Three hits. All three telcos reported results that were within our expectations. SingTel Group’s results, however, came in ahead of consensus estimates. The latter’s star performer for this quarter was its domestic operations, which grew on the back of strong mobile performance and cost cutting measures.

EBITDA margins stay flat QoQ. The average EBITDA margins for 1Q09 stood at 39.1%, the same as the preceding quarter and 1.9ppt higher than a year ago. The improvement over the previous year’s numbers was a result of intense rivalry back then as the telcos prepared for full mobile number portability (MNP). Focusing on QoQ figures, M1’s EBITDA margins improved 0.6ppt while StarHub stayed flat. SingTel was the only one which witnessed a decline (-0.6ppt), due largely to recently acquired SCS.

ARPU lower for mobile and broadband, but higher for Pay TV. StarHub’s drop in ARPU for the first two segments came as no surprise, but the pick-up in PTV ARPU was. This was due to higher take-up of premium channels and upgrade to its Hubstations. SingTel does not publish ARPU figures for this segment. Over the quarter, StarHub added 3k subscribers, bringing the total to 527k. SingTel’s mio TV piled on 19k customers for a total of 78k, thanks to bundling offers and new content.

What to look out for? Intensifying broadband war, PTV content fight and the impact of retrenchments may be some events to look out for on the telco front in the next few months. Maintain OVERWEIGHT. We maintain our OVERWEIGHT position on the Singapore telco sector given its attractive yields and stable outlook, with StarHub as our top pick. Dividends will continue to be attractive given the healthy FCF generation. StarHub has committed to a payout of S$0.18 per share (~100% of earnings), while SingTel and M1 have hung on to their payout guidance of 45-60% and 80% respectively.