StarHub – BT

StarHub’s bottom line kicked by World Cup

Net profit for Q2 drops 25.4% from $77.8m to $58.1m

THE World Cup dealt StarHub a swift kick in the bottom line in the second quarter of this year, along with higher costs from subsidies for the iPhone and other smart phones.

Net profit for the quarter fell 25.4 per cent from $77.8 million to $58.1 million.

Even as operating revenue rose 6.9 per cent to $569.3 million in Q2, it was overshadowed by a 14 per cent – or $60.5 million – increase in operating expenses to $492.3 million.

For H1, net profit was down 37.2 per cent to $100.7 million.

Revenue for the same period rose 6 per cent to $1.13 billion, while operating expenses surged 16 per cent.

Earnings per share for Q2 and H1 were 3.39 cents and 5.87 cents respectively, down from 4.55 cents and 9.37 cents for the corresponding periods a year ago.

In May this year, StarHub and SingTel reached a deal with Fifa over the broadcast rights for the World Cup event, for an undisclosed sum.

While Fifa had put a $40 million price tag on the rights, speculation then had pegged the final sum to be about half that.

According to StarHub, the cost of the broadcast rights were expensed based on the number of matches aired.

With 56 out of 64 matches aired in June and the remainder in July, the bulk of the rights has been expensed for Q2.

Its cable television revenue for the quarter, however, grew the most across StarHub’s segments, with a 9 per cent rise to $109.6 million, year-on-year.

Excluding the revenue from the World Cup, average revenue per user per month would have been $2 lower in Q2, at $54.

StarHub’s mobile services revenue grew 8.2 per cent in Q2, year-on-year, to $294 million, while its fixed networks services revenue managed a 2.1 per cent increase to $81.6 million.

The broadband segment was the only one to shrink, its revenue dipping 1.8 per cent to $59.2 million.

The group is expecting to turn a corner on the subsidies for iPhones and other smart phones that have ratcheted up costs for both Q1 and Q2.

‘The benefits of the smart phone investments are beginning to come through in the Ebitda margins,’ said Neil Montefiore, StarHub’s chief executive officer.

Ebitda margins in Q2 gained 3.4 percentage points month-on-month, from 22.5 per cent in Q1 to 25.9 per cent.

For FY2010, StarHub expects to maintain an Ebitda margin on service revenue of about 28 per cent.

Its guidance on revenue growth for the year was a little on the conservative side – low single-digit range – partially due to its loss of the English Premier League (EPL) broadcast rights for the next three seasons, starting on Aug 14.

‘After Aug 14, there might be some customers who will want to move from us, but we’re not sure,’ said Mr Montefiore.

In H1, the customer subscriber base for its cable TV service held steady at 541,000 customers in both quarters.

Late last year, it had expected to lose 10 per cent of its cable TV customer base over the EPL loss.

On the controversial cross-carriage mandate front, StarHub said that it had submitted its feedback to the government and was still waiting for the outcome.

The cross-carriage mandate forces operators to share any exclusive content that they sign from March 12.

StarHub is maintaining its cash dividend payout of 5 cents per ordinary share per quarter, 20 cents for FY2010 in total.

The counter closed one cent lower at $2.33 in trading yesterday.

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