6 Quick Things Investors Should Learn About StarHub Ltd

StarHub Ltd (SGX: CC3) is one of the cool companies in Singapore which shares webcasts of their quarterly earnings presentations (the link for Starhub is here).

As one of the big trio in the telecommunications industry – the others being Singapore Telecommunications Limited (SGX: ZY4) and M1 Ltd (SGX: B2F) – StarHub makes its money from mobile, pay TV, broadband, and fixed services.

You can read more about StarHub here.

Lumbering giant?

Below are six useful things I learned from going through the transcript of StarHub’s recent first-quarter webcast:

  1. Chief Executive Officer (CEO) Tan Tong Hai summed up the quarter by focusing on a few key points:
    • Customer retention activities were pulled ahead for the quarter, resulting in lower earnings. Churn rate (rate of customers leaving) was kept low – in particular, Pay TV churn rate was 0.7%, its lowest ever.
    • On the company’s Hubbing scorecard, Tan points out that 245,000 households in Singapore buys three services from Starhub. This was an increase of 6% from a year ago.
    • Despite the 10.8% drop in broadband services revenue on a year on year basis, Tan noted that there was a quarter on quarter growth.
  2. As mentioned in the earnings report, Starhub recorded negative free cash-flow for the quarter. Vice President of Corporate Finance Chen Chiat Chiat stated that it was due to higher working capital needs for the sale of smartphones as well as major capex projects completed towards the end of last year. Tan also added that the handset sales for the first quarter was unusually high, but expects this year’s subsidies to remain at about the same absolute level as last year. Starhub also has intentions to announce its plans for its Mediahub facility which may affect capex for the year.
  3. When asked on whether Starhub’s customer retention activities were a reaction to a fourth telco operator entering the fray, Tan responded by saying it was to secure customers earlier.
  4. Responding to a question about Starhub’s main drivers of growth, Tan stated that it would be from the mobile segment and the enterprise segment. In particular, Tan said that Starhub has yet to move strongly into the growing trend of the Internet of Things (IoT) and felt that there will be opportunities there. Chief Commercial Officer Kevin Lim added that the opportunities can come from machine to machine connections (SIM cards) and data analytics.
  5. Of the 473,000 Starhub broadband subscribers, a total of 193,000 are on fiber broadband. Tan sees opportunity in migrating the rest of the 280,000 subscribers (which yours truly happens to be one) to fiber broadband. On competition, Tan also mentioned that Starhub’s strategy is to compete on a bundle basis (broadband and TV) rather than on a standalone basis. Furthermore, Tan feels that Starhub has a comparable advantage in cost for international bandwidth (submarine cables) compared to a smaller provider.
  6. Speaking on controlling programming costs in the Pay TV space, Tan said that Starhub has a good audience measurement system to determine the value of a program. Starhub is willing to drop non-performing programs as part of its efforts to control cost. Tan also felt that Starhub’s competitors on the Pay TV space has mellowed out after competing strongly for programs in the earlier years.

Foolish takeaway

To buy and hold a company’s shares for the long term also means keeping up with developments in the firm.

The access to management teams via earnings webcasts gives the Foolish investor a fair chance to judge for themselves on whether they would like to invest alongside those teams. It also helps us put together a more complete thesis around a company and keep up with developments in its industry.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.