How Starhub Ltd Plans to Stand Out in Competitive Markets

Telecommunications firm StarHub Ltd (SGX: CC3) operates in a competitive environment.

In the first quarter of 2016, both StarHub’s Pay TV and Mobile Services segment saw their revenue inch downwards. But, StarHub believes that it can defend its subscriber base. One way is through its Hubbing strategy. The strategy essentially sees StarHub bundling two or three services together and offering discounts for these Hub Club members.

Clubbing at the hub

StarHub has been working on its Hubbing strategy for a while. The graph below shows the historical trend of what StarHub refers to as the Hubbing Scorecard: A summary of customer households with one service, double services, or triples services.

starhub hub club
Source: Starhub’s earnings presentation

From the graph above, we can see that the number of triple service households has been on the rise over the past eight years. Tan Tong Hai, StarHub’s chief executive, stressed the importance of the Hubbing strategy in a recent earnings briefing:

“The Hubbing remains a very important part of our overall strategy because it clearly differentiates us and we will continue to drive the Hubbing household.”

But, StarHub’s recent earnings report also showed that the subscriber base for those on triple and double services had retreated from where they were in the first quarter of 2015. The slide below summarises it:

2016-05-20 Hub Club
Source: Starhub’s earnings presentation

From the above, we can see that the number of triple service households fell by 2,000 while the number of double service households fell by 6,000. Single service households, though, rose by 3,000. Tan had an explanation for the changes in the recent earnings briefing:

“Next you look at our Hubbing scorecard. The total number of Hubbing households actually has dropped compared to a year ago, mainly due to less cable TV subscribers, that has resulted in the drop in the Hubbing households. But if you look at the single service household, we have actually registered an increase.”

Despite the retreat in the triple service and double service households, Tan still has his sights set on StarHub’s Hubbing strategy:

“The drop is mainly due to the TV Lite but we still have the overall strategy to grow Hubbing households and it remains a very important part of our overall arching strategy to differentiate ourselves from the new players.”

As investors, we may want to observe if StarHub’s Hubbing approach is able to protect its business from future competition. Competition could come from alternate online streaming services, existing competitors like M1 Ltd (SGX: B2F) and Singapore Telecommunication Limited (SGX: Z74), as well as the impending arrival of a fourth telco in Singapore.

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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.