TELCOs – AmFraser

No edge scored with World Cup

• Both StarHub and SingTel have secured broadcast rights to 2010 FIFA World Cop, almost at the last hour much to the relief of die-hard followers in Singapore. Both operators will be offering all 64 matches ‘live’ over their TV, internet and mobile platforms.

• This turn of events is unexpected. Previous joint-bid by the two operators was rejected by FIFA. And while the two now secured the rights as separate bids, this non-exclusive award appear little different as both operators will offer the same pricing to consumers.

• We therefore conclude that the combined value of the separate bids is higher than the rejected joint bid. While we cannot confirm whether the bids for both operators are similar, to be sure, the content cost impact will be more visible on StarHub’s bottomline.

• Both operators will charge common pricing for the World Cup package – at $66 for early birds signed up by 31 May 2010, and after at $88. This is significantly higher than the $10.50 to $26.75 packages StarHub charged for 2006 World Cup.

• The hike in pricing is a strong indication of the premium in the bids. We think this just about covers costs for StarHub at best, with the event meant more as a branding and marketing exercise.

• Both operators are at status quo in respect to their Pay TV subscriber base. As both have secured rights, World Cup offers no edge to either operator.

• As such we expect little impact on StarHub’s bottomline, biased on the downside. On announcement of its 1QFY10 results on 6 May, we had just cut FY10F EPS by 11% (also see Report 7 May). At the same time, we lowered FV based on DCF approach, by 4% to $1.88. We’re comfortable to keep these numbers.

• No change to our ratings – SELL StarHub (FV $1.88) and HOLD SingTel (FV $3.05).

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