Category: StarHub
StarHub – BT
StarHub Q2 net jumps 34.3% to $78m
STARHUB’S second-quarter net profit jumped 34.3 per cent to $78 million, from $58.1 million last year, as operating expenses fell in the absence of premium pay-television content such as the World Cup and Barclays Premier League (BPL).
Earnings per share for the three months ended June 30 rose to 4.54 cents, from 3.39 cents in 2010. Q2 revenue stayed flat at $568.6 million.
Last year, StarHub was heavily weighed down by the cost of bringing the Fifa World Cup to local soccer fans. Speculation was rife then that local operators had paid nearly $20 million to finally put an end to the protracted negotiations over the content deal.
With the weight now lifted, the firm’s operating expenses eased 3.1 per cent to $477.2 million in Q2.
StarHub saw a slight topline improvement in three of its four key business segments in the April-June period.
Mobile sales, which accounts for nearly 60 per cent of its service revenue, rose 2.9 per cent year-on- year to $302.5 million.
This was largely due to a 4.4 per cent increase in post-paid subscriber revenue to $239.2 million in the second quarter. Sales from the pre-paid segment dipped 2.6 per cent to $63.3 million in the period.
This company attributed the pre-paid decline to the expiry of certain promotional cards and a database clean-up to comply with regulatory requirements.
StarHub’s total mobile subscriber base grew by 8,000 to 2.15 million at the end of Q2. Revenue from the broadband and fixed network services segments rose 3 per cent and 2.2 per cent to $61 million and $83.4 million respectively during the period.
The exception to the rule was StarHub’s pay-TV unit, which saw its sales slide 15.7 per cent to $92.3 million after it slashed its sports package pricing to reflect the loss of the BPL broadcast rights to rival Singapore Telecommunications. The absence of one-off takings from the World Cup also contributed to the decline, the firm said.
Despite the BPL loss, the firm still managed to grow its pay-TV base by 3,000 year-on-year to 544,000.
‘Although there’s competition, customers are still keeping our (set-top) box. They’re maintaining two (pay-TV set-top) boxes,’ StarHub’s chief operating officer Tan Tong Hai said in a conference call yesterday.
In June, the firm announced plans to raise its monthly pay-TV pricing by $2 from this month. However, the move is not expected to lead to a significant customer loss, StarHub CEO Neil Montefiore added.
For the first six months of this year, StarHub’s net profit soared 46 per cent to $147.1 million, while revenue stayed flat at $1.13 billion.
Looking ahead, the operator now expects its full-year operating revenue to grow in the low single- digit range, a downward revision from the single-digit forecast it had earlier issued as a result of a flat top line in H1.
In addition, the boon it was initially expecting from the ongoing Next-Gen NBN (National Broadband Network) rollout, particularly from the corporate market, may not come through this year, Mr Montefiore said.
StarHub shares closed closed 8 cents lower yesterday at $2.83 before its Q2 earnings were released.
StarHub – BT
StarHub shares buck market decline
STARHUB was the only telco to emerge unscathed from the trading bloodbath yesterday as investors continue to be spooked by the prospect of a credit rating downgrade and bleak economic signals in the United States.
Shares of Singapore’s second-largest operator closed four cents higher yesterday at $2.91, resisting a wider market fallout which saw the Straits Time Index fall 1.47 per cent or 46.75 points to 3,130.34.
StarHub, which reports its second quarter results later today, was among a handful of counters to buck the downtrend. Its rally also came on the back of a recent analyst downgrade. On Monday, BNP Paribas had changed StarHub to hold from a sustained buy rating.
‘We see few short-term catalysts that could re-rate the stock in the next 12 months,’ BNP Paribas analyst Foong Choong Chen said in his research note.
Local operators will find it difficult to profit from the mobile data boom in the medium term due to heavy handset subsidies and generous cellular Internet bundles. For StarHub, an increase in capital expenditure as a result of investments in subsidiary Nucleus Connect means there is little hope of raising shareholder payouts or declaring a special dividend, he added.
While market watchers say defensive plays such as telcos could find favour with investors in light of lingering uncertainty in the US, the StarHub rally was not repeated across the board yesterday.
Rivals Singapore Telecommunications slipped six cents to $3.32 on fears that Bharti Airtel could continue to weigh down its bottom line. SingTel’s largest overseas associate yesterday reported a 28 per cent drop in its first-quarter net profit to 12.15 billion rupees (S$330 million).
M1 shares edged down by one cent to end trading at $2.58.
TELCOs – DBSV
2Q11F Preview and key sector issues
• 2Q11F earnings of StarHub & M1 are likely to reinforce sector’s appeal as bastion of stability.
• Potential decline in smartphone sales in 2H11F to benefit StarHub more; Downgrade M1 to HOLD after its recent run-up.
• Cross-carriage to start from Aug 1, but may not have sharp teeth to make a difference.
2Q11F earnings should reaffirm sector’s defensive appeal. M1 is likely to report 2Q11 earnings of S$42.5m (0% QoQ, +4% YoY) on 14th July, as its fair value accounting may not leave much scope for improvement. StarHub is likely to report 2Q11 earnings of S$74m (+7% QoQ, +27% YoY) on 4th August in a seasonally strong 2Q as it recovers from the impact of “dunning” in 1Q11.
