MAYBANK Securities lowered its call on StarHub from ‘buy’ to ‘hold’ and reduced its price target from S$1.44 to S$1.30 as it expects stiffer competition in the telecommunications sector weighs on the company’s growth.

On Tuesday (Oct. 29), the research firm said its new target comes as it cuts StarHub’s net profit after tax for fiscal years 2025 to 2026 by 4% to 5%.

This comes amid growing competition for market share in the mobile and fixed broadband (FBB) segment between Simba and incumbents such as StarHub and Singtel, said analyst Hussaini Saifee.

Saifee highlighted that Simba’s improving fundamentals and balance sheet, as well as the wide gap in average revenue per user, compared to incumbents, suggest that it is “favorably positioned to continue to gain market share”.

He highlighted that Simba – with just 4.8 per cent revenue market share – achieved earnings before interest, tax, depreciation and amortization of 42 per cent, and that its free cash flow is positive.

“This came as a positive surprise as telecom operators in regional markets are not able to achieve this feat even with a 15-20 percent market share,” Saifee said.

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Given that Simba’s mobile plans are 50 percent lower than those of incumbent operators, the analyst believes that the telecom company is likely to capture part of the low-end consumer segment.

Additionally, Saifee also believes that Simba “has the opportunity to invest in the network” and potentially gain a foothold in the high-end market. The telecom operator recently ventured into the FBB sector, in which the analyst predicts that Simba could take 5 to 6 percent market share.

Therefore, with 41% of StarHub’s revenue tied to the mobile and FBB segment, Saifee expects greater growth challenges arising from Simba’s growing dominance.

“An aggressive and sustained Simba could continue to weigh on growth (of StarHub) even if the industry undergoes consolidation,” warned the analyst.

As for Singtel, Saifee maintained its buy call because less than 10 per cent of the telco’s total parts is driven by Singapore consumers, so it “remains relatively protected”.

Actions of StarHub were trading 0.8 percent or S$0.01 higher at S$1.22, while Singtel Shares were down 0.9 percent or S$0.03 at S$3.17 as of 10:59 a.m. Tuesday.