End-2011 results for Singapore's telecoms industry have been made been available by the Infocomm Development Authority (IDA) as well as mobile operators Singapore Telecommunications (SingTel), StarHub and M1, which were subsequently factored into our forecast scenarios.

Singapore's mobile market reported disappointing growth in Q411 to bring the total to 7.756mn. Despite having one of the highest penetration rates in the region, we continue to see the subscriber base gradually increasing in the next few years, largely due to the continued demand for 3G services and multiple device ownership. We envisage 8.770mn mobile subscribers in the country by end-2016, of which 7.531mn will be using 3G services. Although the rising popularity of mobile services caused the fixed-line market in many countries to contract, the sector has held up well in the last few years. We continue to see some growth potential with the number of subscribers increasing to 2.057mn in 2013. However, we expect the inevitable decline to take place from 2014 onwards as businesses and consumers embrace next-generation technologies. One of the threats to the traditional fixed-line market is Singapore's Next Generation Nationwide Broadband Network, which allows better VoIP services. BMI forecasts the number of fixed and mobile broadband subscribers to increase to 11.097mn in 2016, up from 9.960mn in 2012.

Given the high 3G penetration rate, operators have turned their attention to next generation technologies, specifically LTE and fibre broadband, for the next revenue generating opportunity. However, we foresee limited adoption in 2012, given that existing options are more than sufficient to meet the needs of the mass market. According to the IDA, there were 98,500 fibre broadband subscribers at the end of December 2011, which was a 145% increase from June 2011. Meanwhile, SingTel and M1 are still in the are busy expanding their LTE networks, while StarHub has yet to announce a launch data for its 4G service. We expect subscriber growth to start gaining traction in 2013.

Singapore was ranked second in BMI's latest Asia Pacific Telecoms Risk/Reward Ratings with a Telecoms Rating score of 73.9. Singapore overtook Australia, although the latter has a significantly larger population as Singapore excelled on the Country Rewards, Industry Risks and Country Risk components. However, although Singapore's headline CPI measure fell by 0.7 percentage points to 4.8% in January as a result of lower transport costs, we note that the Monetary Authority of Singapore's (MAS) core inflation measure, which strips out accommodation and transport costs, jumped by a greater-than-expected 0.9pp to 3.5%. While we expect further disinflation, the jump in core inflation underscores the growing risk that we may be entering a period of transitory stagflation in the city-state, and complicates the MAS's upcoming policy meeting in April 2012.

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