4 Things Investors Should Know About StarHub Ltd’s Latest Earnings Announcement

StarHub Ltd (SGX: CC3) is currently the second largest operational telco in Singapore’s telco scene, behind Singapore Telecommunications Limited (SGX: Z74).

StarHub recently reported its 2016 full year earnings. Here are four useful pieces of information from the results announcement.

1. A cut in the dividend

The telco kept its annual dividend in 2016 at S$0.20 per share, a level that has been maintained since 2010. But, StarHub also said that it will reduce its annual dividend for 2017 by 20% to S$0.16 per share.

This cut in dividend is arguably one of the biggest items within StarHub’s latest results announcement. But it is by no means completely unexpected; over the past few years, StarHub has been paying more in dividends than the free cash flow it generates.

Given the ongoing increase in competition within the telco industry in Singapore, this move by StarHub’s management may be favorable for the company in the long run since it helps conserve cash resources.

2. Challenges in the Pay TV segment

In 2016, StarHub’s Pay TV segment saw its revenue fall by 3.4% despite having an unchanged average revenue per user (ARPU). That’s because the number of Pay TV subscribers had declined by 7.2% from 536,000 in 2015 to 498,000 in 2016.

The Pay TV segment of StarHub is facing challenges due to the appearance of alternative video streaming services in Singapore’s market.

3. The state of the Mobile business

Revenue at StarHub’s Mobile segment slid by 2% in 2016. The ARPU for the pre-paid Mobile sub-segment also declined from S$18 in 2015 to S$16 in 2016; ARPU for the post-paid sub-segment was flat at S$70.

But, there is still a positive in the segment: StarHub’s Mobile customer base had increased by 5.4% from 2.188 million in the fourth quarter of 2015 to 2.307 million in the last quarter of 2016. In other words, StarHub appears to have gained market share.

4. Growth in Broadband and Enterprise Fixed segments

So far, what we have seen above from StarHub are mostly negative in nature. But some of the company’s business segments are actually done fine.

In 2016, the Broadband segment managed to post 8.2% growth in revenue. The segment had enjoyed growth in ARPU, which compensated a slight decline in the subscriber count.

As for Enterprise Fixed, the segment registered growth of 3.9% in revenue in 2016, driven by increases in the sub-segments of Data & Internet and Voice.

In sum, StarHub reported weaker overall results in 2016 due to an increase in competition within its industry. This eventually led to a lower forecasted dividend. But, the company’s business still displayed some positive signs, such as growth in its Mobile segment’s subscriber base and higher revenue from its Broadband and Enterprise Fixed segments.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.