Broker: Maybank Research Pte Ltd
Date of Report: September 3, 2025

Singtel’s Multi-Engine Growth: Unlocking Value in Optus, Singapore, and Digital Infrastructure

Executive Summary: Singtel’s Triple Growth Engines Power Ahead

Singapore Telecommunications Limited (Singtel) continues to outperform market expectations, buoyed by robust tailwinds across its core businesses in Australia, Singapore, and its rapidly expanding digital infrastructure segment. Maybank Research has raised its target price for Singtel by 11% to SGD 4.75, reflecting a bullish outlook driven by improvements at Optus, looming consolidation in Singapore, and untapped opportunities in AI and data centers. Despite currency headwinds, the growth catalysts far outweigh risks, reaffirming Singtel as a compelling BUY for investors seeking strong total returns and exposure to secular digital trends.

Key Drivers of Singtel’s Outperformance

• Optus recovery: Multi-faceted margin and cash flow improvement in Australia
• Singapore mobile market consolidation: Rational competition poised to drive ARPU recovery
• Digital Infraco (Nxera): Rapid data center expansion and early-mover advantage in sovereign AI GPU infrastructure

Optus: Multi-Engine Recovery in Motion

Rational Competition and Higher Prices

Optus, Singtel’s Australian subsidiary, is capturing value from a rational competitive landscape, broad-based pricing discipline, and supportive macroeconomic fundamentals. All three major operators—Telstra, Optus, and Vodafone/TPG—have implemented multiple rounds of price hikes across 2024–2025, underpinning ARPU and revenue growth.

Telstra’s postpaid ARPU rose 2.5% YoY in FY25, with Optus and TPG reporting similar uptrends.
Australia’s GDP is forecasted to grow by 1.8% in 2025 and 2.2% in 2026, with unemployment at a low 4.2%, supporting telco spending.

Margin Expansion and Cost Rationalization

Despite several rounds of price increases, sector ROIC (Return on Invested Capital) remains in the 2.0-8.5% range, well below low-mid-teens targets. Optus has improved EBITDA margins by 130bps over three years, but still trails Telstra and TPG, signaling further upside from ongoing cost-out programs and capex moderation as 5G rollout nears completion. The partnership with TPG (MOCN) further optimizes network costs, especially in rural Australia.

Maybank has raised Optus EBIT estimates by 5-20% and expects mobile revenue, EBIT, and FCF CAGR of 4%, 27%, and >100% respectively, over FY25-28.
Optus’s DCF valuation is up 36% at 8x EV/EBITDA, still at a discount to Telstra and TPG.

Singapore Mobile: Consolidation Set to Drive ARPU Recovery

Industry Rationalization After Intense Competition

Singapore’s mobile market is on the verge of consolidation, expected to restore pricing discipline and drive ARPU recovery. Since 2017, ARPUs have contracted by 36–41%, with Singapore’s ARPUs now 15–40% below developed market Asia peers. This has been fueled by aggressive competition, SIM-only plans, MVNO proliferation, and Simba’s entry.
Post-consolidation, global precedents show industry revenue growth rebounds by ~5%, even as the consolidator may cede market share.
Singapore’s ARPU is ~20–25% lower than DM Asia-Pacific peers, and underperforms even more on a GDP-adjusted basis.

Merged Entity: Integration Challenges and Limited Synergies

The merged entity faces legacy drag from M1, high leverage (~4x net debt/EBITDA), and limited cost synergies. StarHub’s aggressive stance could threaten MVNOs that rely heavily on M1’s network. Regulatory risks, including potential spectrum return and Antina restructuring, pose further uncertainties.

Digital Infraco: Nxera’s Data Center and AI Ambitions

Data Center Pipeline: Rapidly Monetizing Regional Capacity

Nxera, Singtel’s digital infrastructure arm, is scaling up ASEAN data center capacity at unprecedented speed. Over 50% of its 58MW Tuas site (operational Jan-26) is pre-sold, and 80% of its first Thailand facility is contracted before launch. New projects in Johor and Batam add to a regional pipeline of ~400MW.
Tuas data center also acts as a submarine cable landing hub, with five major systems for ultra-low-latency access.
Nxera’s liquid cooling tech supports >200kW/rack GPU deployments, enabling high-performance AI infrastructure.

AI GPU Infrastructure: First Mover in Sovereign GPUaaS

Singtel’s RE:AI initiative is pioneering GPU-as-a-Service (GPUaaS) in Asia. After successful pilot deployments of H100 clusters, the company is now scaling up to customer-underwritten GB200 and GB300 GPU builds, targeting the pharmaceutical, research, and AI enterprise sectors.
Early adopters have signed long-term contracts, locking in mid-teens or higher returns.
Singtel is collaborating with Hitachi to enter Japan and potentially Korea, extending its sovereign AI infrastructure footprint.

Global Telco GPUaaS Initiatives

Other international players are also making moves in the AI GPU infrastructure space:

• Deutsche Telekom (Germany): Building an industrial-scale AI “gigafactory” with Nvidia and Brookfield, targeting 100,000 AI-specialized chips and EUR4b investment per site.
• SK Telecom (Korea): Operating one of Korea’s largest GPU clusters, “Haein,” with over 1,000 NVIDIA Blackwell GPUs, and developing a 100MW AI data center testbed.
• KDDI (Japan): Heavy investments in sovereign AI infrastructure, including Osaka’s planned AI data center with NVIDIA tech and Supermicro hardware.
• Indosat Ooredoo Hutchison (Indonesia): US\$200 million AI Center in Central Java, targeting USD35m in net new revenue in 2025 and potentially USD70–75m in 2026, with 60% EBITDA margins.

Valuation, Dividend, and Yield Proposition

Attractive Total Return: Dividends and Buyback Potential

Singtel has earmarked SGD5 billion for value realization dividends (VRD), with SGD1.4 billion already paid over the past two years. Management now indicates VRD could be extended beyond FY28 to FY30, offering an attractive yield profile. Share buybacks are on the table, supported by strong capital generation.

Singtel’s earnings are expected to grow at a 15% CAGR over the next five years, with strong contributions from Airtel, Optus, and Digital Infraco.

Comprehensive Financials: Singtel Group at a Glance

ESG and Governance: Above-Average Transparency and Commitment

Singtel maintains a robust ESG framework, supported by:

• Ambitious net-zero targets, recently brought forward to 2045
• Comprehensive Scope 1, 2, and 3 emission tracking with ongoing carbon mitigation strategies
• Diversity initiatives, with 43% female board representation and 31% women in management
• Strong governance, with independent committee leadership and no major corruption cases reported
• Recognized for digital inclusion efforts and Bloomberg Gender Equality Index for five consecutive years

Singtel’s overall ESG score is 85, well above the peer average.

Valuation Breakdown: Sum-of-the-Parts Analysis

Conclusion: Singtel’s Multi-Engine Growth Story Remains Intact

With robust structural tailwinds across Optus, Singapore’s rationalizing mobile sector, and Nxera’s digital infrastructure expansion, Singtel is positioned as a top-tier growth and yield play in the Asia-Pacific telco landscape. The group’s strong execution, capital discipline, and early leadership in sovereign AI infrastructure offer investors a unique blend of defensive cash flows and exposure to high-growth digital megatrends. Maybank Research reiterates its BUY call, with a revised target price of SGD 4.75, reflecting a compelling valuation, strong dividend visibility, and multiple growth catalysts ahead.