Category: StarHub
StarHub, SingTel – BT
StarHub stirs up the storm over set-top box
It hits back at SingTel and refutes technology claims
A small set-top box has managed to open up a Pandora’s Box in the local pay-TV sector, as the question of whose hardware to use turns into an open spat between Singapore’s big two.
In the latest development, StarHub yesterday refuted SingTel’s assertion that the green camp’s cable television customers will have to upgrade their set-top boxes when Singapore’s nationwide fibre-optic network starts to kick in from the first quarter of 2010.
‘StarHub would like to make it clear that we completely disagree with any claims about technological reasons for not accepting our recent proposal (to carry some of each other’s programming to get around the need for two set-top boxes),’ StarHub said in a statement.
‘And it is not true that StarHub TV customers must upgrade their set-top box next year for the NGNBN (Next-Generation National Broadband Network),’ the statement added.
On Wednesday, SingTel Singapore CEO Allen Lew said StarHub’s current cable TV box is not compatible with the new broadband highway and consumers should bear this in mind when assessing StarHub’s shared-programming idea to get around the hassle of having two set-top boxes.
StarHub’s rebuttal came a day after it officially tabled an offer to SingTel to carry the latter’s English Premier League and ESPN Star Sports content. From mid-next year, these will be shown over SingTel’s mio TV platform after Singapore’s largest telco clinched the broadcast rights for the programmes last month.
StarHub is touting its shared-programming offer as an interim solution to resolve the double set-top box issue while the government looks into the longer-term possibility of hardware standardisation.
Mr Lew also said on Wednesday that SingTel needs to ‘amortise’ the investment it has sunk into rolling out its own pay-TV infrastructure and that StarHub’s offer came ‘three years too late’.
StarHub said yesterday: ‘References to what could have been proposed three years ago have no relevance. We could say the same about a number of things in the telco space that our competitors could have done over the past 10 years that would have made the playing field more level.
‘The sub-agenda for each of us is transparent. Each operator would like to have its set-top box as the preferred box in the home. That is one reason why StarHub is making the proposal, and the only reason why our competitor would not accept it.’
SingTel, StarHub – BT
SingTel tells StarHub: thanks, but no thanks
Offer on set-top boxes has come 3 years too late, it says to its rival
StarHub’s idea for getting around the inconvenience of multiple set-top boxes appears to have been shot down hours before it tabled a formal proposal to arch rival Singapore Telecom.
Having invested millions in its own Internet television network for pay-TV, SingTel’s prerogative is to recoup this investment, SingTel Singapore CEO Allen Lew said yesterday morning, hours before StarHub finally submitted an official offer to carry SingTel’s pay TV content.
‘Three years ago when we entered the pay-TV market, we had the option of either building a new network or using the incumbent’s (StarHub’s) network,’ he said.
‘At that time, there was no proposal from them and no ability to use their network. The offer is kind of three years too late. Having built the network, I have to recover the investment.’
Mr Lew was responding to comments by StarHub’s outgoing chief Terry Clontz that network sharing could be a way around the need for two pay-TV set-top boxes.
The issue came up after SingTel outbid StarHub to score the sought-after broadcast rights for the next three seasons of the English Premier League (EPL).
Besides winning the coveted league, SingTel also convinced ESPN Star Sports to migrate from cable to its mio TV platform.
Viewers flooded newspapers and online forums with complaints of having to contend with multiple set tops to view entertainment and sports content from next year.
Local authorities are already looking into the possibility of standardisation, but StarHub believes its idea could be an interim solution.
Under the green camp’s mooted approach, StarHub and SingTel’s content could be carried via each other’s networks but consumers would still pay the respective companies for their subscriptions.
This means StarHub customers could watch SingTel content such as EPL matches using their existing cable TV set-top box.
Similarly, SingTel’s mio TV subscribers could access StarHub channels such as Discovery and AXN under the arrangement.
One drawback of this scenario is that unlike SingTel’s mio TV set-top, StarHub’s cable TV box is not NBN (national broadband network)-compatible, SingTel’s Mr Lew said.
