The Motley Fool

3 Operational Metrics to Understand Starhub Ltd’s Business Better

Starhub Ltd (SGX: CC3) is a telecommunication company which provides mobile, entertainment, broadband and cable TV services. It is also one of the major telecommunication companies in Singapore.

Starhub has four key business divisions — mobile services, Pay TV, broadband services, and enterprise services. Investors who are doing research on Starhub need to look through a significant amount of financial numbers and metrics, so let me simplify the process by introducing three key operating metrics. These metrics would provide investors with a good snapshot of how each division is doing, and would also tie back to the financial statement numbers.

1. Subscriber numbers

Subscriber numbers are key to understanding how many customers are latching on to Starhub’s services and should be tracked over the quarters. If there is a trend of falling subscriber numbers, this should ring alarm bells for investors as it may indicate customer attrition to a competitor or a substitute service.

For the first quarter ended 31 March 2019 (Q1 2019), Starhub’s mobile services subscriber numbers dipped marginally (2.4% year-on-year) to 2,228,000 registered customers, which is not a big cause for concern. However, for Pay TV, Starhub’s residential customers fell 12.2% year-on-year from 449,000 to 394,000, which may signal trouble for this division.

2. Average revenue per user

Average revenue per user, or ARPU for short, measures the amount each user pays for its various services. If ARPU increases, it means that customers are either using more of the service (i.e. volume increases) or are willing to pay a higher price for the same level of service.

For Starhub’s Pay TV ARPU, it has declined from S$51 per month in Q1 2018 to S$48 per month in Q1 2019. For Broadband services, ARPU has declined from S$33 per month in Q1 2018, to S$32 per month in Q4 2018, to S$31 in Q1 2019. These are all ominous signs as they point to customers spending less on Starhub’s services over time.

3. Churn rate

Churn rate refers to the percentage of subscribers who discontinue their subscriptions within a given time period. A higher churn rate would imply that more customers are switching providers or shifting to alternative services which may be able to substitute their current ones.

For mobile services, the churn rate is holding steady at around 1.0%, and for broadband services, the average monthly churn rate has also been constant at 0.8% over a year. However, for Pay TV services, the average monthly churn has increased from 0.9% in Q1 2018 to 1.5% in Q1 2019.

Reviewing these metrics periodically

Investors should keep an eye on these three metrics in order to identify red flags early on, as these numbers would eventually flow down to the income and cash flow statements. Questions should also be posed to either the investor relations division or management as to why certain metrics may be declining, and the actions being taken to arrest the decline (if any).

Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.  

The Motley Fool’s purpose is to help the world invest, better. Like us on Facebook to keep up-to-date with our latest news and articles.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.