StarHub Ltd’s 2017 Second Quarter Earnings Briefing: Can Broadband Grow Again?

StarHub Ltd (SGX: CC3) reported its 2017 second quarter results earlier this month.

For the reporting quarter, StarHub generated $542.6 million in service revenue, a figure that was 2% lower compared to a year ago. StarHub derives its service revenue from four business segments: mobile services, pay TV services, enterprise fixed services, and broadband services. Three out of the four segments reported revenue declines.

Let’s take a closer look at StarHub management’s view of the broadband services business segment.

A bird’s eye view

Source: StarHub’s earnings presentation

StarHub’s broadband services revenue was down 3% year-on-year in the second quarter of 2017. The segment posted $52.8 million in revenue and accounted for 9.1% of StarHub’s total revenue. Broadband is the smallest segment within StarHub’s revenue base.

Ups and downs

Source: StarHub’s earnings presentation

At the end of the second quarter of 2017, StarHub recorded 467,000 broadband customers. In the prior quarter, there were 470,0000 customers. A year ago, the customer count was at 473,000. So, there were declines both on a year-on-year basis as well as quarter-on-quarter basis.

Even though the overall subscriber base is down, StarHub’s chief marketing officer, Howie Lau, pointed out during the 2017 second quarter earnings briefing that the fibre subscriber base is up:

“… if we peel the onion a little bit we saw an increase in our fibre broadband customers, compared to a year ago where we had 328,000 fibre sub customers. This quarter we have 373,000, which is a 45,000 year-on-year increase and the quarter-on-quarter 3400 increase in terms of sub.”

Let’s look at the average revenue per user (ARPU) for the broadband services segment next.

Source: StarHub’s earnings presentation

StarHub’s broadband ARPU fell from $37 in the second-quarter of 2016 to $36. The reporting quarter’s ARPU was also lower compared to the previous quarter’s ARPU.

Lau gave his take during the earnings briefing:

“On the broadband, as you probably know, the market is very competitive in the broadband space and for us, it’s very important to – while we saw the increase on the fibre quarter-on-quarter and year-on-year, we’ve also introduced the cable plan, we’ve doubled the speed for cable to 200, because we see the customers will – different segments of customers will require different types of broadband.”

Lau added that StarHub is the only service provider that offers both cable and fibre connections. He also said:

“But our focus is beyond staying competitive, to make sure that the service level is something that we can be proud of. Earlier, I think about two months ago, the customer service index for Singapore CSISG [consumer satisfaction index Singapore] released a report on customer service and we are very encouraged that we have emerged number 1 in terms of the broadband customer service in Singapore.

And we will continue to focus on that because ultimately it’s not just about being price competitive, but the service level associated with it.”

Lau believes that the quality of service provided will make a difference, but we will need to see some numbers to back his claim up. Investors should continue watching developments as they unfold.

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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.