Author: tfwee
StarHub – BT
Just move on, StarHub
DESPERATE times call for desperate measures, so the saying goes. And when one has to turn to one’s rival for balm, that must surely signal that the situation is as dire as it gets.
StarHub may have done just that when it extended an olive branch to Singapore Telecommunications to carry the latter’s pay-television content on its cable platform for free.
On the surface, the suggestion – unheard of in the pay TV industry – appears to be a rare case of business altruism. StarHub’s 500,000 cable television customers can be spared the hassle of having two set top boxes when the new BPL (Barclays Premier League) kicks off next August.
Rival SingTel also stands to gain as it could save millions by tapping StarHub’s infrastructure to reach consumers and businesses instead of investing in its own wiring.
To make the deal even sweeter, customers will pay SingTel for their BPL subscriptions, even though the channel is delivered via StarHub’s cable television set-up. After all, the argument is that StarHub has already been doing the same for free-to-air channels such as MediaCorp 5 and 8.
It would seem that the complaints of long-suffering football fans have finally been heard and, short of any government intervention, an interim win-win work-around has now been found. However, if you peel the bark off the StarHub olive branch, it is quite clear that damage-control is the true self-serving intent.
The BPL has always been the crown jewel of StarHub’s sports line-up and its latest offer to SingTel seems like a veiled attempt to cling on to this prized trophy.
StarHub’s mooted approach will indeed save consumers the inconvenience of owning two pay TV boxes.
What is left unsaid is that it will also help stem the exodus among its current cable television base. This is because StarHub customers who want to watch the BPL will be more inclined to hang on to their pay-TV subscriptions.
Another fact is that StarHub is mandated to carry terrestrial channels such as MediaCorp 5 and 8 by the Media Development Authority of Singapore (MDA). In the latest plot twist, StarHub extended the offer to carry SingTel’s content out of its own free will.
The MDA has already said that it would not interfere in the commercial arrangements of pay-TV operators despite some recent customer rumblings. This is consistent with its decision in 2006 when SingTel appealed successfully to the MDA to ban exclusive content such as the BPL on the grounds that it discourages competition.
This means that any tweaks to the regulator’s policy should only be made in the next round of bidding three years later when the scores between the two quibbling foes are even.
While StarHub could be using the media to influence public opinion to get SingTel to concede the middle ground, it may have done the exact opposite of stirring the hornet’s nest.
At the red camp, this suggestion will undoubtedly be seen as yet another gibe at its ability to wire-up the nation over the next 10 months for BPL broadcast.
StarHub’s outgoing helmsman, Terry Clontz, had already questioned this once and the comment was met with a stern rebuttal from SingTel Singapore CEO Allen Lew.
‘We have never said something and not delivered,’ Mr Lew told BT then.
If SingTel takes up the StarHub offer now, it will be seen as backtracking on a public commitment. Pride aside, a compromise also cast doubts over the viability of its own mio TV platform.
If SingTel can resort to door-to-door selling in housing estates to push its mio TV service two years ago, you can be sure it will spare no expense to drive the take-up for its new sports portfolio.
Furthermore, the marketing machinery at SingTel has already been fired up. Its telemarketers have already started calling customers to up-sell its new sports line-up. Such a content-sharing arrangement would only complicate the sign-up process.
Rather than moping over the BPL loss, StarHub should move quickly to resolve lingering consumer doubts. Concede that the sports battle is lost and move on quickly to reposition itself with its other exclusive pay-TV content. Make the necessary price adjustments and offer perks to lock in consumers with shorter-term one-year contracts to stem immediate customer outflow.
StarHub has said that it would bounce back after being one goal down. Now it’s time to put the money where its mouth is. Offering to take in your rival’s star striker can hardly be considered a viable solution.
SingTel – BT
US$300m sub-sea cable by SingTel and partners lands in Japan
SINGAPORE Telecom, Google and other partners are on track for a substantial sub-sea bandwidth boost from the first quarter of next year.
A US$300 million, 9,620km sub-sea cable system funded by a consortium of six companies – Bharti Airtel, Global Transit, Google, KDDI Corp, Pacnet and SingTel – has landed in the Japanese coastal town of Chikura. Construction of the system was announced in February last year.
