StarHub – BT

StarHub sees less than 10% defecting

Loss of some sports programming won’t hurt pay-TV business too much

STARHUB says the loss of some of its popular sports programming to Singapore Telecom will not make much of a dent in its pay-TV business.

‘Less than 10 per cent of our cable TV base is at risk,’ said CEO Terry Clontz. ‘Most subscribers are going to struggle with two (set top) boxes.’

The 10 per cent figure was derived after customer surveys and a ‘rigorous analysis’ of StarHub’s pay-TV mix, he said.

This showed that instead of defecting, most StarHub customers will subscribe to two separate pay-TV packages – for entertainment and sports content.

To save consumers from having to deal with the inconvenience of two pay-TV set-tops, Mr Clontz said StarHub will make a formal proposal to SingTel to carry each other’s pay-TV content ‘pretty soon’.

If a deal is struck, SingTel’s pay TV offerings will be available as new channels on StarHub’s cable TV platform. Similarly, the green camp’s programmes can be delivered via the red camp’s mio TV service, but customers will still pay the respective companies for their subscriptions.

‘Technology has moved on where it is now possible to offer a carriage of someone else’s channels over our network and vice-versa,’ Mr Clontz said.

Last month, SingTel outbid StarHub to score the broadcast rights for the next three seasons of the coveted English Premier League (ESPN). It also lured ESPN Star Sports to jump to its mio TV platform.

After considering the various scenarios and the cost of EPL and ESPN Star Sports content, StarHub said the loss will have no impact on its ebitda (earnings before interest, taxes, depreciation and amortisation) or free cash flow.

As a sign of its confidence, the company has proposed to raise its quarterly dividend payouts to five cents a share starting from the third quarter of this year, up from 4.5 cents previously.

‘Once we announce a dividend, it’s our intention to maintain it,’ Mr Clontz said.

The increased payout comes on the heels of a 7.1 per cent year-on-year increase in StarHub’s Q3 net profit to $85.2 million on a better performance across its three key business lines.

Earnings per share for the three months ended Sept 30 rose to 4.97 cents, from 4.65 cents in Q3 2008, while operating revenue edged up 2.4 per cent to $537.1 million.

StarHub’s Q3 performance put its nine-month net income at $245.4 million, up 9.6 per cent from last year.

With its new dividend policy, shareholders will be assured of a minimum payout of 19 cents per share in 2009. If the operator keeps to its word, the figure will be 20 cents or more from next year on.

StarHub generated higher sales in three out of its four businesses in Q3.

Its mobile sales, which accounts for half of its revenue, grew 4.7 per cent to $276.8 million. It gained 35,000 new mobile subscribers to take its customer tally to 1.88 million.

Pay-TV sales were up 1.9 per cent to $100.3 million, while fixed network services revenue rose 6.2 per cent to $79.8 million. StarHub gained 5,000 new cable TV customers during the period to take its residential pay-TV base to 535,000.

But broadband revenue fell 6.1 per cent to $58.8 million as more customers opted for discounts and lower-priced Internet packages.

As a result, StarHub’s average revenue per user (ARPU) for broadband was $50 in Q3, down $7 year-on-year.

For the full year, StarHub’s service revenue is expected to be the same as in 2008. Ebitda margin on service revenue will be maintained around 32 per cent, Mr Clontz said.

This will be the last results conference chaired by the StarHub CEO of 10 years. Mr Clontz will retire at the end of the year and hand the reins to former M1 chief Neil Montefiore.

StarHub shares closed two cents lower yesterday at $1.93 before its Q3 results were released.

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