Singapore: Pushing Communication Innovation

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Microsoft (NASDAQ: MSFT) is working together with Singapore based telecommunication companies and one of its largest mobile operators StarHub, with assistance from the government’s Institute for Infocomm Research, to develop and introduce ‘super wi-fi’ in the country. This new technology uses the unused TV spectrum, i.e. lower radio signals than the traditional wi-fi, to transmit information over larger distances at greater speeds. Singapore, next to South Korea, is one of the most connected countries in the world.

Unlike most developed western countries, South East Asia’s digital economy is not based on a strong broadband infrastructure, which requires substantial investments; rather it relies on the mobile Internet penetration into the thousands of Islands that make up this area. The unique geology of this region has made it difficult for its mobile and Internet service providers to extend their services over the entire covered area, which means that millions of people here still have no access to 3G or broadband cable network. Although in terms of overall Internet access, Singapore is generally considered one of the most sophisticated markets.

Singapore has become the first Asian country where ‘super wi-fi’ is being commercially tested. Although the coverage area of this technology is still under examination U.K. trials have shown that signals can be transmitted over an area up to 8km, through large objects and is not disturbed by any climatic conditions. The country’s television spectrum has 11 unused channels which can be used to transfer data at speeds of 14Mbps currently. Mobile phones are not equipped with the technology to use super wi-fi. However, it wouldn’t be surprising if Singapore’s market starts offering phones with a ‘super wi-fi chip’.

The rapid mobile boom in Singapore has also given birth to the world’s second largest mobile operator, Singapore Telecom (SingTel), with 462 million subscribers in 26 countries, the company is second after China Mobile (NYSE: CHL) that boasts more than 1 billion customers. Although unlike SingTel, China Mobile operates only in China and Pakistan. SingTel has recently acquired the Israeli mobile advertising firm Amobee for $321 million. The company is looking for other startups in multimedia and ICT sector to diversify its operations. Recently, SingTel has introduced 4G service to tablets in Singapore with download speeds of 3.4 – 12Mbps along with two compatible tablets; Asus Transformer Pad and the Samsung Galaxy Tab.

SingTel’s main competitor and Singapore’s second largest mobile operator M1 started offering 4G services on 15th September. However, where SingTel’s 4G network is limited to some high data usage areas, M1 is the first to provide nationwide coverage. StarHub, the third largest of the big three, has also announced that it will launch LTE service on September 19th in some parts of the country, just four days after M1 and two days before the launch of Apple (NASDAQ: AAPL)’s iPhone 5 in the country. However, Apple’s website lists the names of the two Singaporean networks, SingTel and M1, which will support LTE for the iPhone 5 Model A1429 (GSM Model).

The pent-up demand for the iPhone 5 has been so big that Apple can get away with still selling it in the Asian markets at stupendous mark-ups.  And unlocked 16Gb iPhone 5 from the Singapore Apple store will run you $778 (at $1.224 USDSGD conversion).  All three carriers have subsidized prices posted and all very close to each other, but all will benefit greatly compared to China Mobile who still has not cut a deal with Apple to get them to build an iPhone compatible with their non-standard CDMA implementation.

Singapore’s GDP is S$326.8 billion, almost negligible when compared to U.S’s $15 trillion, but with its small size and population of just 5.3 million, Singapore recently passed Luxembourg as having the highest per capita GDP in the world thanks to the continued strength of the Singapore Dollar. And, since its economy is growing faster than its population, its per capita will increase by 30% until 2020. The growth forecasts for current year are 3.2% which will reach 4.1% in 2013 and 4.3% in 2014.

Singapore’s vibrant economy is represented by iShares MSCI Singapore (ETF) (EWS), which since the beginning of the year, is up 26.9%, easily outperforming most in the region. The fund is weighted significantly towards SingTel with 11.2% and is its largest holding.  SingTel is a $50 billion company, trading at a multiple of 13.2 with a 4.76% yield.  TTM Return on Assets is a very solid 9.8% through the end of FY 2011. 

Quarter to quarter, SingTel is open to significant currency fluctuations as it has subsidiaries operating all over ASEAN as well as India and Australia.  Their most recent quarter was harmed by the extreme devaluations most of the world saw in their currencies versus the U.S. Dollar.  Their stake in Bharti Airtel in India, now 32.5% has been a money-sink but India is a vitally important future market that will pay huge returns once they work through their current political and budget issues.

In the most recent annual survey by World Economic Forum released this month, Singapore has secured the second spot as the most competitive economy in the world, behind Switzerland while US has fallen from fifth so seventh spot. The high Debt-to-GDP ratio of more than 100% is an issue due to the MAS's policy of aping the Federal Reserve's interest rates, which are now set to be zero-bound for the next 3 years at a minimum.  The MAS will likely have to revise that policy soon or risk blowing a property bubble that even Singapore's prodigious economy will not be able to contain.  But, with foreign reserves of $246.2 billion and rising at a rate of nearly 1% per month their balance sheet is a lot healthier than it appears at first blush. Practically, almost no one in the country is living below the poverty line while unemployment is just 2.5%. 

Singapore’s short-term outlook is mildly bearish but its structure and local government so forward thinking in a number of areas that it will continue to attract the top talent and capital while ASEAN comes together to form a very powerful regional trade and currency block.

PeterPham8 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, China Mobile, and Microsoft. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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