SingTel share price sitting on epic time bomb

What a year it has been for the Singapore telecom industry. The crazy competition has seen StarHub retrenching 300 staff while M1 is the subject of buyout offer by Keppel and SPH. Despite the extensive shake-up in the local telecom industry, leading player SingTel stands tall against the relentless waves of changes. SingTel share price also remains resilient in the face of the unprecedented disruptions that had impacted StarHub and M1. With 735 million mobile customers in 21 countries, SingTel’s investment moat is indeed unassailable.

Investors would note that SingTel share price has been bearish in recent months. However, the recent M1 general offer had led to a mini recovery for SingTel share price because many observers deemed that the industry consolidation would benefit SingTel. But investors should not rejoice as a looming nightmare unfolds. As a matter of fact, the key battles to be fought for SingTel are in overseas markets, and not in Singapore.

In July, I wrote in the article “SingTel share price destined to collapse after ex-dividend day?”, that the sluggish performance of SingTel share price is due to seasonal trend but I anticipate a rough ride for this Singapore blue chip because of the company’s unique strategy of penetrating emerging overseas markets. This approach comes with a dark side.

SingTel share price

Venturing overseas

Since 1993, SingTel is left with no choice but to expand overseas because of the small market in Singapore. The move proved to be shrewd. Over the past three decades, the local market has saturated to such level that the current mobile penetration in Singapore is at a staggering 150%. In Singapore, SingTel remains the top player with 4 million mobile customers and holds 49% of the market share.

Currently, SingTel is not only the top mobile player in Singapore, but also in Indonesia, Thailand, Philippines and India. Its 100% subsidiary, Optus, is the no.2 mobile player in Australia. Through the years, the telco has successfully evolved into a massive regional force. But SingTel’s overseas adventure come at a price as it engages in various commercial disputes with foreign government authorities.

Collectively, the commercial disputes involved liabilities amounting to nearly $4 billion. The level of liabilities is colossus and unprecedented for a Singaporean company. If management is not careful about it, the fallout could hit SingTel share price sharply.

To put things into perspective, it is quite common for government-linked companies to be involved in lawsuits with foreign authorities. And in most cases, its either you pay up or get lost.

In 2017, Keppel O&M was fined $567 million by US and Brazilian authorities for bribe payments. In that year, Singapore Airlines’ cargo carrier was hit with $74.8 million euros fine by EU antitrust regulators for taking part in a price-fixing cartel more than a decade ago. These cases highlighted that in exchange for penetrating into larger overseas markets, local GLC face the risk of foreign government litigations. And SingTel is no exception.

SingTel share price to sink or swim?

For SingTel, settling the disputes is [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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