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What You Should Know About NetLink NBN Trust’s Competition and Growth Ahead

NetLink NBN Trust (SGX: CJLU) designs, builds, owns, and operates the passive fibre network infrastructure (comprising of ducts, manholes, fibre cables, and central offices) of Singapore’s Next Generation Nationwide Broadband Network (Next Gen NBN). The trust was listed on the Singapore stock market in July 2017.

Recently, the Singapore Exchange posted an interview with the chief executive of NetLink NBN Trust, Tong Yew Heng. From the interview, I picked out the trust’s view of its competitors and its growth in the years ahead.

Competition in the industry

During the interview, Tong said that he is aware of industry competition. The trust does not have a monopoly position in providing fibre networks, and any telco with the required licence can develop its own network. However, the telcos have to weigh in on whether it makes economic sense to build their own network. Tong explained:

“It boils down to a buy-versus-build decision – the telcos need to assess what is more cost-effective for them, and we need to convince them that it is better to buy from us than to lay their own fibre.”

He added:

“We’re regulated by a pricing framework such that higher usage rates translate into lower costs for consumers. So while we cannot wish away the competition, we can work hard to drive up our utilisation rates, which will directly benefit end-users.”

With a significant investment in its extensive fibre network, NetLink NBN Trust is able to offer cost advantages for end-users.

Growth drivers for the trust

NetLink NBN Trust has room to grow further.

For one, 300,000 Singapore households are either not using broadband or still access the internet through older technologies. Over the next three to five years, these households should start moving to fibre-based broadband.

Another catalyst for the trust is new housing estates such as Sengkang, Punggol, and Tengah. New estates and private households could result in “up to 20,000 to 25,000 additions per year”.

For the non-residential fibre subscriptions market, NetLink NBN Trust only has a 35% share. According to Media Partners Asia, NetLink NBN Trust’s non-residential fibre subscriptions could expand by 9.9% annually from 2016 to 2021.

The non-building address points (NBAPs) is the third business segment for NetLink NBN Trust. This segment’s services include connections to any location in Singapore that lacks a physical address or postal code, such as lamp posts, bus stops, and traffic lights. With our government’s Smart Nation push, NetLink NBN Trust’s NBAP segment could grow further. According to Media Partners Asia, the number of NBAP connections is forecast to surge by 86.2% per year from 2016 to 2021.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Singapore Exchange. Motley Fool Singapore contributor Sudhan P owns shares in Singapore Exchange and NetLink NBN Trust.