Month: August 2008
StarHub – BT
StarHub Q2 profit falls 20.5% to $64.2m
Telco lowers revenue growth, ebitda margin guidance for 2008
STARHUB’s second-quarter net profit fell a sharp 20.5 per cent to $64.2 million due to aggressive marketing to retain mobile phone customers.
Earnings per share fell to 3.76 cents from 4.48 cents for the three months to June 30.
It also lowered guidance for revenue growth and ebitda (earnings before interest, tax, depreciation and amortisation) margin for the full year.
StarHub said that operating revenue growth is now expected to be around 7 per cent from earlier guidance of 10 per cent while blended Ebitda margin is lowered to 31 per cent from 33 per cent.
But it said that capital expenditure will not exceed 12 per cent of operating revenue and maintained its commitment to pay a minimum annual dividend of 18 cents per ordinary share.
Yesterday, StarHub declared a quarterly dividend of 4.5 cents, same as in the first quarter. For last year, StarHub had paid ordinary dividends of 16 cents in total.
Terry Clontz, StarHub chief executive, said competition remains intense and the telco had seen higher acquisition and retention costs ahead of the launch of mobile number portability (MNP).
MobileOne, its smaller rival which reported results last month, managed a slim 1.2 per cent increase in second-quarter net profit to $41.1 million.
Singapore Telecommunications will report its results on Aug 12.
For the quarter under review, StarHub said that group operating revenue increased 8.6 per cent to $531.4 million from a year ago. Group ebitda fell 10.4 per cent to $146.7 million, primarily due to substantially higher acquisition and retention costs ahead of the June 13 MNP.
The intensified competition and various marketing promotions carried out in the mobile segment saw acquisition cost per gross connection jump 63 per cent to $148.
The quarter saw daily advertisements of new mobile service promotions, including zero cost handsets and aggressive discounts off monthly subscriptions.
‘It’s not a trend we like to see, we like to see that number move back to the $100 mark,’ said Mr Clontz. ‘But the good news was the number of customers who stayed.’
Average monthly churn rate fell to an ‘all time low’ of 0.9 per cent.
Although StarHub managed to grow its mobile customers by 9.9 per cent to 1.8 million, its market share fell to 29.6 per cent from 32.7 per cent a year ago.
Mobile revenue grew 7 per cent to $269 million.
Pay TV revenue rose 25 per cent to $102 million, driven by the increase in fees for its sports channels. Customer base was up 3 per cent to 511,000. Broadband revenue was flat at $62 million. Fixed network revenue grew 12 per cent to $75 million.
Free cash flow at $140 million was 14 per cent lower compared with last year’s $162 million.
Giving an optimistic take on its results, Mr Clontz said that the telco added a record number of post-paid mobile customers who will increase their use of its services.
‘We added a record number of post-paid mobile customers in the second quarter and first half of 2008. The short-term financial consequence of this success is a dilution to earnings. However, this positive trend in customer preference for StarHub services should deliver good momentum in future periods,’ he said.
StarHub ended trade yesterday at $2.80, up seven cents.
SingTel – OCBC
Testing resistance
– SingTel has rebounded as per our forecast on 15 July. The price rose into our forecasted resistance zone around S$3.60 – 3.68 over the last few trading sessions but failed to clear it.
– At this juncture, the reversal candlestick formations coupled with the strong resistance from the 50-day moving average and the downtrend line, suggest that SingTel’s upside is capped around the current levels.
– We expect the price to drift back towards the lower band of the wedge pattern around S$3.47-3.49. A break below this level would take SingTel down towards its support at S$3.16.
– We advocate caution on SingTel at this stage, and advise waiting for a convincing break above the resistance level or a break below the lower band of the wedge pattern before taking up a relevant trading strategy.
M1 – BT
M1 to offer fixed broadband from today
IN a move that gives more choice to broadband customers, Singapore’s smallest telco, MobileOne (M1), announced yesterday that it will offer fixed broadband services from today.
With this, M1 joins StarHub and Singapore Telecommunications (SingTel) in offering both fixed and mobile broadband services. M1 was the first telco to introduce mobile broadband service in Singapore in 2006.
According to M1, it will offer four unlimited data plans. The lowest offers 10 megabits per second (mbps). The other three speeds are 15 mbps, 30 mbps and 100 mbps. With the 100 mbps option, M1 joins StarHub in offering the highest connection speeds in Singapore today.
The promotional price for the 10 mbps plan is $43.50 a month, with existing M1 customers paying $40.60 a month. For the 100 mbps plan, the promotional price is $88.50 a month with existing M1 customers paying $76.70 a month.
