SingTel Asked To Cross-Carry BPL Content

Singapore’s Media Development Authority (MDA) has directed SingTel to cross-carry the Barclays Premier League (BPL) for the 2013-2016 season starting in August. We are surprised by the directive but view it as favorable for StarHub as it would help to mitigate pay-TV churn. StarHub subscribers would now have access to the iconic content without a second set-top box. The decision is, however, negative for SingTel as it has to share content as well as bear the associated cross carriage costs despite having signed for the BPL on non-exclusive terms. We are keeping our NEUTRAL ratings on both companies given the recent strong share price re-rating for the sector. StarHub remains our preferred exposure to Singapore telecoms.

Getting a fair play. MDA’s directive was in response to the complaint filed by StarHub in February on its inability to negotiate for separate rights to the BPL. Media reports have said that SingTel had built in ‘restrictive conditions’ after inking the non-exclusive agreement with the Football Association Premier League (FAPL). This was said to have prevented the FAPL from commencing negotiations with other parties for an extended period of time.

Positive for StarHub. StarHub welcomes the development and sees pay-TV subscribers as the ultimate beneficiaries. We gather from management that it had capitalized on a provision within the cross carriage guidelines which stipulate that non-exclusive content can be shared if the agreement signed by another provider contained certain clauses which prevent or restrict, or are likely to prevent or restrict, the same content from being acquired or otherwise obtained for transmission on selected pay-TV platforms in Singapore.

SingTel to file an appeal. SingTel said it is “gravely disappointed” with MDA’s decision as it would ”disadvantage” both consumers and the industry. The company would appeal the decision and seek legal recourse, if necessary. Management believes the directive will discourage pay-TV operators from acting swiftly in the future to procure top quality content as this penalizes the operator and would see consumers losing out since it may no longer be economically viable for broadcasters to continue investing in quality programming for the benefit of consumers and businesses.

The red camp may play hardball. We believe SingTel could still make it difficult for StarHub’s subscribers to access the BPL with commercial terms of carriage that may be less favorable. SingTel is caught in a bind as it is mandated to charge other viewers the same rate it charges its own customers. The directive is negative for SingTel as it forces the company to share the content – although signed on a non-exclusive basis – and bear all costs associated with the carriage cost.

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