NetLink NetLink NBN Trust’s IPO: 2 Reasons Why Mobile Broadband is Not a Threat

Singapore Telecommunication Limited’s (SGX: Z74) associate, NetLink Trust, has filed its preliminary prospectus to list on the Singapore stock exchange as NetLink NBN Trust.

As of 31 March 2017, NetLink Trust owned a network of about 76,000 kilometers (km) of fibre cable, 16,200 km of ducts, and 62,000 manholes. The vast network connects 1.1 million residential homes in Singapore. According to a study by Media Partners Asia (MPA – commissioned by NetLink Trust), the trust’s fibre network is expected to expand as users are driven to migrate from traditional ADSL and HFC connections.

The migration is a tailwind today, but it also raises the question as to whether new technologies could cause NetLink Trust’s network to be less relevant in the future.

The alternate network

Mobile broadband can be delivered through existing 3G or 4G networks owned by Singtel, M1 Ltd (SGX: B2F) and StarHub Ltd (SGX: CC3). The fifth variant of mobile connection, termed 5G, is expected to be widespread in the future.  

5G trials are ongoing, and promise speeds of up to one gigabyte per second. MPA thinks that 5G could arrive after 2020, posing a threat to fibre networks. Even so, MPA outlined a few reasons why NetLink Trust’s fibre network will still be viable in a world of widespread 5G connectivity.

1. The need for speed

In the trust’s IPO prospectus, it said:

“Wireless broadband services in Singapore, delivered via 3G and 4G, currently offer limited speeds when compared to wired broadband networks. Median speeds on the 3G and 4G networks in various areas in the country, measured by IMDA My Connection SG, from July to December 2016, were at 4.2Mbps and 33.2Mbps respectively.”

“This is significantly below the speeds delivered via HFC and fibre networks of 50Mbps-10Gbps.”

The existing 3G and 4G network speeds does not offer speeds that are comparable to fibre networks. In fact, current speed levels are slower than the traditional HFC connection.

2. Data caps

Furthermore, MPA notes:

“At present, wireless broadband providers (i.e., mobile telco operators) do not offer subscription plans with unlimited mobile data usage. Singapore telco operators currently offer data allowances of 300MB-20GB per month, depending on the plan.”

There is a limit to the amount of data that a mobile customer is able to use with 3G and 4G. NetLink Trust cited MPA estimates that the average monthly data consumption on wired broadband services adds up to between 10 and 20 times more than wireless broadband. Fibre broadband is also offered without data caps.

Foolish takeaway

The two snippets above represent NetLink Trust’s points of view against the potential threat of new technology or alternate internet options. We will have to watch if its competitive strengths translates to the advantages that we see above.

Editor’s note: More reasons why fibre networks will still be viable in a world of widespread 5G connectivity have been shared. You can find them here.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.