Here’s What Starhub Ltd Said About Declining Mobile Services Revenue and the 4th Telco

Telecommunications firm StarHub Ltd (SGX: CC3) reported its 2016 first quarter earnings recently. During the earnings briefing, StarHub’s management faced some tough questions from analysts.

There were questions about the subscriber losses in the company’s Pay TV segment. Questions were also raised on the company’s lack of revenue growth. Then, there were questions asked on the fall in StarHub’s mobile services revenue and the impending arrival of a fourth telco in Singapore.

Mobile services is an important piece of business for StarHub. In the first quarter of 2016, mobile services revenue had dipped by 2.4%, but still made up over 50% of total revenue.

Mobile woes

In his opening address for the briefing, StarHub’s chief executive Tan Tong Hai commented that the fall in the segment’s revenue was due to lower IDD, voice, and roaming usage from its customers. Chief commercial officer Kevin Lim added this statement later on:

“Declines in mobile revenue, as we have explained, comes primarily from the usage revenue. So there is substitution in terms of roaming, voice roaming. So there has been lower voice roaming, lower IDD usages but our subscription revenues are still growing. It’s just the usage revenue that has come off.”

StarHub had added 51,000 new mobile customers in the first quarter of 2016 when compared to the same period a year ago. This is summarised in the slide below:

2016-05-19 Starhub Subscriber base
Source: StarHub’s earnings presentation

As Lim notes, subscriber revenue is up but usage revenue is down. It is possible that IDD, roaming, and voice usage had declined in the reporting quarter due to the availability of substitute services such as Whatsapp and the increasing availability of wi-fi connections.

But, StarHub is not sitting still. Tan said that the telco is adding new roaming plans:

“We have a RoamEasy plan that we actually have been promoting. So that is one way for us to grow it. Because our RoamEasy is operator-agnostic. This is something that customers like very much and you pay S$10 for 100mb. You do not need to care about any operator – which operator you lock onto and that resolves a lot of unhappiness in terms of bill shock and all those things.”

The fourth telco player

As mentioned, the impending arrival of a fourth telco operator in Singapore also captured the attention of analysts. Howie Lau, chief marketing officer, had the following comments on the subject:

“So in terms of the fourth operator, for us it’s a continued focus on the customer. That’s more important. Pre-paid side. Prepaid, we continue to focus on it. We do see that usage is lower because there is some substitution in lieu of IDD.

So for example a number of dormitories today have better access to Wi-Fi and that does have a direct impact and I think if you look at just pure observation, there’s quite an increased usage of OTT voice services as well. So on the flip side we do see that data services is going up because like the rest of our post-paid customers we do see prepaid customers using more data as well.

So this is something that obviously as the customer trend evolves we continue to monitor to make sure the product is relevant and then the touch points we have and the offerings as well.”

For the reporting quarter, StarHub said that subscribers had used an average of 3.1 gigabytes of data per month and the percentage of customers exceeding their data bundle was 22%. StarHub’s business could benefit from the higher data usage in the future.

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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.