Telecommunications Sector - A less bumpy ride on the way up Singapore telco service consumption growth remains intact, as could be seen in 3Q07 results. We are bullish on Singapore telcos on account of their reliable earnings growth against the backdrop of a robust domestic economy with the fastest wage growth in seven years, coupled with an immigration boom and an expected take-off of 3G/wireless services in 2008. StarHub stands out for its ARPU growth while SingTel is a subscriber market-share gainer. Robust free cash flow is also supportive of our above-consensus CY08 sector yield projection of 8.4% (consensus: 6.0%). Maintain Overweight with StarHub as our top pick, followed by SingTel. Risk-reward is attractive as Singapore telcos are trading at 7.4x CY08 EV/EBITDA, towards the low end of their historical range.
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