Potential decline in smartphone sales in 2H11F & FY12F may benefit StarHub. High penetration of smart phones (60-65%) in Singapore may imply lower smartphone sales in 2H11F, implying lower subsidy burden
at StarHub & SingTel. Lower smartphone sales, on the other hand, may adversely impact M1’s earnings due to its unique practice of fair value accounting. While M1 is a key beneficiary of National Broadband Network, it may take another 2-3 years to show significant profit contribution from the new business.
StarHub is our new top pick after M1’s recent outperformance. YTD total returns are 15% for M1 (our previous top pick) versus 11% for StarHub and –1% for STI. At current price, M1 offers 6-7% dividend yield based on 80-100% payout ratio vs assured 7% for StarHub. MI offers flat earnings in FY12F versus mid-single digit growth at StarHub.
Cross-carriage to start from Aug 1, but impact may be muted. Cross-carriage applies only to the “exclusive” content signed after Mar 12, 2010. Firstly, StarHub has locked-in most of the popular content on exclusive basis before Mar 12 for 3-5 years. Secondly, content can still be signed on “non-exclusive” basis where pay TV operators negotiate the price as opposed to bidding earlier. As long as other pay TV operators do not buy “non-exclusive” content rights, they would not be able to cross-carry those contents.
TELCOs – DBSV
2Q11F Preview and key sector issues
• 2Q11F earnings of StarHub & M1 are likely to reinforce sector’s appeal as bastion of stability.
• Potential decline in smartphone sales in 2H11F to benefit StarHub more; Downgrade M1 to HOLD after its recent run-up.
• Cross-carriage to start from Aug 1, but may not have sharp teeth to make a difference.
2Q11F earnings should reaffirm sector’s defensive appeal. M1 is likely to report 2Q11 earnings of S$42.5m (0% QoQ, +4% YoY) on 14th July, as its fair value accounting may not leave much scope for improvement. StarHub is likely to report 2Q11 earnings of S$74m (+7% QoQ, +27% YoY) on 4th August in a seasonally strong 2Q as it recovers from the impact of “dunning” in 1Q11.
Potential decline in smartphone sales in 2H11F & FY12F may benefit StarHub. High penetration of smart phones (60-65%) in Singapore may imply lower smartphone sales in 2H11F, implying lower subsidy burden
at StarHub & SingTel. Lower smartphone sales, on the other hand, may adversely impact M1’s earnings due to its unique practice of fair value accounting. While M1 is a key beneficiary of National Broadband Network, it may take another 2-3 years to show significant profit contribution from the new business.
StarHub is our new top pick after M1’s recent outperformance. YTD total returns are 15% for M1 (our previous top pick) versus 11% for StarHub and –1% for STI. At current price, M1 offers 6-7% dividend yield based on 80-100% payout ratio vs assured 7% for StarHub. MI offers flat earnings in FY12F versus mid-single digit growth at StarHub.
Cross-carriage to start from Aug 1, but impact may be muted. Cross-carriage applies only to the “exclusive” content signed after Mar 12, 2010. Firstly, StarHub has locked-in most of the popular content on exclusive basis before Mar 12 for 3-5 years. Secondly, content can still be signed on “non-exclusive” basis where pay TV operators negotiate the price as opposed to bidding earlier. As long as other pay TV operators do not buy “non-exclusive” content rights, they would not be able to cross-carry those contents.
TELCOs – OCBC
Mandatory cross-carriage from 01 Aug 11
Makes cross-carriage mandatory from 2 Jul 11. The MDA (Media Development Authority) has announced that Pay TV service providers will have to implement the cross-carriage measure from 2 Jul 11; this as it has gazetted the amendments to the Media Market Conduct Code 2010 (MMCC 2010) on 1 Jul, effectively brining closure to its extensive consultation process which started on 12 Mar 2010. In a nutshell, Pay TV providers will have to cross-carry each other’s content that is acquired or renewed on an exclusive basis; this also means that Pay TV customers will be able to watch all Pay TV content with their preferred operator and need not pay any extra fee for doing so.
Implementation of framework from 1 Aug 11. However, MDA has extended the implementation date of the cross carriage measure to 1 Aug 11 in consideration of the industry’s views that there was a need to put the necessary systems and infrastructure in place to certify the content security measures before implementing the measure. And to facilitate the implementation, MDA has also issued guidelines on the content security protection requirements on 1 Jul. Some of the key technical issues include the piping of exclusive content from one operator to another, the encryption and decryption of the content. Operational issues include subscription and billing, difficulty in individual pricing due to bundling practices, ownership of technical glitches etc.
But likely to be non-event for now. But we understand that the two main operators – SingTel and StarHub – have not signed any “qualified content” after the announcement of the mandate in Mar 2010 to date. As such, there will not be any content that needs to be made available for cross carriage as yet; this also means that the implementation of the cross-carriage measure is likely to be a non-event for them as well as consumers until the signing of the first exclusive content. Nevertheless, the cross-carriage mandate could still mean better deals for consumers in the future as Pay TV operators may not bid as aggressively for coveted content as before; rising content cost was also why MDA introduced the measure in the first place.
Content is still king. Having said that, we still believe that content is king and we do not foresee a sharp drop in content cost, as Pay TV operators will still want to “own” exclusive content; this as they will still be able to enjoy revenue from subscription and advertising. As we see this development as a long-term positive, we maintain our OVERWEIGHT rating on the sector.