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StarHub Ltd’s Year in Review: Can Broadband Save The Company?

Last Friday, StarHub Ltd (SGX: CC3) reported its full year earnings for 2016.

During the year, StarHub earned $2.2 billion in Service revenue, a figure that was a touch lower than in 2015. Although Service revenue barely changed, it was a different story for the individual business segments. StarHub’s Service revenue has four components: Mobile, Pay TV, Enterprise Fixed, and Broadband.

Let’s take a closer look at the Broadband business segment.

A bird’s eye view

2017-02-03 Starhub Segment Revenue
Source: Starhub’s earnings presentation

Unlike the Mobile and Pay TV segments, revenue from Broadband rose 8.2% from $200 million in 2015 to around $217 million in 2016. Broadband, though, is the smallest revenue contributor among the four business segments, accounting for just 9.8% of StarHub’s overall Service revenue.

During the year, the Broadband segment benefitted from the adoption of fiber connections.

Tailwinds from fibre adoption

2017-02-03 Starhub Broadband Subscribers
Source: Starhub’s earnings presentation

In terms of the number of Broadband subscribers, StarHub registered a decline from 476,000 at end-2015 to 473,000 at end-2016. So, how did the Broadband segment’s revenue grow? In a word, Fibre.

In the second quarter of 2016, StarHub had 473,000 Broadband subscribers. Of the figure, 328,000 were fibre subscribers. By the  third quarter of 2016, the number of fibre subscribers had grown to 351,000. At the end of 2016, StarHub had 363,000 fibre subscribers out of its total pool of 473,000 Broadband subscribers.

Tan Tong Hai, StarHub’s chief executive, said the following in the company’s 2016 second quarter earnings presentation:

“The broadband increase in ARPU was because we have – every time we re-contract the customer now they are on the higher tier plans. As a result of that you see a uplift in the ARPU.”

As a fibre plan is able to offer higher speeds compared to cable, the higher adoption of fibre appears to have lifted the Broadband segment’s average revenue per user (ARPU).

2017-02-03 Starhub Broadband ARPU
Source: Starhub’s earnings presentation

In the fourth quarter of 2015, StarHub’s Broadband ARPU was $35. But the ARPU rose 5.7% to end at $37 in the fourth quarter of 2016. Howie Lau, Starhub’s chief marketing officer, commented on the broadband market during the company’s 2016 third quarter earnings presentation:

“I think in Singapore, we always see a lot of competitive offers in the broadband space. I think we’re unique as a provider in that besides offering the fibre plans that’s available, we’re the only provider that also provides cable, because there will be some homes and some places that doesn’t allow fibre, it’s inconvenient to fibre. So we also make that available to our customers.”

To be sure, Broadband ARPU was flat in the fourth quarter of 2016 when compared to the previous two sequential quarters. Furthermore, Broadband penetration already sits at 105% in Singapore, although Lau believes the penetration rate still has room to run. But, the number of Broadband subscribers have stalled at StarHub in 2016, so it might be worth watching the ARPU figure in the coming quarters.

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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.