StarHub banks on digitalisation trend to drive external sales, cut internal costs

StarHub banks on digitalisation trend to drive external sales, cut internal costs

By: 
PC Lee
27/08/18, 11:22 am

SINGAPORE (Aug 27): StarHub plans to ride on the trend of enterprise digitalisation to generate external revenue and improve marketing and cost control internally, said its new CEO.

See: UOB and StarHub ink MoU to help SMEs accelerate their digitisation efforts

Speaking at a recent analyst briefing, new CEO Peter Kaliaropoulos said the broad strategy which will help the telco prepare for external threats, will be proposed to the board for approval.

With the addition of new competitors, Kaliaropoulos also revealed that the MVNO (mobile virtual network operator) business model do not last beyond a few years on average as incumbents adjust their business structures and marketing plans accordingly to mitigate new competition.

Still, the new CEO expected incoming TPG, the fourth MNO set to enter Singapore in the second half of 2018, to put up a fight but there are few markets where four operators each with significant market shares exist.

However, unlike the past when the MNO incumbents did not react quickly to disruptive promotions, there is not likely to be a long grace period for TPG.

Whether via MVNOs or directly, the incumbents will react to bring parity, said Kaliaropoulos, who sees industry consolidation two to three years out.

Meanwhile, StarHub will continue to be manage overall costs but with higher utilisation of available technology and applications.

“The content costs for the pay TV business model will be managed ideally to a variable cost system than the current fixed cost model as contract renewal periods come due,” says Kaliaropoulos.

In a Aug 22 report, Maybank KimEng analyst Luis Hilado views the overall purpose of the strategy positively but will wait for more concrete details and targets.

Maybank is maintaining “our view that StarHub’s share price is currently assuming a dire scenario and that value has already emerged”.

“At current levels, the share price is implying extreme scenarios of pay-TV revenues going to zero or wireless service revenues dropping a further about 15% from our estimate,” says Hilado.

Maybank is maintaining a “buy” with a DCF-based target price of $1.96.

Key risk is a scenario where the incumbents engage in a price war rather than let their MVNOs fight in the low-price segment against TPG.

Year to date, shares in StarHub are down 43% to $1.64 as at 11.19am.

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