TELCO – CNA

Regulatory changes best bet for StarHub, say analysts

StarHub’s stock price has come under pressure of late, following news that it had lost the rights to broadcast English Premier League football matches in Singapore.

And it took another hit this week when it became the only player not offering the popular iPhone.

With sentiment in its outlook depressed, market watchers say StarHub’s best bet for a change of fortune will be for authorities to make content sharing compulsory.

StarHub is clearly in damage control mode, trying to find its footing again after having lost the rights to broadcast EPL matches in Singapore.

Investors started selling out, with the counter now down by some 10 per cent since the news broke – from S$2.17 per share on September 30 to S$2.02 at closing on October 14.

Market-watchers say it is going to get tougher, now that M1 is also selling the iPhone, leaving StarHub as the only telco in Singapore not carrying the popular mobile handset.

At least three brokerages downgraded their calls on the counter this month. But some analysts say they started to hold a pessimistic view even earlier.

Gregory Yap, senior investment analyst at Kim Eng Research, said: “I took the view that if StarHub were to win the EPL rights, it would have meant that they would lose more money in pay-TV, which is already a loss-making enterprise for them.

“And if they were to lose the EPL rights as what has turned out, then they would start to lose their subscribers to SingTel. Either way it was no-win scenario.”

Analysts say StarHub’s best hope for a turnaround may be a change in regulations to allow content-sharing. This could allow for the resale of broadcasting rights and allow other media companies to screen EPL on their own platforms.

But it is still uncertain if changes will happen at all. It would also depend on whether the EPL allows this for Singapore.

Meanwhile, M1 has become a favourite with analysts – because it is seen as having avoided a bruising battle for the football rights.

One reason is that it had escaped what has been labelled a bruising battle for the football broadcast rights, and has been able to focus on steadily improving their market share.

The view on SingTel is also optimistic due to its strong balance sheet, which can help it tide over short-term losses more easily than its rivals.

But some say it may be a good time to move away from the defensive telco industry and capitalise on high-beta stocks instead.

Roger Tan, vice president of SIAS Research, said: “In a good time, you would see higher beta stocks rising faster than the underlying STI. At this point of time, with the economy recovering, and investors coming back into the market to pick on good stocks, investors may be able to enhance their returns more with taking higher beta stocks, rather than being defensive with the telco side.”

Analysts are expecting results for the telco sector to show growth for the third quarter, and some are waiting till then to review their stock calls. – CNA/de

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