There are a number of companies in the stock markets of Singapore and Malaysia that are providing telecommunications services.
Some analysts think of telcos as being defensive businesses as demand for their services is unlikely to change much even in tough times. This is also why telcos can be popular stocks amongst investors looking for dividends.
I thus thought it’d be interesting to look at the dividend yields of the telcos in both countries’ stock markets. But before I do so, let’s have a quick overview of the landscape of the mobile business in Singapore and Malaysia.
Last month, TPG Telecom emerged as Singapore’s fourth mobile operator after beating MyRepublic in a spectrum auction organised by the Infocomm Development Authority.
Though TPG Telecom has yet to begin offering any services (the company says it plans to offer its services in 2018), the three incumbents – Singapore Telecommunications Limited (SGX: Z74), StarHub Ltd (SGX: CC3), and M1 Ltd (SGX: B2F) – had already started engaging in price wars in 2016. Moreover, all three have also seen their consumer-related telecommunications revenues fall in recent quarters.
Although Singtel’s stock price is more or less unchanged over the last 12 months, the other two incumbents have been shunned by investors – StarHub and M1’s stock prices have declined by 22% and 26%, respectively.
Across the causeway in Malaysia, the mobile telecommunications market is also challenging due to the increase in competitive pressure over the last 12 months.
For instance, fixed-line provider Telekom Malaysia Berhad (KLSE: 4863.KL) entered the mobile market in September this year with the launch of its mobile arm webe.
In another instance, the big three mobile providers, namely, Axiata Group Berhad (KLSE: 6888.KL), Maxis Berhad (KLSE: 6012.KL), and DiGi.com Bhd (KLSE: 6947.KL), are engaging in a price war, in a similar manner to Singapore’s three telcos.
Over the last 12 months, the four aforementioned Malaysian-listed telcos have all seen their share prices fall, from a range of 7% to 29%.
The dividend yields
With the overview of the mobile market in Singapore and Malaysia seen above, let’s now turn our attention to the dividend yields of the telcos.
Source: S&P Global Market Intelligence
We can see that the telcos in Singapore generally have a higher dividend yield than their counterparts in Malaysia. From this, investors can have a useful starting point for further research.
For anyone studying the telcos, it’s worth keeping something in mind. Most of the telcos mentioned above have seen their stock prices fall over the past year leading to some of them offering dividend yields that are near multi-year highs. The declines are not unwarranted, given the stronger competitive forces they’re dealing with. But the question here is: “Is the situation really that bad?” Answering this can help separate real investing opportunities from the pretenders.
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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 Lawrence Nga doesn’t own shares in any companies mentioned.