Fitch Ratings said average net leverage for the telecom sector in Singapore is likely to increase to around 2.3x in 2018 from 2.0x in 2016, due to high investment and stagnant domestic EBITDA.

Singapore Telecommunications’ net leverage will be below 2.0x for the financial year ending March 2019 (FY19), particularly if the company uses its recent NetLink NBN Trust’s IPO proceeds for its investment needs and debt reduction.

CFFO will remain relatively flat, underpinning rising competitive pressure and the substitution threat from online streaming.

Singtel is the least vulnerable among the incumbents to the entry of fourth mobile network operator, TPG Telecom, given its diversified income and steady stream of dividends from associates.

M1 is the most exposed, being the smallest, and has greater reliance on the domestic market. StarHub and M1 have already cut dividends by 20 percent-25 percent in 2017, signalling a weaker earnings outlook and rising investment needs.

Domestic competition is set to rise further, with the entry of TPG Telecom in mid-2018 and internet service provider MyRepublic’s plans to offer generous data offerings as an MVNO by end-2017 and TV services in 2018. Incumbents have also launched unlimited data plans, albeit catering only to data-heavy users for now.

Fitch Ratings said its operating EBITDAR margins forecast of 30 percent- 31 percent against 32 percent in 2016 reflects higher handset subsidies and marketing costs to retain subscribers, and the ramping-up of enterprise solutions to offset a decline in the consumer business.

Capex of telecoms in Singapore may be higher than its forecast of 14 percent of revenue against 19 percent in 2017 should the 700MHz band become available for use in 2018, prompting significant spectrum payments during the year.

Approximately 74 percent of the total SGD1.14 billion spectrum proceeds in April 2017’s auction will fall due when the 700MHz spectrum rights commence, depending on the timeline for the switch-off of the analogue broadcasting network.