StarHub – BT

StarHub Q2 profit falls 20.5% to $64.2m

Telco lowers revenue growth, ebitda margin guidance for 2008

STARHUB’s second-quarter net profit fell a sharp 20.5 per cent to $64.2 million due to aggressive marketing to retain mobile phone customers.

Earnings per share fell to 3.76 cents from 4.48 cents for the three months to June 30.

It also lowered guidance for revenue growth and ebitda (earnings before interest, tax, depreciation and amortisation) margin for the full year.

StarHub said that operating revenue growth is now expected to be around 7 per cent from earlier guidance of 10 per cent while blended Ebitda margin is lowered to 31 per cent from 33 per cent.

But it said that capital expenditure will not exceed 12 per cent of operating revenue and maintained its commitment to pay a minimum annual dividend of 18 cents per ordinary share.

Yesterday, StarHub declared a quarterly dividend of 4.5 cents, same as in the first quarter. For last year, StarHub had paid ordinary dividends of 16 cents in total.

Terry Clontz, StarHub chief executive, said competition remains intense and the telco had seen higher acquisition and retention costs ahead of the launch of mobile number portability (MNP).

MobileOne, its smaller rival which reported results last month, managed a slim 1.2 per cent increase in second-quarter net profit to $41.1 million.

Singapore Telecommunications will report its results on Aug 12.

For the quarter under review, StarHub said that group operating revenue increased 8.6 per cent to $531.4 million from a year ago. Group ebitda fell 10.4 per cent to $146.7 million, primarily due to substantially higher acquisition and retention costs ahead of the June 13 MNP.

The intensified competition and various marketing promotions carried out in the mobile segment saw acquisition cost per gross connection jump 63 per cent to $148.

The quarter saw daily advertisements of new mobile service promotions, including zero cost handsets and aggressive discounts off monthly subscriptions.

‘It’s not a trend we like to see, we like to see that number move back to the $100 mark,’ said Mr Clontz. ‘But the good news was the number of customers who stayed.’

Average monthly churn rate fell to an ‘all time low’ of 0.9 per cent.

Although StarHub managed to grow its mobile customers by 9.9 per cent to 1.8 million, its market share fell to 29.6 per cent from 32.7 per cent a year ago.

Mobile revenue grew 7 per cent to $269 million.

Pay TV revenue rose 25 per cent to $102 million, driven by the increase in fees for its sports channels. Customer base was up 3 per cent to 511,000. Broadband revenue was flat at $62 million. Fixed network revenue grew 12 per cent to $75 million.

Free cash flow at $140 million was 14 per cent lower compared with last year’s $162 million.

Giving an optimistic take on its results, Mr Clontz said that the telco added a record number of post-paid mobile customers who will increase their use of its services.

‘We added a record number of post-paid mobile customers in the second quarter and first half of 2008. The short-term financial consequence of this success is a dilution to earnings. However, this positive trend in customer preference for StarHub services should deliver good momentum in future periods,’ he said.

StarHub ended trade yesterday at $2.80, up seven cents.

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