6 Quotes from StarHub Ltd’s Management That Investors Should Know

StarHub Ltd  (SGX: C33) reported its 2016 third-quarter earnings recently and had delivered a presentation on its results.

As a quick background, StarHub is Singapore’s second largest telecommunications outfit and it has five business segments, namely Mobile, Pay TV, Enterprise Fixed, Broadband, and Sale of Equipment; the first four are collectively known as Service revenue.

Here’re six quotes you might not want to miss from StarHub’s earnings presentation.

A mixed bag

Service revenue was down amidst a mixed performance from the individual segments. But importantly, not every segment was down. StarHub’s chief executive officer Tan Tong Hai pinpointed the main contributor for the fall in Service revenue:

“If you look at the year-to-date performance, as what at the beginning I’ve shared that the revenue drop is mainly due to the drop in mobile, and that is mainly due to usage by both roaming, IDD and excess data usage.”

In the third-quarter of 2016, StarHub picked up 9,000 post-paid mobile customers and 30,000 pre-paid mobile customers when compared to the previous sequential quarter. But the decline in usage of its services amongst customers led to a decline in the average revenue per user (ARPU). There was subsequently a fall in revenue.

All that being said, there were other bright spots, as Tan noted:

“Pay TV dropped by 2.4%, mainly due to less subscribers, but we see healthy growth in broadband. This is our seventh consecutive quarter of growth in broadband and also steady growth of our enterprise fixed”

In the first nine months of the year, the Broadband segment’s revenue was up 9.8% year-on-year while Enterprise Fixed’s revenue climbed 2% year-on-year. Pay TV and Mobile revenues, though, were down by 2.4% and 2.6%, respectively, over the same period.

Looking at the positives

Tan drew some positives from the fall in Mobile segment sales, focusing on the margins. He said:

“We want to continue to drive margin through the growth in the mobile, because while you see the revenue drop, the margin is maintained, because it is outbound roaming revenue.

It doesn’t affect our margin that much.”

Earlier, Tan had noted that StarHub’s EBITDA (earnings before interest, taxes, depreciation and amortization) margin was unchanged despite the fall in service revenue:

“EBITDA, almost flat. EBITDA margin year to date is 33.8%, above our guidance of 32%”

A reminder that StarHub is focusing on margin

Tan stressed that StarHub is looking at driving margin growth. In this context, he feels that growth in the Mobile and Enterprise Fixed segments are beneficial:

“So we’ll continue to drive margin through mobile, and the growth in enterprise, which is now our second-largest contributor, will also contribute to margin. So we intend to drive margin through the growth in mobile, as well as the enterprise fixed.”

Tan also drew a distinction between a flat sales outlook and its focus on growing margins:

“And that’s how we are running it, though outwardly it may look relatively flat, but from a margin perspective, I think we’re still working on growing the margin. In this way, we intend to drive the business forward.”

We can learn much more about StarHub through its earnings briefing. The six quotes above give investors a deeper insight on how the business is performing and where StarHub’s eyes are focused.

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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.