Telecommunications Sector Poised for Continued Growth in 2025: Singtel, Starhub, and NetLink Analyzed
UOB Kay Hian Research Report | 28 March 2025
Sector Earnings Grow 18% YoY in 4Q24, Outlook Remains Positive
The telecommunications sector in Singapore saw an 18% year-over-year (YoY) increase in underlying earnings for the fourth quarter of 2024, in line with expectations. This performance was driven by stronger contributions from Singtel’s regional associates, improved cost discipline, and solid execution in the enterprise businesses.
Singtel: Unlocking Value, Boosting Dividends
Singtel’s value-unlocking initiatives remain on track, with the company identifying about S\$6 billion in capital recycling opportunities in the medium term. This is expected to come from paring down its stakes in regional associates, such as a 5.74% stake in Bharti Airtel, as well as monetizing non-core fixed assets and assets from Thailand.
These initiatives could generate a cash windfall of S$12-13 billion for Singtel within the next 2-3 years. In line with the company’s ST28 strategy, Singtel is expected to pay higher value-realization dividends (VRD) towards the end of its 3-6 S cents per share guidance. Based on estimates, every S$1 billion in cash could lead to an additional 5-6 S cents per share of VRD, translating to around a 1.9% dividend yield boost.
NetLink: A Defensive Shelter
NetLink, with its predictable revenue streams and attractive 6% dividend yield, offers a defensive shelter for investors amid market volatility. The company’s strong earnings visibility, healthy balance sheet, and cautious approach to acquisitions make it an appealing choice for those seeking stability in the telecommunications sector.
Starhub: Muted Earnings in 2025, but Poised for Improvement
Starhub is expected to see muted earnings in 2025 as it reaches the tail end of its DARE+ investment program. Ongoing legacy costs to decommission systems and higher amortization costs from the upcoming S\$282 million 700MHz spectrum payment in 2Q25 will weigh on the company’s margins and earnings. However, the realization of DARE+ benefits and cost optimization efforts are expected to improve Starhub’s margins and earnings from 1Q26 onwards.
Sector Outlook and Risks
The telecommunications sector is expected to continue its earnings growth in 2025, driven by increased contributions from enterprise businesses, ongoing cost-saving initiatives, and improving business outlooks across the region. Key risks include weaker-than-expected domestic market performance due to consumers trading down to lower-value plans and potential underperformance in the enterprise business amid an uncertain macroeconomic environment.
Sector Picks
UOB Kay Hian’s top pick is Singtel, given its decent 5% dividend yield, potential value-unlocking initiatives, and ongoing market repair across its regional markets. For defensive earnings, the firm likes NetLink due to its sustainable earnings and projected 6% dividend yield in 2025. Starhub is seen as a key beneficiary of market consolidation in Singapore, but its muted earnings in 2025 may limit its near-term upside.
