StarHub share price: mobile subscribers and pay TV business the ones to watch for its Q2 results

Telecommunications firm StarHub will be reporting its second quarter financial results for the three months ended June 30, 2019, after trading hours next Tuesday (August 6, 2019).

Launched in 2000 and listed on the Singapore Exchange mainboard since 2004, the Singapore-headquartered firm manages business segments such as mobile services, pay TV, and internet services.

StarHub is one of the major telcos in Singapore, with rivals including Singtel and M1.

StarHub net profit down 14.2% for the first quarter on investment losses

StarHub posted a 14.2% slump in net profit to S$54 million for the first quarter, due to losses on its cybersecurity business.

Revenue rose by 6% to S$596.8 million on contributions from its enterprise business, the group said.

The cost of running cybersecurity services went up from S$13.5 million to S$37.8 million, causing operating expenses to go up by 9.4% to S$524.7 million.

Earnings per share slipped to three Singapore cents, from 3.5 Singapore cents in the same quarter a year ago.

Core businesses mobile services and pay TV met with declining numbers in Q1

The telco’s core divisions mobile services and pay TV experienced falling customer retention numbers for the first quarter of this year compared to a year ago. Signs on the telco’s recovery in health will be reflected through data from these two segments in the upcoming second quarter results.

StarHub’s mobile division saw revenue fall by 5.3% from S$203 million to S$192.3 million for the first quarter. The fall in pre-paid customers outnumbered the increase in post-paid customers, causing overall customer numbers to decline. Meanwhile, average revenue per user or ARPU slipped as well.

Overall market share for StarHub in the mobile segment eased to 26.4% for the first quarter, from 27.2% the same period a year earlier.

StarHub’s pay TV segment was battered as its number of customers fell by 12.2% for the first quarter from a year ago. The presence of other movie and entertainment streaming options such as Netflix and Viu in the market is significantly affecting this segment of its business.

Telco price war

Singapore’s fourth telco TPG Telecom, entered the market this year, offering unlimited data and calls with its SIM-only plan. As of the end of last month, the firm said it has signed up nearly 200,000 mobile users for that year-long trial.

The aggressive stance from the new entrant as it tries to gain market share continues with it offering unlimited data roaming in Malaysia and Indonesia to its new army of mobile users last month.

The Singapore market now has four main telco players, namely StarHub, Singtel, M1, and TPG Telecom.

Ratings agency Moody’s has earlier this year sounded the warning for a consolidation in telcos within three years, as the Singapore market gets more crowded. The arrival of newcomers such as mobile virtual network operators (MVNOs) and the ongoing price war to retain subscribers could wear down the existing incumbents, it added.

StarHub share price down 13.1% year-to-date

As of Wednesday’s (July 31, 2019) price of S$1.52, shares of the telco have fallen by 13.1%, from S$1.75 on January 1, 2019.

The stock met with “sell” and “neutral” calls from banks in February, after the telco concluded its 2018 financial year that month with a 26.2% step down in earnings at S$201.5 million due to weaker performance from its mobile and pay TV segments.

The management also guided for a total pay-out of nine Singapore cents for the financial year of 2019, below the 16 cents paid out annually in the last two years, a decision which may have caused income-focused investors to reduce their stock holding positions.

To put in a price comparison, StarHub’s share price five years ago in May 2014 was at S$4.13.

Lower dividend to support the company as headwinds persist

The board recommended a dividend of 2.25 Singapore cents for the first quarter, compared to four Singapore cents in the same period a year ago.

StarHub plans to pay out at least 2.25 Singapore cents per quarter, making it nine Singapore cents for the full year. Any additional pay-outs will come in the last quarter, it said.

Phillip Capital analyst Alvin Chia said in an article from The Edge Singapore that the lowered dividend may be positive for StarHub in the long run as it puts less of a strain on the group’s balance sheet and allows for additional resources to channel into the enterprise segment.