Customers will be offered a plug and play cable modem as part of the launch promotion when they sign up for the service.
M1 fixed broadband will be available to all homes with cable access points or which are cable-ready, according to an M1 spokesman.
He added that the service is capable of achieving download speeds of up to 100 mbps and upload speeds of up to 2 mbps.
The spokesman added that fixed broadband customers will be connected to M1’s infrastructure via StarHub Cable’s open access network. ‘The traffic is then carried from our network to the Internet.’
When asked about what additional investment was done by M1 for this service, the spokesman said that routers and other such enabling hardware were added to the company’s existing infrastructure to enable this.
M1 and StarHub are both part of the Infinity Consortium, along with Hong Kong-based City Telecom (HK) Ltd. The consortium is one of the two bidders for building Singapore’s prestigious Next Generation National Broadband Network (NGNBN).
Neil Montefiore, M1’s CEO, said the company is repositioning itself for the future as it develops new businesses anchored on its core competencies.
‘The launch of M1 fixed broadband is an important step in our planned transformation from a single-play mobile operator to a dynamic multi-play operator with interests in both the mobile and fixed sectors,’ he added.
Commenting on the M1 offerings, a StarHub spokesman said: ‘The landscape for broadband services is set to change even more radically in the coming years with the Government’s NGNBN initiative.
‘This recent move by our Infinity consortium member should come as no surprise, as we all prepare for new challenges and opportunities. Singaporeans can always count on StarHub to remain committed to offering a strong value proposition to customers, especially those who want fast broadband, mobile, fixed line, and CableTV services from a single service provider.’
A SingTel spokesman noted: ‘We welcome competition and will continue to ensure that our quad-play service offerings – fixed, broadband, mobile and TV – will delight and meet our customers’ needs.’
For more information about M1 fixed broadband, visit: www.m1.com.sg/broadband.
SingTel – BT
SingTel says it’s in talks with China telco
SINGAPORE Telecommunications said talks are in progress for it to invest in a Chinese operator, part of plans to drive earnings through emerging markets.
‘We track the developments closely,’ chief executive Chua Sock Koong said in an interview at a conference in Singapore yesterday. She declined to elaborate because it was ‘too premature’ to identify target companies.
Ms Chua, who took the helm in April last year, has said she aims to expand growth by investing in emerging markets including Africa.
The SingTel CEO, who reiterated yesterday interest in investing in the Middle East, faces the challenge of raising earnings amid currency fluctuations and intensifying competition in Australia, its largest market.
The company is in discussions for a possible investment in operators in China, the world’s biggest telephone market by users, Ms Chua said on June 17.
China Telecom Corp, the nation’s largest fixed-line company, said in June it was in talks to sell a stake to a strategic investor.
Ms Chua said on April 15 that SingTel was looking at investments in the Middle East as the company favours emerging markets with large populations and low mobile-phone usage.
‘We continue to look to see if there are significant opportunities,’ she said. — Bloomberg
SingPost – UOBKH
Slower Growth Ahead; HOLD For Yield
Net profit up 2.9% to S$39.5m. Singapore Post’s (SingPost) revenue grew 4.6% yoy to S$120.9m in 1QFY09, with the mail segment contributing 73% of total revenue. The core business, the mail segment, saw modest revenue growth of 2.4% yoy and flat international mail growth, mainly driven by 4% yoy growth in domestic mail. EBIT margin widened to 40.6% in 1QFY09 (39.3% in 1QFY08), partly due to less selling expenses and slower growth of volume-related expenses.
Competition overhang. Under the competition framework set by Infocommunication Development Authority of Singapore (IDA), SingPost will continue to hold the master keys but it must provide other postal service operators with access to its distribution network. How IDA regulates Reference Access Offer (RAO) rates and executes the new framework will be closely watched. Four new entrants have been granted postal services licences.
Not so defensive against economic slowdown. According to IDA, business users account for more than 90% of total domestic mail. Therefore, a slowdown in business activities would hurt SingPost’s business. This is evidenced by the slight dip in mail volume handled in FY03 (Apr 03-Mar 04) when Singapore was hit by SARS. The moderated revenue growth in the past few quarters, especially from the mail segment, signals an economic slowdown. If economic uncertainties continue, SingPost could see slower growth ahead.
Decent yield warrants a HOLD. We downgrade SingPost to HOLD with a fair price of S$1.07. Our valuation is based on the DCF model (WACC: 5.7%; terminal growth rate: 0.5%). We suggest accumulating at S$0.96 or below. Upside risk could come from a special dividend payout.