Linking Japan to the US via the Pacific Ocean, this undersea digital superhighway is expected to be a major boost for its owners, as well as businesses and consumers in bandwidth-hungry Asia.
The cable system will add up to 4.8 terabits per second (Tbps) of bandwidth between the US and Asia and help its owners meet growing demand for data, e-commerce and Internet traffic between Asia and the US.
It will also serve as an important alternate route to ferry digital traffic in the event of disruptions to other cable systems.
The timing of the Chikura landing shows the consortium – called Unity – is on schedule with construction.
‘The new Unity cable system will enable members of the consortium to deliver increased capacity and more reliable connectivity to support the growth of bandwidth-hungry applications such as video, the growing popularity of cloud computing and to address the rise of digital content travelling between Asia and the United States,’ said Chris Wilson, chairman of the Unity executive committee.
This is the first time since 2004 that SingTel is financing a sub-sea cable-laying project.
In 2004, it joined 15 other companies to build a 20,000km system known as the South East Asia-Middle-East – West Europe 4, or SEA-ME – WE 4.
This venture is also notable for the participation of Internet search giant Google.
Unity’s largest investor Pacnet, which owns the region’s largest private sub- sea cable system EAC-C2C, will link its portion of the new cable system – dubbed EAC Pacific – with the EAC-C2C.
SPH – CS
Faster-than-expected pace of recovery so far in FY10
● According to the CS Page Monitor, newspaper ad demand pickedup further in 1Q FY10, after bottoming in 3Q FY09. Estimated total classified volume fell 9% YoY in the first two months (September and October) of 1Q FY10 – a big improvement from the – 17% in 4Q and -33% in 3Q. In addition, our page count indicates that display ad volume fell by ‘only’ 3% during the same period, versus -9% in 4Q and -11% in 3Q.
● In fact, our work shows that display and non-job classified ad volume grew YoY in October – the first time since the ad volume grew YoY in August/September 2008. Our FY10E total newspaper ad revenue forecast of -6% might be too conservative if the pace of improvement continues to surprise on the upside. Our sensitivity analysis shows that every 5% upgrade in FY10E ad revenue forecast translates into a +6% net profit revision (and +9% media profit upgrade) for SPH.
● While SPH has started to outperform, it continues to trade at a discount to the market. We maintain our OUTPERFORM rating with a target price of S$4.41.
SMRT – DBS
Hop onto this train
• 2Q net profit of S$52.8m slightly ahead (+24% yoy) on lower opex and higher other operating income
• Electricity locked in till Sep 2010, giving more certainty to costs, in our view
• 49% stake in Shenzhen Zona for RMB320m; Zona’s profit expect to double by 2010/11
• Upgrade to Buy; TP: S$2.00 (24% upside)
2Q slightly ahead. Headline net profit of S$52.8m (+24% yo-y, +6% q-o-q) was slightly ahead of our expectations on higher other operating income (S$8.5m, +25.9% yoy) and lower operating expenses (S$174.7m, -3.6% yoy). Topline inched up marginally to S$229.4m (+1.1% yoy) on higher MRT revenues, rental and overseas consultancy fees, but offset by the fare reduction. An interim dividend of 1.75 Scents was declared (similar to 1H09).
Electricity contracts locked in till Sep’10. Management has locked in its electricity contract rates at 11% higher than the previous one which expired in Sep’09. While this would increase its operating costs in 2H vis-à-vis 1H, we believe it gives certainty to its operating results given the current environment.
Fruition of 49% stake in Shenzhen Zona. The agreement has just been signed on 30 Oct for a 49% stake (RMB320m). Historical PAT (2008) of Zona was RMB24.1m, but management guided that profit would more than double by 2010/11 on lower interest costs and a larger vehicle fleet expected. We estimate it would account for c.3% of earnings by then.
Upgrade Buy, TP: S$2.00. We see positive investment attributes in this defensive counter based on its: (i) stable recurring earnings on firm ridership; (ii) foray overseas and the potential in its associate, which management appears to be very optimistic about; and, (iii) that the counter has been overlooked recently over higher beta plays. Our TP is based on an average of 15x FY10/11F PER and DCF (WACC 7.2%).