AMA The Fifth Person
Asked by Anonymous
Asked on 15 Feb 2019
I just saw the recent reports and both singtel and starhub seem to be taking a beating. Anyone has any ideas why?
Top Contributor (Jun)
They are all doing not so well.
Singtel being bogged down by its huge investment in Bharti Airtel India.
Starhub undergoing massive business transformation. Profits down, dividends cut.
M1 losing ARPU and the price war is hurting it.
Plus, the incoming TPG, the current circles.life promos will all add up into more competition in an already super saturated market. Sooner or later there will be a consolidation. A small population in Singapore will have limited people on data plans, any price war will hurt revenues.
Telco are facing structural change in the industry. Moving forward you can expect stronger headwind. It may take some time before everything settle down.
My personal opinion is to sit on the sideline at the moment.
Looking macro level at the big 3(Singtel, Starhub, M1) earnings report, I think it really goes to show how the telecomms industry is being squeezed by existing competition, headwinds and declining ARPU. This will definitely be compounded as mentioned by Gabriel with TPG's entrance into SG.
For existing starhub shareholders who might be long term bulls or those looking to trade, there are also positives to note from this report. Changing from a fixed to variable dividends policy will be more beneficial to LT future growth of the company given current conditions. One will also be evaluating relatively newly appointed Chief Executive Peter Kaliaropoulos whom has delivered on vast changes since being headhunted for this role.
For div investors, I would suggest rebalancing your dividend portfolio especially if you have a steady yield you want to hit consistently.
This is going to be really tough. Just looking at the Starhub stock itself, I was looking at it's dividend payout over the years and initially was entriced.
But looking at the new CEO's answer as of today... it's definitely not ideal:
"Asked about his long-term outlook for the consumer business, which accounts for 60 per cent of StarHub's revenue, Mr Kaliaropoulos said: "We don't see consumer revenues growing dramatically, if at all."
He noted that consumers want more choice and technology for the same if not lower ARPUs. "It doesn't mean we won't win back customers. You can offer customers a lot more capability at home, they're not predisposed to pay for it."
Mr Kaliaropoulos also noted that the enterprise business offers more "high-value" customers, though margins are lower there.
Faced with high overheads and shrinking profits, he said that he is open to talk to any operator about network sharing. "We think the smart business model for the future is not building alternative infrastructure (which) very quickly gets commoditised."