London NW1 6AA UK Tel (44 20) 7595 2000 Fax (44 20) 7595 2555

MADRID BNP Paribas SA, sucursal en Espana Hermanos Becquer 3 PO Box 50784 28006 Madrid Spain Tel (34 91) 745 9000 Fax (34 91) 745 8888

MILAN BNP Paribas Equities Italia SIM SpA Piazza San Fedele, 2 20121 Milan Italy Tel (39 02) 72 47 1 Fax (39 02) 72 47 6562

PARIS BNP Paribas Equities France Société de Bourse 20 boulevard des Italiens 75009 Paris France Tel (33 1) 4014 9673 Fax (33 1) 4014 0066

ZURICH BNP Paribas Talstrasse 41 8022 Zurich Switzerland Tel (41 1) 229 6891 Fax (41 1) 267 6813

MANAMA BNP Paribas Bahrain PO Box 5253 Manama Bahrain Tel (973) 53 3978 Fax (973) 53 1237

TOKYO BNP Paribas Securities (Japan) Ltd GranTokyo North Tower 1-9-1 Marunouchi, Chiyoda-Ku Tokyo 100-6740 Japan Tel (81 3) 6377 2000 Fax (81 3) 5218 5970

MUMBAI

BNP Paribas Equities (Asia) Ltd Shanghai Representative Office Room 2630, 26/F Shanghai World Financial Center 100 Century Avenue Shanghai 200120, China Tel (86 21) 6096 9000 Fax (86 21) 6096 9018

JAKARTA PT BNP Paribas Securities Indonesia Grand Indonesia, Menara BCA, JI. M.H. Thamrin No. 1Jakarta 10 0 Indonesia Tel (62 21) 2358 6586 Fax (62 21) 2358 7587

35/F

31

TAIPEI BNP Paribas Securities (Taiwan) Co Ltd 72 F, Taipei 101 No. 7 Xin Yi Road, Sec. 5 Taipei, Taiwan

(886 2) 8729 7000 Fax (886 2) 8101 2168

Tel

/Vista Tower, Level 48CThe Intermark, 182 Jalan Tun Razak50400 Kuala Lumpur

Tel (60 3) 2179 6222Fax (60 3) 2179 6226

BNP Paribas Capital (Malaysia) Sdn Bhd BNP Paribas Securities India Pvt Ltd BNP Paribas House1 North Avenue, Maker MaxityBandra Kurla ComplexBandra EastMumbai 400 051Tel (91 22) 3370 4000Fax (91 22) 3370 4386

https://eqresearch.bnpparibas.com

TEB Investment (A JV between TEB Bank and BNP Paribas) TEB Kampus D7 Saray Mahallesi Sokullu Sok No 7 Umraniye 34768 Istanbul Turkey Tel: (90 216) 636 44 44 Fax: (90 216) 631 44 00

SINGAPORE BNP Paribas Securities (Singapore) Pte Ltd (Co. Reg. No. 199801966C)

Tel (65) 6210 1288 Fax (65) 6210 1980

10 Collyer Quay

Singapore 049315 34/F Ocean Financial Centre

ISTANBUL CAPE TOWN Ground floor, Fernwood House The Oval, 1 Oakdale Road, Newlands Cape Town South Africa 7700 Tel (27 21) 657 8300 Fax (27 21) 657 8301

BNP Paribas Cadiz Securities (Pty) Ltd

BEIJING BNP Paribas (China) Ltd Beijing Branch Room 2001, 20/F China World Tower 1 Jianguomenwai Avenue Beijing, China Tel: +86-10-6535 0888 Fax: +86-10-6535 0883

BANGKOK(In cooperation with BNP Paribas) FSS International Investment Advisory Securities Co., Ltd 990 Abdulrahim Place, 12/F, Room 1210 Rama IV Road, Bangrak Bangkok 10500 Thailand Tel (66 2) 611 3500 Fax (66 2) 611 3551

SEOULBNP Paribas Securities Korea Co Ltd 25/F, State Tower Namsan 100 Toegye-Ro Jung-Gu, Seoul 100-052 Tel (82 2) 2125 0500 Fax (82 2) 2125 0593

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