Thursday, November 8, 2018

Has Singtel truly became Sinktel?

Singtel. The telecomm company you choose just because everything else sucks. Or so until circles came riding along.

I am still wondering why I bought Singtel awhile back at $3.38. The irony of the matter is I went against Peter Lynch's advice of BUYING WHAT YOU KNOW. I was a singtel user for quite a few years... and then I changed my plan to Circles. and bought singtel stocks.

Shame shame.

the circle here indicates the buffering circle that was my thought process in buying Singtel. 

What the heck was I thinking.

The main considerations here for Singtel is that it is facing cost competitors EVERYWHERE.
From the Philippines to Singapore, and its Indian investment facing fierce competition from a startup with a warchest that would make everything go to pieces.

In Australia, it faced falling profits, as can be seen from this link -

In India, the new entrant is crushing prices and causing Airtel's margin to shrink.

Let's also not talk about the increased capital expenditure required to get 5G in, and the anti-monopoly laws in Singapore that will require Singtel to essentially "share" this tech with the other telecommunication companies.

Another possible long-term end to Singtel's dominance might be that of new technology in another country, and literally far far away - SpaceX, Elon Musk's plan of building Starlink, a global satellite based wifi, to put it crudely. While this is still a few years away, this just highlights how easily telecommunications can be just a commodity and there is no differentiating factor, and highlights also how easily a new entrant can disrupt everything.

(Link for this here)

Those are the downsides, and also a potential end to a once large and deep moat.

I bought the stock on four premises - a good dividend yield (still there I guess) , first mover to 5G in an IOT environment (still the only hope for redemption, yet at great capex ), great market share (not anymore) and dominance in all its subsidiaries (bye) , and a good profit margin (sigh).

The truth of the matter is this is not a stock nor market I should have invested in. I think out of all my purchases, even for those which might have fallen more, this is probably the most senseless stock I bought. I don't see the point in holding this stock for anything more than dividend yield, and yet even that seems to be pointless if the stock price is falling.

The story I bought into was a company that would be able to defend its dominance, but it is obviously not the case. I fell for the irrationality that "Singtel has always been around/protected by gahmen!". So was Hyflux.

I have to admit I dropped the ball on this one. I am considering selling all my shares in Singtel tomorrow and to move the cash to a better company.

Sometimes you just have to admit you made a mistake.


1 comment:

  1. Hi there, I think it may be too early to write off Singtel. Its businesses are still relevant. They are currently still making profits despite the intense competition.

    Also "Starlink" cannot just setup business in any countries despite using a global satellite umbrella technology. It will run into regulatory trouble and law suits. This needs to be sorted out and will take a long long time taking into account so many countries involved. The technology is also currently in testing phases and I am skeptical on whether they can launch so many satellites into space. Until more concrete plans are seen, it is too early to write off Singtel business which remains a solid blue chip.


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