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How StarHub Ltd Plans to Stand Out in A Competitive Industry

Telecommunications firm StarHub Ltd (SGX:CC3) operates in a competitive environment. And, it’s about to get harder.

In 2016, StarHub recorded lower revenues for its Mobile and Pay TV segments. The Mobile segment will have to contend with the pending arrival of the fourth telco, Australia’s TPG Telecom. Meanwhile, the Pay TV segment has lost 47,000 subscribers since the second quarter of 2015 as it grapples with the competitive threat of alternate online streaming options.

Still, StarHub believes that it can defend its subscriber bases through its Hubbing strategy, which essentially involves StarHub bundling two or three services together and offering discounts.

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 its Hubbing Scorecard; a summary of customer households with one service, double services, or triple services.

Starhub hubbing hubclub
Source: StarHub’s earnings presentations

From the graph above, we can see that the number of triple service households has been on the rise from 2007 to 2015. Tan Tong Hai, StarHub’s chief executive, stressed the importance of the Hubbing strategy in the company’s 2016 first quarter 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, 2016 proved to be a different story. The slide below from StarHub’s latest earnings report says it all:

2017-02-03 Starhub Hubbing Scorecard
Source: StarHub’s earnings presentation

From the above, we can see that the number of triple service households in the fourth quarter of 2016 fell by 10,000 from end-2015 while the number of double service households declined by 7,000. Single service households, though, rose by 10,000 subscribers.

In StarHub’s 2016 fourth quarter earnings briefing, Tan noted that the Pay TV segment is the cause behind the decline:

“If you take a look, the number of Hubbing households has dropped from 774,000 to 767,000. That’s mainly due to the drop in pay TV subscribers.”

Despite being the root cause for the decline in the number of triple and double service households, Tan believes that StarHub’s Pay TV segment will still be a differentiator in the company’s Hubbing strategy:

“So this will continue to be a differentiator, because if you look at the new player who are coming on board, I don’t think today that they have announced that they are going to get into content.”

Howie Lau, StarHub’s chief marketing officer, also outlined the value of including Pay TV into the Hubbing mix:

“So as Tong Hai mentioned earlier, based on what we know so far, the fourth operator has not indicated anything on content, so this will still remain the differentiator for us, because hubbing basically means being able to go to the customer and say, all your basic needs, come to one place and we can help put it together for you and service you well.

So we do believe it will still be a competitive differentiator for us.”

The trends seen in 2016 are not promising for StarHub’s Hubbing strategy. As investors, we may want to observe if the company’s Hubbing approach will actually be able to protect its business from future competition.

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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.