StarHub – BT

StarHub Q4 net profit down 31% at $98m

Revenue rises 14% despite pressure on margins and falling mobile market share

STARHUB yesterday posted net profit of $98 million for the fourth quarter ended Dec 31, down 31 per cent due to tax credit adjustments.

For the full year 2007, net profit was $330 million, down 8 per cent, on a 12 per cent rise in revenue to $2 billion. StarHub tax credits were $20 million and $77 million for 2007 and 2006 respectively.

Despite pressure on margins and falling market share in the all-important mobile phone segment, the second-largest telco in Singapore managed a credible 14 per cent rise in Q4 total revenue to $539 million and saw free cash flow jump 23.4 per cent to $67.2 million. Free cash flow for the full year grew 45 per cent to $483 million.

StarHub decided to reward shareholders with a higher fourth-quarter dividend of 4.5 cents, up from 3.5 cents, bringing the total for the year to 16 cents.

It further delighted shareholders by promising to raise dividend payout for 2008 to a minimum 18 cents.

The confident telco also said it expects full-year operating revenue to grow 10 per cent and capital expenditure to not exceed 12 per cent of operating revenue.

But for the first time, StarHub said it expects Ebitda – earnings before interest, tax, depreciation and amortisation – to decline to 33 per cent for 2008. It was 33.7 per cent in 2007.

Chief executive Terry Clontz said while he expects continued growth, pressures on margin will increase given the fierce competition.

Without naming its bigger rival Singapore Telecommunications, which has increased share of the lucrative mobile phone segment by aggressive marketing, Mr Clontz said ‘it only takes one to disturb the balance’, though he believes that in the long run, rational behaviour should prevail in a mature market such as Singapore.

During the quarter under review, StarHub’s mobile unit was as usual the top performer, with sales up 14 per cent to $275.6 million and 13 per cent to $1 billion for the full year.

Customer base grew 14 per cent to 1.76 million at end-2007 but StarHub’s market share eased to 31.3 per cent from 33.1 per cent a year ago.

Singapore’s mobile penetration has risen to 122.5 per cent fuelled by the rising number of foreign workers and SingTel has the lion’s market share in excess of 41 per cent.

The fight for market share has been intensifying since late last year when Singapore announced that mobile number portability (MNP) will be introduced in June.

StarHub, SingTel and third-place MobileOne have been spending more to retain customers ahead of June and the telcos’ marketing efforts will get more bitter in order to defend their customer bases ahead of the start of MNP.

Mr Clontz said while market share is important, his focus is on increasing shareholder value and cash flow.

He also noted that StarHub still has the highest average revenue per user per month at $26 for pre-paid and $79 for post-paid.

StarHub’s cable TV revenues grew 20 per cent for the quarter to $95 million as it managed to increase subscription prices to customers and sign on more viewers. Despite SingTel’s entrance into the pay-TV space, StarHub has managed to defend its position as the premier provider by cornering the exclusive broadcast rights to all the must-watch sports events, such as bagging this year’s UEFA European Championship football matches.

Customer base rose 4 per cent to 504,000 at end-2007, giving StarHub a household penetration of 45 per cent.