StarHub – BT

StarHub Q3 net profit dips 2.1% to $79.5m

Growth strongest for pay-TV business, flat for mobile and broadband units

STARHUB’S third-quarter net profit fell 2.1 per cent to $79.5 million due to higher content costs for its pay-TV business and a flat showing by its mobile and broadband units.

Revenue for the three months ended Sept 30 was 2.3 per cent higher year on year at $524.6 million, but earnings per share slipped to 4.65 cents from 4.78 cents.

StarHub yesterday declared a quarterly dividend of 4.5 cents, unchanged from Q2, and reaffirmed its commitment to pay at least 18 cents in 2008. This translates to a minimum dividend payout of 4.5 cents for the final quarter.

Singapore’s second-largest teleco continues to bear the brunt of soaring content prices for pay-TV, with the cost of services rising 21 per cent year on year to $73.1 million in Q3, which raised operating expenses 3 per cent to $417.6 million.

On the mobile phone front, the promotional frenzy sparked by the introduction of True Mobile Number Portability in the second quarter is easing, according to StarHub CEO Terry Clontz. This led to lower handset subsidies, which consequently reduced the cost of equipment sold by 19 per cent sequentially to $51.7 million.

The pay-TV business registered the strongest growth in Q3, with sales rising 14.7 per cent to $98.4 million. This was largely helped by an increase in subscription prices for basic and sports packages which kicked in late last year. StarHub added 9,000 pay-TV subscribers in Q3 to bring its customer base to 520,000.

Revenue from the mobile phone business slipped 0.7 per cent to $264.4 million during the quarter, with the arrival of the iPhone 3G triggering some customer defections in September, Mr Clontz said. Despite the migration and lower handset subsidies, StarHub added 17,000 post-paid subscribers in the quarter.

It now has 1.74 million mobile customers and a market share of 28.9 per cent, down from 31.9 per cent a year earlier.

StarHub’s broadband revenue rose one per cent in Q3 to $62.6 million, while its fixed network service sales edged up 2.4 per cent to $75.1 million.

The company’s bid for the right to build Singapore’s future Internet highway fell through during the quarter, as the consortium it was spearheading lost out to a rival group involving SingTel.

StarHub’s closing cash and cash equivalents balance at end-September was $126.9 million. After netting this cash balance, the company’s debt was 4 per cent lower at $786.8 million. Its gearing as a ratio of 2007 Ebitda – earnings before interest, tax, depreciation and amortisation – has improved from 1.3 times last year to 1.2 times.

For the first nine months of this year, StarHub recorded a 3.5 per cent drop in net income to $223.9 million, although revenue increased 7.9 per cent to $1.59 billion.

The company is keeping to its full-year sales growth projection of 7 per cent and expects Ebitda to be 31 per cent of revenue.

Despite economic headwinds, StarHub has no plans to introduce new cost-cutting measures. ‘If you look at the past six years, we’ve not increased headcount at all. We’re pretty lean as it is,’ Mr Clontz said.

StarHub shares climbed 3.2 per cent to close at $2.29 yesterday.

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