StarHub – BT

Funding capital spending a key issue at StarHub

FEARS that StarHub could initiate a cash call sparked a flurry of questions from shareholders about the operator’s capital expenditure (capex) plans for the year at its annual general meeting (AGM) yesterday.

Minority shareholder Tan See Peng got the ball rolling with a barrage of queries revolving around the group’s outstanding bank loans of $914 million and whether there are plans for major cash outlays in 2009.

‘I’m just afraid you (StarHub) will turn to us (for cash),’ he quipped. His concern could stem from the right issues called by other corporate titans such as DBS Group, CapitaLand and Chartered Semiconductor in recent months.

Moreover, StarHub recently landed the government’s OpCo tender for operating the nation’s upcoming fibre-optic broadband network and there may be some uncertainty about the investments required for this project,

‘This (OpCo) will have some requirements on capex, but we have sufficient resources, as well as lines of credit to fund the expenditure,’ said StarHub chairman Tan Guong Ching.

The operator has previously said that it expects to pump in $100 million over the next few years to set up its OpCo venture. The new unit is projected to require an annual capital spending of around $40 million over the next 25 years.

‘We have a very strong cash flow. It’s more than sufficient to pay for capex as well as for the repayment of loans,’ he assured shareholders.

StarHub’s AGM typically attracts a smaller crowd compared to rivals Mobile One and Singapore Telecommunications as the stock is largely owned by institutional investors.

While the annual gathering is usually wrapped up in less than hour, yesterday’s AGM stretched to nearly 90 minutes with queries about the pay of StarHub directors prolonging the latter part of the question-and-answer session.

They were mostly fielded by shareholder Tony Tan, who also owns shares in M1. Armed with a detailed analysis of the two companies’ financial statements, he quizzed StarHub’s rationale for paying its directors a remuneration package of $1.078 million, a figure which he said is ‘2.8’ times higher than that of its competitor.

In addition, he queried StarHub’s need for having a large board composition of 13 members when rival M1 was doing the opposite by shrinking its directorate pool.

‘We have diversified revenue. The experience needed for some of these (segments) is very different. The complexity of their (M1’s) business is different from ours,’ StarHub CEO Terry Clontz explained.

This is because StarHub is among a handful of operators capable of offering a complete suite of Internet, telephony and pay-TV services, he added.

‘This (diversification) will cushion us against a downturn in any particular sector,’ said StarHub chairman Mr Tan, adding that its mobile business is already seeing signs of a slowdown due to Singapore’s saturating mobile phone user base.

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