“Telco Shake-Up? StarHub and M1 Merger Speculation Heats Up Amid Payment Deferrals”
Speculation is mounting over a potential merger between Singapore telcos StarHub and M1, as both companies defer their 700 MHz spectrum payment deadlines to mid-2025, potentially signaling efforts to finalize a deal and avoid hefty payment fees.
Strategic Delays Spark Merger Buzz
Macquarie analyst Foo Zhiwei flagged the deferrals, with StarHub pushing its payment to between November 2024 and June 2025 and M1’s parent company, Keppel, aligning its payment deadline to June 2025. These moves suggest a potential effort to finalize merger talks before payments are due, raising the stakes in Singapore’s competitive telco market.
The spectrum, awarded through a 2017 auction, cost StarHub S$282 million for three lots and M1 S$188 million for two. With this valuable low-band frequency set to enhance mobile broadband capabilities, the timing of the payment deferrals has not gone unnoticed.
Subscriber Wars and Pricing Games
Both telcos are ramping up efforts to grow subscriber bases, with StarHub reporting a remarkable 83,000 subscriber increase year-on-year as of September 30, 2024. Meanwhile, competition remains fierce, with virtual network operators like Eight and Maxx offering ultra-competitive data plans at rock-bottom prices.
Paul Chew of Phillip Securities Research observed StarHub’s surge in subscribers as an “exceptional” sign of a possible effort to strengthen its valuation ahead of a merger. Analysts speculate that competitive pricing and subscriber growth are strategic moves to position the companies favorably in negotiations.
Business Case for a Merger
Analysts highlight significant benefits in a potential merger, including cost efficiencies and improved EBITDA margins, which currently lag behind Singtel’s dominant 37% margin. DBS analyst Sachin Mittal pointed to opportunities for enhanced cost management and cross-selling, describing the merger as having a “strong business case.”
However, while delaying spectrum payments may ease negotiations, Chew cautioned that the move alone won’t seal the deal. “It might help catalyze discussions, but the merger will need more than just payment deferrals to move forward,” he said.
Singtel’s Take
Amid the speculation, Singtel has confirmed its full payment for the 700 MHz spectrum, emphasizing its readiness to leverage the frequency for improved coverage. Singtel CEO Yuen Kuan Moon expressed optimism about the spectrum’s potential, signaling its intent to maintain dominance in Singapore’s telco market.
With the clock ticking on deferred payments, all eyes are now on whether StarHub and M1 will close the deal in time to create a formidable competitor in the telco space. For now, the industry is bracing for potential disruption as consolidation talks heat up.
Stay tuned as we bring you the latest updates on this unfolding saga.
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