StarHub retrenchment underscores dark chapter of telco industry
I can imagine SingTel CEO Chua Sock Koong rubbing her hands in glee as she read news of how arch rival StarHub struggles amid the unprecedent shake-up in the telco industry. Just months after StarHub failed to renegotiate contract with popular Discovery Channel, SingTel snagged the rights to broadcast the channels in October 2018. SingTel victory must be bitter to StarHub as the latter also lost the English Premier League broadcast to the leading telco more than ten years ago. Then, there is the StarHub retrenchment.
In my previous article, “StarHub share price to plunge after being booted out of STI”, I have highlighted how StarHub share price is expected to face destiny after being demoted from the prestigious Straits Times Index.
But the announcement of the StarHub retrenchment was a bomb-shell and illustrated a dark chapter of the local telco industry. Perennially seen as one of the top dividend stocks in Singapore Exchange, should StarHub investors throw in the towel?
StarHub massacre
News of StarHub retrenchment raised eyebrows because of the sheer number of culling cited. According to the company’s press release, 300 full-time employees will be axed no later than the end of October 2018. The StarHub retrenchment is part of a so-called “strategic transformation programme”, which is expected to realise $210 million in savings over a three-year period from 2019.
For sure, the substantial cost savings would be of cold comfort to StarHub employees but investors bought into the news and sent the share price roaring to $1.95, the highest in four months.
The biggest victims of the telco battle are definitely StarHub’s employees. Laying off staff is obviously the easiest way for management to trim costs and improve earning margins. But what is galling is that the situation for StarHub has not even reached to that critical stage to warrant such mind-boggling retrenchment exercise. After all, the company is still making healthy level of profits – $127 million in the first half of FY2018 for that matter.
StarHub retrenchment certainly raises [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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