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Final 2.1GHz prices lower than expected

■ Singtel & Antina won the maximum allowed 5 paired lots of 5G-2.1GHz spectrum while TPG was allocated the remaining 2 paired lots.
■ Final 2.1GHz prices were much lower than expected. TPG may not be able to use 2.1GHz to deliver much faster 5G speeds given the limited bandwidth.
■ Stay sector Overweight. Singtel (Add, TP: S$2.90) is still our top pick.

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IMDA announces results of 2.1GHz spectrum auction

● On 26 Nov 2021, the Infocomm Media Development Authority (IMDA) announced the results of the 2.1GHz spectrum auction for the 5G standalone (SA) network deployment: (a) Singtel won the maximum allowed 5 paired lots (4 + 1 lot on First Right of Refusal or FROR basis), totaling 2x25MHz for S$65m, (b) Antina (StarHub- M1 joint venture) also won the maximum allowed 5 paired lots (3 + 1 FROR lot each for M1 and StarHub), totaling 2x25MHz for S$52.5m, and (c) TPG was allocated the remaining 2 paired lots, giving it 2x10MHz for S$31m.

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Final spectrum prices are much lower than expected

● As w e had earlier expected, Singtel and Ant ina w on the maximum allowed lots. How ever, the spectrum price is much lower than the S$130-195m w e had believed that each may have to pay (assuming final prices were 3x the reserve price) as it appears that TPG did not bid aggressively. The final price of each lot w as S$15.5m, only 29% higher than the reserve price, while the FROR lots were allocated to Singtel, StarHub and M1 at just S$3m each.

● For StarHub, its S$26.3m share of the 2.1GHz spectrum payment (i.e. 50% of Antina’s) represents S$78.8m savings (4.5 Scts/share) over w hat w e had factored into our forecasts. For Singtel, the impact of 2.1GHz payment is immaterial.

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● Post the award, TPG will have access to the 2.1GHz (2x10MHz) spectrum, in addition to 900MHz (2x10MHz), 2.3GHz (40MHz) and 2.5GHz (10MHz). Ex-millimetre wave, its total spectrum holdings of 90MHz is still much less than Singtel’s 325MHz, StarHub’s 225MHz and M1’s 18 5MHz (based on t he latter two’s 50% share of Antina’s 2.1GHz and 3.5GHz spectrum). TPG will use the 2.1GHz to deploy 5G as added capacity (possibly in carrier aggregation with the 2.3GHz spectrum, though there is a limited
compatible device ecosystem thus far) and indoors (may be able to re-use existing antenna systems), in our view . Given the relatively narrow bandwidth (5G ideally requires 80-100MHz), w e think TPG will not be able to make use of the 2.1GHz to deliver 5G speeds that are much faster than on its existing 4G network.

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Reiterate Overweight on Singapore telcos; top pick: Singtel

● We reiterate Overweight on the Singapore telco sector . We believe the earnings risk from stiffer mobile competition due to TPG’s entry is priced in and see progressively more stable mobile competition (with the transition to 5G) and enterprise revenues growing stronger in CY22-23F. Key sector downside risk: st if fer-than-expected competition. Singtel remains our top pick, with FY3/22F core EPS recovery, further asset monetisation and expansion into higher growth business areas (e.g. regional data centres) as key re-rating catalysts.

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