Companies in the telecommunications sector in Singapore are known for providing high dividends and stable returns for investors over the long term. Of the three telecommunication service providers here, Starhub (SGX: CC3) and Singapore Telecommunications (SGX: Z74) tend to get more attention from investors.
So, if we want to get exposure to the sector from just one telecommunications operator, how do we go about choosing between the two?
To answer that, we first have to know the key difference between them – their market focus.
Starhub is a company that focuses mainly in Singapore; its vision is “to be Singapore’s first choice for information, communications and entertainment services”; meanwhile, its mission is to “provide every person, home and business in Singapore with world-class multimedia services and content.” From such statements, it’s easy to tell that Starhub’s main focus is right here at home. The company is, in essence, a pure-play on Singapore’s telecommunications sector.
The same cannot be said about Singtel however. The company is one of the largest telecommunication groups in the whole of Asia. Its business interests span 25 countries and 3 continents. Its main market lies in Singapore and Australia. In addition, the company also has significant stakes in the major telcos of Indonesia, Thailand, the Philippines and India.
In Australia, SingTel’s presence comes from its wholly-owned subsidiary Optus, the second largest player in the country’s market behind Australia-listed Telstra. For some examples of its other foreign holdings, SingTel owns 35% of Indonesia’s number one telco, Telkomsel; 23% of Thailand’s largest telco AIS; and 47% of Globe, Philippines’ second largest telco.
Simply said, Singtel can be viewed as a global telecommunication company. A reinforcement of this point can be seen in how SingTel obtained 77% of its EBITDA (earnings before interest, taxes, depreciation & amortization) from outside Singapore’s shores with the bulk of that (some 31% of the company’s total EBITDA) actually coming from Optus.
For investors wanting to gain exposure to the telecommunication sector, it is important to look through both Starhub and Singtel in detail. From this discussion today, we can see that the two companies have huge differences in terms of their geographical reach and that might have very different impacts on their respective investors over the long run.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.