StarHub Ltd’s Pay TV Business Continues to Lose Subscribers: Here’s What Investors Should Know

Local telco StarHub Ltd (SGX:CC3) lost 11,000 Pay TV subscribers in the first quarter of 2017 when compared to the fourth quarter of 2016.

In the third quarter of 2016, StarHub’s Pay TV segment also recorded a sequential loss of 11,000 subscribers. In the last quarter of 2016, the subscriber-loss had narrowed to 9,000. However, as we’ve just seen, the latest quarter saw those losses widen again to 11,000 subscribers.

These are summarised in the slide below:

Source: StarHub’s earnings presentation

During StarHub’s 2017 first quarter earnings presentation, its chief marketing officer, Howie Lau, explained the losses:

“… on pay TV, the revenue decreased by 7%, while holding ARPU [average revenue per user] stable at $51.

Similar to previous quarters, this has continued to be impacted by piracy as well as the viewing means available to customers.”

Lau’s mention of ARPU is a key point. Increasingly, StarHub is focusing its efforts on maintaining its high-ARPU Pay TV subscribers. StarHub’s chief executive officer, Tan Tong Hai, shared his thoughts during the same briefing:

“If you look at the stats itself, our churn rate remains relatively low at 0.9%, which means that we are still keeping our customers, and ARPU at $51 shows you that we’re still holding on to the high-margin customers in spite of the drop in subscriber base.”

Meanwhile, StarHub is also dropping non-performing channels from its TV slate. Tan said that this action would lead to losses in the subscriber base:

“And over time, we will also drop those nonperforming channels, and as we drop those nonperforming channels, corresponding the revenue will drop and some subscriber base also will drop.”

Most of all, Tan believes that StarHub’s Pay TV segment should be best assessed by changes in its profit margin profile:

“So it may not be the right way to see the business purely from the revenue perspective or from the subscriber base perspective. I think you need to look at the churn rate, the ARPU.

At the same time, are we improving the overall margin? Although we don’t share the margin of the TV business by itself, but we look at it and say internally, that’s our most important part is really to grow, improve on the margin of the pay TV business.”

According to Tan, the most important metric for the Pay TV business would be its margin. Without sharing details, Tan seemed to imply that the segment’s margin was getting better – but we cannot know for sure. As it stands, the subscriber losses to StarHub’s Pay TV business has not stopped. When the subscriber bleed is stemmed, we may then have an idea what StarHub’s Pay TV core customer base looks like.

For that, we will have to see what the next few quarters bring.

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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.