🔻Yesterday, $Singtel(Z74.SI)$ shares tumbled as much as 2.4% in the morning, on the back of a warning from Circles.Life, a mobile operator operating on M1’s network, that the proposed M1-Simba merger could have negative consequences for their customers
💰On 11 August, Keppel said it would sell the telco business of its subsidiary M1 to Simba for S$1.43 billion, in what is set to be Singapore’s first telco consolidation
📊The merged entity would potentially control 77% of the wholesale market and have a postpaid retail market share exceeding 38%, according to Circles.Life
🤝The proposed merger however, has yet to been approved, and may come only after the Media Development Authority’s (IMDA) public consultation that closed last Friday on 7 November
❓What are the implications should the merger fail to go through?
📝How does Macquarie Research (MQ) rate the odds of the merger still going through? Read more from the MQ research report published yesterday:
What’s new
Circles.Life, a mobile virtual network operator (MVNO) operating on M1's network, has filed concerns that the proposed deal could have negative consequences for consumers. It proposes that IMDA enforce its wholesale framework for all MVNOs contracts with the merged entity. A screenshot of Circles.Life statement on its website is reproduced below:
Circles.Life's statement on M1-SIMBA
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Australian media takes this a step further, suggesting that Circles.Life's submission to IMDA argued for them to either be allowed to terminate or renegotiate its contract with M1 as a condition for allowing the transaction to proceed. MQ notes that Circles.Life submission is not public, so they read this with some scepticism.
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As a reminder, IMDA's public consultation for the proposed consolidation closed on 7 Nov 2025, 12 noon
Why it matters:
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MQ would like to remind all that the M1-SIMBA merger carries a conditional clause that if not met, could derail the merger. Specifically, condition 3.2(c) of the merger announcement specifies that M1's EBITDA should not decline by more than 17.5% from the reported S$195.4 million in CY24 before completion of the merger.
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The risk here is if Circles.Life decides to terminate its contract with M1, as MQ estimates their contribution to be around 20% of M1's EBITDA. A renegotiation would lower Circles.Life's contribution to M1 at most, without triggering the condition.
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There are two implications here:
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First, $Keppel(BN4.SI)$ (KEP SP, Outperform, $9.50 target price based on a Sum of Parts methodology) would fail to complete the proposed divestment of M1, negatively impacting perception of a higher dividend payout for FY25.
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Second, non-completion of the deal nullifies hopes for ARPU recovery from sector consolidation. This would be downside risk for Singtel (ST SP, Outperform) which has rallied hard and is trading at 7.3x FY26 EV/Proportionate EBITDA, above its +1SD (6.6x) level.
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Incidentally, $StarHub(CC3.SI)$ (STH SP, Underperform) would benefit from the merger not completing, as they would be the smallest telco player post-merger
What now
MQ continues to assume merger completion, and have Singtel at Outperform with a 12-month target price of $5.03 based on a Sum of Parts stock methodology, and Starhub at Underperform with a 12-month target price of $0.95 based on the same stock methodology.
Note: Macquarie Research is independent from the Warrants business, what the Macquarie Warrants desks quote from Macquarie Research may not reflect the complete analysis of Macquarie Research on the relevant company over time.
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Macquarie has a trending call warrant $SingtelMBeCW260227(9PBW.SI)$ tracking SingTel shares. Click on the link to be taken into the Live Matrix of the trending call warrant 9PBW, where you can see how it moves alongside SingTel: https://warrants.com.sg/tools/livematrix/9PBW
*Trending warrant refers to warrants on the tightest spreads and highest liquidity
The warrant is up 76.9% this month-to-date (MTD) from SGD 0.013 to SGD 0.023 as of 9AM this morning, 8 times more than SingTel’s 8.9% MTD increase to $4.63.
Those bullish on SingTel shares from current levels may therefore wish to consider using trending SingTel call warrant 9PBW to do so. As for those bearish, note that SingTel put warrant QPYW is quoted on widened offer spreads due to its extremely low delta
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