This means that it cannot receive television programmes delivered via the upcoming nationwide fibre optic network.
Consumers will have to upgrade their StarHub set-top boxes when the NBN becomes progressively operational from the first quarter of 2010, he said.
In any event, SingTel did not receive official word from StarHub until yesterday, Mr Lew said.
‘I find it very strange that our competitor would make a commercial proposal through the press,’ he said. ‘If someone is serious about doing something, they approach the other party first,’ Mr Lew told reporters at SingTel’s second-quarter results briefing.
Singapore’s largest telco yesterday posted a second straight quarterly bottomline improvement, with net profit rising 10.1 per cent to $956 million on a strong showing across Singapore, Australia and Indonesia.
Earnings per share for the three months ended Sept 30 jumped 10.1 per cent to six cents, while revenue increased 5.4 per cent to $4.1 billion.
Net profit from Singapore operations fell 9 per cent to $321 million while that from Australian unit Optus soared 21.4 per cent to $184 million.
Pre-tax earnings from SingTel’s six regional affiliates grew 32 per cent to $571 million.
StarHub – Phillip
3Q09 results
3Q09 results. StarHub reported 3Q09 operating revenue of S$537.1m (+2.4% yoy) and net profit of S$85.2m (+7.1% yoy). Net profit rose because of higher revenue, lower staff costs and marketing and promotion expenses as well as decrease in tax provisions. It also announced an interim dividend of S$0.05 per ordinary share for 3Q09, which was higher than S$0.045 for 3Q08.
Performances of the various business units. The revenue of the various business units was as follows: mobile revenue was S$276.8m (+4.7% yoy), Pay TV revenue was S$100.3m (+1.9% yoy), broadband revenue was S$58.8m (-6.1% yoy), fixed network services revenue was S$79.8m (+6.2% yoy) and sale of equipment was S$21.4m (-11.3% yoy).
Mobile revenue was higher due to an increase in the number of post-paid and prepaid customers to 923,000 (+5.1% yoy) and 961,000 (+11.2% yoy) in 3Q09. Pay TV revenue increased because the number of customers gained by 2.9% to 535,000. Broadband revenue dropped as customers selected lower speed and discount plans. Fixed network services revenue rose as revenue from data and internet services increased more than the decline in voice services revenue. Sale of equipment fell as customers bought cheaper mobile phones.
Greater competition in Pay TV. We expect more competition for StarHub in Pay TV. StarHub had lost the bid to SingTel for the rights to BPL matches for a period of three years beginning August 2010. We expect football fans to switch from StarHub’s Cable TV to SingTel’s mioTV and this will affect StarHub’s revenue and profit.
iPhone this year. StarHub announced that it has reached an agreement to offer iPhone to its customers later this year. We believe that this will boost its number of mobile customers and help it to compete against SingTel and M1, which also offer iPhones. We expect StarHub to market its iPhone through promotions and providing discounts to customers.
FY2009F Outlook. StarHub expects the service revenue for 2009 to be maintained at 2008 level. It expects to pay dividend of S$0.05 per ordinary share per quarter from 3Q09. This brings the total dividend for FY2009F to S$0.19.
Maintain HOLD recommendation and target price at S$2.05. Based on the valuation using the discounted cash flow (DCF) model, we obtain a fair value of S$2.05. We maintain our hold recommendation, as StarHub is likely to face greater competition in the telecommunications market to maintain its market share. Investors can hold the stock for dividends; the dividend yield is expected to be 9.8% in FY2009F.
StarHub – DBS
Higher dividends amid rising competition?
At a Glance
• Excluding S$3m forex gains, net profit of S$82m inline with consensus and our expectations.
• Raised dividend guidance, surprisingly, to 5 cents each quarter (4.5 cents earlier). The dividends may not be sustainable in the long term, in our view, and leave limited flexibility for the new CEO, joining in Jan 2010.
• Management mentioned that EPL loss should not be EBITDA and FCF negative, bit too optimistic in our view.
