Category: StarHub
TELCOs – CIMB
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.
TELCOs – CIMB
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.
TELCOs – CIMB
Singapore visit takeaways
From our recent visit to the Singapore telcos, we gather that StarHub is currently in talks with FA Premier League (FAPL) but we believe that the rights to the Barclays Premier League (BPL) matches are less attractive given the limited time before the season starts.
We also note that competition in fibre broadband has intensified. We maintain Underweight on the sector as de-rating catalysts are expected from SingTel given regulatory and competitive risks. Our top pick is StarHub.
What Happened
We recently met up with M1 and StarHub. Key takeaways are:
StarHub: It has begun talks with the FAPL for the rights to broadcast the Barclays Premier League (BPL). No decision has been made at this juncture. It also does not plan to hire a new COO as its current CEO will be able to take on both the roles. Competition in fibre broadband is increasing, mainly sparked by smaller players like MyRepublic and ViewQuest. StarHub also noted that the average consumption of mobile data by its subscribers has increased from below 1GB/month to 1-2GB/month.
M1: Its fixed broadband segment is now EBITDA-positive but it guided that it will be lower than the overall group’s margin going forward. It expects mobile ARPUs to rise as customers recontract into tiered data plans. M1 expects its capex to peak in 2013 before declining in 2014, albeit still higher than in 2012.
What We Think
StarHub: We think that it is now less compelling for StarHub to acquire the rights to the BPL given that there is limited time left to garner sponsors and advertisers. On top of that, we believe that SingTel has had a head start in locking in most of the BPL fans as subscribers under mioTV.
M1: We expect mobile ARPUs to rise as data usage increases. SingTel has also said it plans double its charge to S$10.70/GB for users exceeding their data quota which will help SingTel to further monetise data. We also expect the overall subsidy for handsets to fall yoy as there are more mid-end 4G devices available in the market.
What You Should Do
We reiterate our Underweight call on the sector given the lack of re-rating catalysts and heightened regulatory and competitive risks.
StarHub – DBSV
Outperformance leaves limited upside potential
• Negotiations for English Premier League (EPL) rights underway; need to stem decline in pay TV customer base
• Any potential rise in annual DPS to 22Scts would imply only a 5% yield.
• The stock has rallied 17% since our upgrade on 7 Nov, 2012. Downgrade to HOLD on valuation grounds.
Need to defend pay TV customer base. StarHub is negotiating with the Premier League for EPL rights for the 2013-16 seasons on a non-exclusive basis. As per our analysis, StarHub has benefitted at least S$20m annually due to the absence of EPL rights over the last three years. However, StarHub lost 9K pay TV customers in 2012 and in order to defend its hubbing proposition, StarHub needs to spend more on content in our view.
Even a higher 22 Scts annual DPS would translate to only a 5% yield. Current dividend yield of 4.6% does not seem attractive compared to 5%-6% yield offered by some of the Thai and Malaysian telcos. Potential auction of spectrum in mid 2013 and negotiations for EPL rights are the key events before management could raise dividends. Post these events, the annual DPS could potentially be raised to match our projected EPS of 22 Scts in 2013. Prior to 2012, StarHub paid out higher DPS than EPS as it did not have to pay any cash tax due to certain group losses, which is not the case now.
Downgrade to HOLD. The stock has risen 17% since our upgrade on 7 Nov, 2012, and has exceeded our TP of S$4.30, based on DCF (WACC 6.5%, terminal growth 0%). Positives are priced in.
StarHub – DBSV
Outperformance leaves limited upside potential
• Negotiations for English Premier League (EPL) rights underway; need to stem decline in pay TV customer base
• Any potential rise in annual DPS to 22Scts would imply only a 5% yield.
• The stock has rallied 17% since our upgrade on 7 Nov, 2012. Downgrade to HOLD on valuation grounds.
Need to defend pay TV customer base. StarHub is negotiating with the Premier League for EPL rights for the 2013-16 seasons on a non-exclusive basis. As per our analysis, StarHub has benefitted at least S$20m annually due to the absence of EPL rights over the last three years. However, StarHub lost 9K pay TV customers in 2012 and in order to defend its hubbing proposition, StarHub needs to spend more on content in our view.
Even a higher 22 Scts annual DPS would translate to only a 5% yield. Current dividend yield of 4.6% does not seem attractive compared to 5%-6% yield offered by some of the Thai and Malaysian telcos. Potential auction of spectrum in mid 2013 and negotiations for EPL rights are the key events before management could raise dividends. Post these events, the annual DPS could potentially be raised to match our projected EPS of 22 Scts in 2013. Prior to 2012, StarHub paid out higher DPS than EPS as it did not have to pay any cash tax due to certain group losses, which is not the case now.
Downgrade to HOLD. The stock has risen 17% since our upgrade on 7 Nov, 2012, and has exceeded our TP of S$4.30, based on DCF (WACC 6.5%, terminal growth 0%). Positives are priced in.