NetLink NBN Trust’s IPO: 4 Reasons Why Mobile Broadband is Not a Threat

Singapore Telecommunications 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 head here

2. Data caps head here

3. Latency

The next downside to mobile broadband lies in its latency:

“Wireless broadband networks face a higher latency compared to wired broadband networks. High latency reduces the quality of services, especially for time-sensitive applications such as audio and video calls and online gaming.”

In layman terms, network latency can be described as the amount of time it takes for a packet of data to get from one point to another. In other words, if the average latencies are longer in mobile broadband, the quality of the connection would suffer.

4. Coverage

The final counterpoint presented is on the reliability of mobile broadband coverage:

“Wireless connections may suffer from network congestion as well as signal degradation caused by obstructions to the mobile signals by buildings, walls and floors. As a result, wireless broadband services are often unable to match the reliability, coverage and average speeds of a wired broadband connection.”

As noted, wireless broadband connections can get congested depending on the number of users, and can get affected by obstructions. In this regard, wired broadband has the upper hand, according to MPA.

Foolish takeaway

The four snippets above represent NetLink Trust’s point of view against the potential threat of new technology or alternate internet options. We will have to observe on our own to see if its competitive strengths translate to the advantages that we see above.

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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.