Singtel share price needs StarHub merger

LIFETIME MEMBERSHIP When will Singtel share price ever see daylight? In my previous article, I shared that Singtel share price would blow up in pieces following the release of full-year financial result for FY2020. Indeed, Singtel share price turned bearish for the past three months, falling from $2.60 in April to a low of $2.25 in early July. To halt the slump in Singtel share price, the management announced a new strategic direction to capture growth on 27 May.

To be fair to the management, the current state of Singtel share price should not be attributed to the new Chairman nor the new CEO. They have inherited a company that had seen growth under severe pressure due to intense competition in its regional associates’ businesses. The pandemic has brought even more headwinds and disruptions for Singtel. Against this backdrop, the strategic reset announced on 27 May is an attempt to revive the long-term outlook for Singtel share price.

In the strategic plan, Group CEO Yuen Kuan Moon outlined three new growth pivots – harnessing 5G, repositioning NCS for overseas ICT expansion and unlocking value of infrastructure assets. In my opinion, the strategic reset represents a major shift for Singtel’s growth strategy. Although these pivots could potentially restore Singtel share price back to its hey-days, there are two significant items that are glaringly missing from CEO Yuen’s grand vision.

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The first major shift for Singtel is the change in the mandate to be a regional telco powerhouse. For the past 30 years, Singtel share price had been one of the leading lights of SGX because of its dominant telco position in the South East Asia. It’s tried and tested strategy had been to acquire the number 1 or 2 telcos in the regional markets. This growth mandate saw Singtel acquiring Australia’s Optus, India’s Bharti Airtel, Indonesia’s Telkomsel, Philippines’ Globe and Thailand’s AIS. That remarkable journey saw Singtel serving a whopping 744 million mobile customers as at 31 March 2021.

With a new management regime, does this mean that Singtel will be trimming its stakes in regional associates or even divest them? Given that Singtel is dropping its regional expansion mandate, does it pave the way for the merger with StarHub?

Another surprising omission from CEO Yuen’s strategic plan is the digibank consortium formed with Grab. Although Singtel only has 40% stake in the digibank, many investors and analysts have hailed digibank as the next frontier of revenue growth that could propel Singtel share price in the long-run. So the omission is indeed puzzling. In this article, I will share my opinion on the outlook for Singtel share price in FY2021 and what the new strategic reset could mean for the telco.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in Singtel before. Whether Singtel share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

Singtel share price in need of major catalyst

The strategic reset to shift away from overseas telco expansion should be viewed as a significant change. After all, Singapore is a small market. For Singtel to continue to thrive as a telco player in the post-pandemic era, it would have to rely on overseas markets for revenue and profits. However, Singtel’s overseas adventure came at a price as it incurred various contingency liabilities. Examples would be the recently concluded Airtel penalty and AIS dispute. These missteps had punctured the form of Singtel share price in recent years.

For sure, Singtel’s regional associates are subjected to foreign jurisdiction. So it would make sense to look at its home turf to strengthen its telco market share. With stake of 52%, Temasek Holdings holds the key in the merger between Singtel and StarHub. In fact, I will even claim that the biggest catalyst for Singtel share price is the [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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