TELCOs – Kim Eng

Let the BPL Money Games Begin

Buy StarHub to hedge rising cost of BPL TV rights. British soccer fans have just agreed to hand over GBP3b to the Premier League, the richest soccer league in the world, as the 2013-2016 UK TV rights were recently sold at a 71% premium over the last three seasons. In Singapore, soccer fans will have no choice but to tighten their belts yet again. However, we think StarHub will be the ultimate winner, even if SingTel decides to throw caution to the winds and bids aggressively. BUY StarHub to hedge against the rising cost of watching your favourite team; SingTel remains a SELL.

BPL scores huge TV rights win at home. The world’s richest soccer league, Premier League, just got a billion pounds richer. British pay TV broadcasters BSkyB and BT recently agreed to fork out GBP3.04b over the next three years for the UK domestic live TV broadcast rights for the 2013-2016 seasons, a 71% rise over the cost of the rights for the 2010-2013 seasons. BPL stars Yaya Toure and Mario Balotelli (despite his goal drought) can look forward to even more lavish pay hikes.

What will happen to Singapore? The worst case scenario is both telcos and Premier League walk away from the negotiation table, which we think is unlikely. Given the presence of cross-carriage laws this time round, it is more plausible that Premier League will allow a joint bid between SingTel and StarHub that will result in it receiving a sum more than the estimated SGD425m SingTel paid for the 2010-2013 seasons.

No good news for soccer fans. Whichever the scenario, there is unlikely to be any good news for soccer fans; just various degrees of bad. Assuming a joint bid is possible and a 30% rise in TV rights cost over the 2010-2013 seasons, as mooted in Hong Kong-based reports, our best case scenario suggests that subscribers will still need to pay between SGD27 and SGD35 more a month to watch BPL, which we think is still reasonable.

Odds are with StarHub. In the final analysis, we think StarHub will watch the dollars and cents and refrain from harming its generous dividend policy by bidding too aggressively, even if it does bid jointly with SingTel. If SingTel decides to be as aggressive as it was in 2009 and clinches the rights to the three seasons, the cross-carriage law will work to StarHub’s advantage. In such a tactical strategy game, we think the odds (and investors’ favour) are with StarHub.

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