StarHub – BT

Higher operating profit, tax adjustment boost StarHub Q1 performance

STARHUB emerged from a more competitive first quarter with net earnings 15 per cent higher at $80 million, helped by better operating profit and a one-time tax adjustment.

‘If the one-time net tax adjustment had been excluded in Q107, the Q108 profits after tax would show a 4 per cent increase year-on-year,’ said StarHub.

Diluted earnings per share was up 25 per cent at 4.67 cents and it proposed an interim dividend of 4.5 cents per share, up from 3.5 cents a year ago.

Singapore’s second largest telco said operating revenue increased 13 per cent to $535 million although margins fell as it paid more to retain and acquire customers. Operating profit rose 5 per cent to $108 million.

The group’s earnings before interest, tax, depreciation and amortisation grew 6 per cent to $168 million but margin was 33.1 per cent, down 2 points from 35 per cent. ‘Competitive intensity has heated up quite a bit,’ said Starhub chief executive Terry Clontz. He said that the firm is watching its margins closely. StarHub has guided that margins to be about 33 per cent for the full year.

StarHub said higher programming and content costs amortisation while partially mitigated by increases in subscription prices in the cable TV business continue to impact Ebitda in 2008. Further, the intensified competition in the mobile market has led to higher acquisition and retention costs for both the pre-paid and post-paid segments in Q1 2008, which further impacted the Ebitda margin.

Singapore telcos have intensified their marketing campaigns ahead of the introduction of true number mobile portability next month, when consumers will be able to switch operators effortlessly while keeping their phone numbers.

So while StarHub managed to increase mobile customers by 42,600 during the quarter to 1.8 million, its market share fell to 30.4 per cent from 31.3 per cent.

Mobile revenue grew 13 per cent to $273 million while pay TV sales jumped 23 per cent to $97 million. Broadband revenue rose 6 per cent to $64 million and fixed network sales 7 per cent to $73 million.

Free cash flow fell 78 per cent to $31 million from $140.7 million due to higher capital expenditure payments, higher prepayments, reduced trade payables and accruals in the quarter. Capital expenditure was $35 million higher at $59 million. The rise included $28 million of capex payments for projects carried over from December 2007 and paid in the beginning of this year.

CEO Kwek Buck Chye said that he expects the free cash flow to increase to over $100 million in the current quarter. StarHub expects 2008 cash capex not to exceed 12 per cent of operating revenue.

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