Cannibalisation risk from MR. MyRepublic (MR), StarHub’s maiden mobile virtual network operator (MVNO) has unveiled three SIM-only plans in the market. MR’s plans start at SGD35 (Figure 1) with 7GB (additional 3GB for MR customers) data bundled. Mid and higher tier plans are priced at SGD55 and SGD85, for 12GB and 25GB respectively. Although the prices do not undercut existing MVNOs, we see some risk of cannibalisation with StarHub’s existing SIM-only plans. MR’s plan offers greater value with larger data inclusions based on a similar SGD34 plan (S plan) from StarHub. StarHub’s mobile service revenue (MSR) fell by a steep 10% QoQ in 1Q18 vs 2-4% contraction recorded by its peers. Its postpaid base fell 3,000 QoQ. Competition is likely to intensify with MR eventually bundling mobile service with fibre broadband packages.
Cutting losses on pay-TV. A failed negotiation with Discovery Networks on fair pricing will see 11 pay-TV channels axed in stages over the next two months. To fill the void, seven new first in Singapore/Asia channels will be introduced on a staggered basis from 3 Jul (Figure 2). We believe content realignment as inevitable and a reflection of the tough pay-TV market. StarHub has been losing pay-TV revenues on a YoY basis for the past 12 quarters (1Q18: -10% QoQ post Singapore Financial Reporting Standards (SFRS) 15), while pay-TV subs have declined for 11 quarters in a row. It is not clear if the newer, more cost effective channels will improve the economics of the pay-TV business.
New CEO has work cut out but expectations are high. Incoming CEO, Mr Peter Kaliaropoulos (PK) officially takes charge on 9 Jul, replacing Mr Tan Tong Hai who resigned earlier. PK is a telco veteran with over 35 years of experience (BT, Telstra, Optus Ooredoo) and ex-StarHub. His entry is keenly awaited and could not have been at a better time with StarHub battling intense competition. While it is not immediately clear what his outright KPIs are, we think shareholder value creation would be one of the key priorities. PK’s most recent stint was with Zain in Saudi Arabia, where he led the company to its maiden profit in 2017 after a decade of operations.
Source : RHB Research