StarHub Ltd (SGX:CC3) lost another 11,000 Pay TV subscribers in the third quarter of 2016. A little over a year ago, StarHub had 545,000 Pay TV subscribers. The chart below is from the second quarter of 2015. Back then, StarHub’s Pay TV subscriber base was actually increasing. Source: StarHub’s Earnings Presentation Around that period of time, there was talk that US internet streaming service Netflix would be entering the Singapore market in 2016. In responding to the concern, StarHub’s chief executive officer Tan Tong Hai noted that Netflix has been around for a while (through VPN) and expressed confidence that StarHub’s Pay TV business will…
A little over a year ago, StarHub had 545,000 Pay TV subscribers. The chart below is from the second quarter of 2015. Back then, StarHub’s Pay TV subscriber base was actually increasing.
Source: StarHub’s Earnings Presentation
Around that period of time, there was talk that US internet streaming service Netflix would be entering the Singapore market in 2016.
In responding to the concern, StarHub’s chief executive officer Tan Tong Hai noted that Netflix has been around for a while (through VPN) and expressed confidence that StarHub’s Pay TV business will remain resilient. In the earnings presentation for 2015’s second quarter, he said:
“That’s where, even with Netflix, it will only be complementary to the family, to the household, who still require to watch Asian content. I believe that is the reason you’ll find that even though Netflix and all this has been around for some time, you’ll note that our pay TV business remains resilient.”
However, StarHub’s Pay TV subscriber count started to fall in the third quarter of 2015. And since then, the subscriber losses have been piling up.
In the first quarter this year, StarHub’s Pay TV segment recorded a loss of 8,000 subscribers. Then, the second quarter saw the subscriber count fall by another 10,000. In StarHub’s latest quarter – the third quarter of 2016 – the company saw another 11,000 subscribers leave its Pay TV service.
In total, StarHub has lost 38,000 subscribers between the second quarter of 2015 and the third quarter of 2016. This represents a 7% decline in its subscriber base and is summarised in the chart below:
Source: StarHub’s Earnings Presentation
StarHub’s chief marketing officer Howie Lau explained the reasons behind the decline in Pay TV subscribers in the company’s 2016 third quarter earnings presentation:
“The pay TV side, we observe a couple of factors.
One is that the OOC, the out of contract base for quarter three was large. But at the same time, we also do recognise that the customers have many other alternative viewing options out in the market, and those options continue to be widely available and in fact increase in options.”
StarHub’s tone appears to have softened in the more recent quarters. The telco is starting to acknowledge that alternate viewing options (such as Netflix) is behind some of its subscriber losses.
StarHub has some work to do. Lau said:
“We do recognise that continued work in terms of the type of pricing and content is going to be key for us, because we do recognise that customers have very different types of requests for content.”
In particular, StarHub believes that there is a core customer base that still prefers to have the Pay TV option. Lau explained:
“So our focus is making sure that the high-ARPU [average revenue per user] customers continue to stay with StarHub, at the same time make sure that there are other options available. For example, if you are always on the go, you can subscribe to StarHub Go S$9.90, which is a lower price option.”
As already mentioned, StarHub has been losing Pay TV subscribers for a number of quarters. When the subscriber bleeding stops, we might have an idea what that core customer base looks like.
At the moment, it is likely that questions will be raised again by investors if StarHub continues to lose Pay TV subscribers in the upcoming fourth quarter and beyond.
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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 owns shares in Netflix.