SingTel knocked the wind out of Starhub

Should Starhub investors run for their lives? The month of November had been a dreadful one for Singapore’s number two telecommunication player as its major shareholder, DBS, sold off 900,000 shares, then followed by the shock announcement of CEO Tan Tong Hai who will step down in May 2018. The bad news came swiftly after the announcement of the poor 3Q17 financial results. On the other hand, arch rival SingTel announced a set of smashing good financial results after the divestment of NetLink Trust.

Starhub in crisis?

The announcement of the departure of Tan Tong Hai was indeed surprising, coming at a time when the industry is undergoing a major shake-up. The disruptions caused by technology has led to challenging operating environment faced by all players as many consumers used applications to access overseas calls and short messages. The trend has led to declining revenue from mobile and fixed lines. In the past, IDD call charges and SMS had been cash cows for the telco players. Now, consumers typically use applications to bypass such services.

For Starhub, the decline started many years ago when it lost the monopoly of Pay TV coverage of English Premier League to SingTel in 2009. That was a real turning point and SingTel had really knocked the wind out of Starhub.

Turning point

Thus, it is unfair to pin the blame on Tan Tong Hai, who assumed the CEO position only in 2013. But under Tong Hai’s leadership, the subscriber base has been shrinking. As of 30 September 2017, Pay TV subscriber base was 467,000 subscribers after the quarter’s net churn of 10,000 subscribers. Compared to a year ago, Pay TV subscriber base decreased by 40,000 subscribers or 7.9%.

To put things into perspective, Starhub has never derived the bulk of revenue from its Pay TV. Traditionally, most of the revenue had been from the mobile services segment. But the telco has positioned itself very well with its unique “hubbing strategy” in which the Pay TV services were bundled with voice and data plan packages. Declining Pay TV subscriber base could see Starhub facing continued profit margin pressure. And the latest results certainly reflected this.

Financial results for 3Q17 were nothing disgraceful, but they weren’t good either. All business metrics declined as compared to a year ago, from revenue to net profit to customer bases for mobile and Pay TV services. Under the helm of Tong Hai, it seems that Starhub cannot [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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