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DEALS:

Singtel takes 16.3% stake in Indonesia's Bank Fama for S$48 million

Can 5G Lead Singtel’s Stock Recovery?

·4-min read
5G Graphic
5G Graphic

Singtel (SGX: Z74) has been hard at work building up its 5G network infrastructure and connectivity.

Last week, the telecommunication company (telco) unveiled a range of use cases to demonstrate the potential for its 5G network.

CEO Yuen Kuan Moon proudly announced this on LinkedIn, with uses covering 5G-powered remote-controlled e-racing, live video streaming and augmented and virtual reality experiences, among others.

Such innovative use cases are in line with what the government is urging.

Minister for Communications and Information, Josephine Teo, called on the telco industry to develop innovative use cases for 5G and also beef up security to build trust and confidence.

On Singtel’s part, Yuen believes that 5G will play a vital role in helping Singapore’s post-COVID recovery, and can help to further accelerate digitalisation.

According to him, this is just the beginning of what Singtel has envisioned, and that there is much more to come.

Can 5G help Singtel to reclaim its former glory?

Can its share price recover to what it was five years ago?

Partnerships in a new paradigm

5G technology sounds almost magical in its promise as it can make “connectivity intelligent”, according to Yuen.

The proliferation of this technology will enable the Internet of Things (IoT), cloud computing and artificial intelligence to scale new heights, while also driving the creation of new business models.

Singtel also announced new tie-ups for its 5G standalone network, with examples including a hybrid work plan with Samsung Electronics (KRX: 005930) and videoconferencing platform Zoom Video (NASDAQ: ZM).

These arrangements include a Productivity Data Pass plan to offer data-free usage of Zoom.

Singtel’s customers can connect to family and colleagues easily and seamlessly while also setting up virtual workstations.

The telco is also powering 5G-enabled displays and performances at the National Gallery Singapore and Esplanade.

The group also added more neighbourhoods to the areas that can access its 5G network, achieving standalone coverage across half the island.

If non-standalone 5G is included, around two-thirds of Singapore can now tap on this high-speed network.

Advanced enterprise solutions

On the corporate side, Singtel’s 5G network can power industries and businesses with greater productivity and operational efficiency.

One big use is multi-access edge computing (MEC) that taps on low latency and high connectivity speeds to deliver real-time computing and data storage at the edge.

Edge computing is one of the hottest growth sectors in the computing field, led by companies such as Fastly (NYSE: FSLY) and Cloudflare (NYSE: NET).

MEC also promises other enterprise applications such as automated quality inspection in factories and smart city planning as it supports faster connectivity of devices.

Singtel has also signed a memorandum of understanding (MOU) with Ericsson (STO: ERIC-B) and other partners to collaborate on the development and deployment of advanced 5G enterprise solutions in Singapore.

The above offers a small window into what 5G can potentially achieve for Singtel’s business-to-business division.

Should the telco be able to tap on its network to assist fast-growing sectors, it could find itself reaping the rewards many years down the road.

Encouraging more data usage and boosting ARPU

Singtel will certainly welcome the surge in business that comes with its 5G roll-out.

Data usage is already on the rise here — for the telco’s latest quarter ended 30 June 2021, customers used eight gigabytes per month of data, up 52% from a year ago.

And this usage is set to climb even more as more use cases are found for consumers, be it in e-sports or live video.

The main gripe for the group has been its average revenue per user, or ARPU.

Blended ARPU has remained stagnant over the last 12 months even as data usage climbed, at S$23 per month.

Should the telco be able to better monetise its 5G usage, it would translate into higher revenue and earnings.

Get Smart: A long, promising growth runway

5G should be a game-changer for Singapore as the island enjoys faster connectivity speeds and less lag.

For Singtel, it also translates to better opportunities to monetise its network and boost its user base and ARPU.

Things also look promising for the enterprise division, and new 5G use cases can act as a catalyst for new revenue streams.

All in all, it’s a long and promising growth runway for Singtel, and this is only the beginning.

However, the journey might be long and arduous as more money needs to be spent and more resources need to be committed.

But at least for investors, there is some light at the end of the tunnel that things will eventually improve for the telco.

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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

The post Can 5G Lead Singtel’s Stock Recovery? appeared first on The Smart Investor.

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