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.

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.

SingTel directed to share BPL

In a surprising move, the regulator has directed SingTel to cross-carry the 2013-16 seasons of the Barclays Premier League. This is despite SingTel having non-exclusive rights to the BPL, which allows it to not share its content. This raises the question of MDA over-ruling again.

StarHub stands to gain a little as this lowers the likelihood of churns and generates revenues from providing cross carriage. It is a setback for SingTel in its efforts to build up a pay TV franchise. All in, this development does not change our forecasts and views on SingTel and StarHub. The sector remains a Neutral with M1 (Outperform) as our top pick.

What Happened

In a surprising move, the Media Development Authority (MDA) has directed SingTel to cross-carry Barclays Premier League (BPL) 2013-16 seasons. This is despite SingTel acquiring the rights to the BPL on a non-exclusive basis, which it is not required to share. SingTel said it will “appeal this decision and seek legal recourse if necessary”. It added that customers who wish to watch BPL on its own (via cross carriage) will most likely have to pay significantly higher monthly fees.

What We Think

MDA’s decision surprised us as it contradicts its cross-carriage ruling that was enforced in March 2010. The MDA ruled that holders of exclusive content are obligated to open their content while holders of non-exclusive content are not required to share. With this about-turn, it raises the question of MDA over-ruling again in the future. This is a major setback for SingTel in its quest to capture a bigger piece of the pay TV pie. By having to share the BPL, SingTel’s ability to have users sign up to mio TV is sharply reduced. This ruling is a small positive for StarHub as its customers can now subscribe for BPL directly from SingTel without having to sign up with SingTel’s overall pay TV service. This reduces the likelihood of StarHub’s customers leaving for SingTel.

What You Should Do

Stay invested in M1, our top Singapore telco pick. While positive for StarHub, this regulatory outcome does not change our Neutral recommendation on StarHub. The negative impact on SingTel reinforces our Underperform recommendation on the stock.