Telco dividends can help offset mobile phone bills

Most people in Singapore have a mobile phone from popular providers Singtel, Starhub and M1. However, how many people have invested in these companies, allowing regular dividends distributions to cover regular mobile bills? And, like phone bills that can be paid via Giro and your bank dividends can also be paid to your bank account automatically. Direct Crediting Service allows CDP account holders to receive Singapore-dollar dividend payments directly to their bank account on payment date. The home budget difference is that phone bills represent expenses and dividends represent income. Investors can estimate how much of their phone bill can be offset, by looking at the dividend yield of the telecommunication stock if the yield is 4.0% - for every S$10,000 worth of stocks owned, S$400 is estimated to be distributed in dividends throughout the year. The Straits Times Index (STI) includes two mobile carriers, Singtel and Starhub, while the FTSE ST Telecommunications also includes M1. All these three companies distribute dividends Singtel and M1 on a semi-annual basis and Starhub on a quarterly basis. Telecommunication stocks across the region are known for relatively high dividend yields. The FTSE Asian Telecommunications Index which is made up of 25 regional stocks maintained a dividend yield of 3.8% as of the end of October. This was the second highest dividend yielding index of the 18 indices that make up the FTSE Asian Sector Index Series. The FTSE ST Telecommunications Index which is made up of Singtel, Starhub and M1, had a yield of 4.4% at the end of October. This was the second highest yield index of the FTSE ST Index series. Over the last three years, the total return of the FTSE ST Telecommunication Index which includes dividend distributions made over the three year period was 50.4%, the highest of the FTSE ST Index series. In addition, over the period, the FTSE ST Telecommunication Index was the second least volatile of the FTSE ST Index series, after the FTSE ST Real Estate Investment Trust (REIT) Index. The annualised volatility of the Index for the three years came to 14.5%. Differences within the Sector Telecommunication companies can be differentiated on many counts, the most obvious variations are whether or not the company is categorised to fixed line communications or mobile telecommunications and where in the world the company operates its business or reports revenue. Of the six companies listed on SGX, the four largest companies are categorised as Mobile Telecommunications by the Industry classification Benchmark (ICB) with the remaining two companies, Pacific Century Developments and Lantrovision Singapore categorised as Fixed Line Communications.

Two of the three companies that make up the FTSE ST Telecommunication Index reported all their revenue in Singapore in their most recent Annual Reports. These two companies, according to Bloomberg data were Starhub and M1. With the Singtel Optus Pty Limited business, Singtel generates revenue in both Australia and Singapore.

Short Name

SGX Code

Market Cap (S$m) 59,629 9,840 7,325 3,009 610 92

ICB Subsector Name

Price Chg (%) Nov 2010 Nov 2013 20.0 134.8 61.6 48.4 8.1 1.6

Total Return (%) Nov 2010 Nov 2013 43.1 594.2 92.6 77.1 8.1 7.9

Price on 29 Nov

Dvd Yield on 29 Nov 4.5 4.9 4.7 4.5 N/A 5.7

SINGAPORE TELECO TOTAL ACCESS-FRN STARHUB LTD M1 LTD PACIFIC CENTURY LANTROVISION SIN

Z74 B2W CC3 B2F P15 Q7W

Mobile Telecommunications Mobile Telecommunications Mobile Telecommunications Mobile Telecommunications Fixed Line Telecommunications Fixed Line Telecommunications

3.720 4.126 4.250 3.280 0.200 0.340

Source: Bloomberg (Data as of 29 November 2013), *since October 2004

SingTel With a market capitalisation of S$59.6 billion for the year-to-date, SingTel is the largest Telecommunication company listed on SGX. It has been listed on the mainboard since November 1993. The principle business activities of the group involve a diverse range of telecommunication services such as mobile, fixed-line voice and broadband internet services. According to its FY2013 Annual Report, the group derived 44.9% of its revenue from Mobile communications, 20.1% from data and internet and the rest from sales of equipment, national and international telephone service. SingTel reports revenue from both Australia and Singapore at 63.0% and 37.0% respectively. According to Bloomberg, SingTel has distributed a total of S$2.59 worth of dividends per share since its listing. StarHub Listed on SGX in 2004, StarHub is the third largest Telecommunication company with a market capitalisation of S$7.3 billion as of 18 November 2013. The primary activities of the company are the provision of information, communications and entertainment services over fixed, cable, mobile and internet platforms. StarHub and M1 are the only two companies in the Telecommunication sector which generated their entire revenue in Singapore according to their latest annual reports. From the same annual filing, the company reported that it derived slightly more than half of its revenue from Mobile service with the remaining being derived from pay TV, fixed network service, broadband and sale of equipment. The price performance of the counter for the past 9 years since the day it was listed on SGX was 251.5% while its 3-year total return was the second highest among the 6 counters at 92.3%. According to Bloomberg, StarHub has distributed a total of S$2.18 worth of dividends per share since the day of its listing.

M1 M1, the fourth largest Telecommunication company, was listed on SGX in December 2002. It has a market capitalisation of S$3.0 billion as of 29 November 2013. The principal activities of the Group are the provision of mobile telecommunication services, international call services and other telecommunication-related activities. According to its 2012 annual report, M1 derived 56.4% of its revenue from mobile telecommunications and the other revenue segments were handset sales, international call services and fixed network services. According to Bloomberg, M1 has distributed a total of S$2.09 worth of dividend per share since its IPO.

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