• Maintain FULLY VALUED in view of regulatory changes due to National Broadband Network and rising competition in the pay TV business, potentially spilling over to mobile business.
Comment on Results
3Q09 revenue of S$537m (+2%yoy, +1% qoq) and underlying profit of S$82m (unch. yoy, +5% qoq) after excluding forex gains were in line with our expectations. StarHub has achieved 77% of our FY09F forecast. 4Q is typically weak due to festive promotions.
Service EBITDA margins improved to 33.4% versus 31.5% in 2Q09. Mobile margins improved to 37.8% versus 36.8% in 2Q09, as StarHub was not overly aggressive in customer acquisition, as mobile market share declined slightly to 28.1% versus 28.4% in 2Q09. Pay TV margins improved to 21.4% versus 19% in 2Q09, which was impacted by one-off content costs in 2Q09. Fixed lines margins improved to 41.9% versus 38.3% in 2Q09 as StarHub benefited from higher contribution from corporate data business.
Recommendation
Annual DPS of 20 Scts implies annual dividends of S$343m, translating to earnings payout ratio of 118% on our FY10F estimates as we expect an 8% yoy decline in FY10F earnings. StarHub can still support the dividend payout in 2010, due to lower cash tax in 2010 but we are doubtful beyond that. Maintain FULLY VALUED. The stock trades at 6.1x FY09F and 6.3x FY10F EV/EBITDA compared to M1’s 5.9x and 5.7x EV/EBITDA respectively.
StarHub – OCBC
3Q09 results above expectations
3Q09 results above expectations. StarHub Ltd reported a better-thanexpected set of 3Q09 results; revenue came in at S$537.1m (+2.4% YoY and 0.9% QoQ) vs. our forecast of S$534.0m; net profit came in at S$85.2m (+7.3% YoY and 9.4% QoQ) vs. our S$78.1m estimate. The main reason for the outperformance was improved service EBITDA (up 4.6% YoY and 6.9% QoQ, aided by higher fixed network margins). For 9M09, revenue inched up 0.6% to S$1600.1m, meeting nearly 74.5% of our FY09 forecast, while net profit climbed 9.6% to S$245.4m, or around 77.8% of our fullyear estimate. StarHub has increased its quarterly dividend from S$0.045 to S$0.05 per share – this is expected to continue into FY10.
Mobile segment remains strong. Its mobile segment continues to improve, growing 4.7% YoY and 1.8% QoQ; this as it added another 35k subscribers (22k in pre-paid). It was also able to sustain its post-paid monthly ARPU at S$69 and pre-paid at S$23, as well as reduce its acquisition cost to S$74 (vs. S$104 in 3Q08 and S$79 in 2Q09). Again, its broadband business was its worst performer, down 6.1% YoY and 2.4% QoQ, as monthly ARPU continues to fall, although churn has eased from 1.4% in 2Q09 to 1.2%. Lastly, fixed network services grew 6.3% YoY but down 0.2% QoQ; StarHub expects sequential growth to be flat due to an expected increase in competition ahead of the NBN launch in 1Q10.
Maintains outlook for 4Q09. Going forward, management has kept its guidance for 4Q09 but we are more concerned about the loss of its EPL and ESPN and STAR Sports content from mid-2010 onwards. While management believes that the loss is “EBITDA neutral”, where it expects to lose just 10% of its pay TV subscribers, we are less sanguine. Instead, we believe the loss is probably closer to 15-18% and it will also suffer a double whammy in terms of ARPU. Last but not least, it may also lose some of the stickiness needed to keep its “hubbing strategy” going. As such, we have adjusted our FY10 estimates accordingly to reflect our concerns (revenue down 12.8%, earnings down 11.4%).
Reducing fair value to S$2.29. While we have adjusted our FY09 earnings forecast by 2.2% to reflect the higher 9M09 showing, our DCF-based fair value eases from S$2.88 to S$2.29. But given the combined upside potential of 23.8%, we maintain our BUY rating.