StarHub's conference call sheds light on their PayTV business

StarHub is one of the few companies who conducts a conference call after their quarterly earnings announcement.

I didn't realise the significance of such calls until I've sat through them.

Financial Highlights 3Q 2015

• Total Revenue up 2% (helped by sale of handsets)
• Service (what I deem core/recurring) revenue up 1%
• EBITDA up 4% helped by controlled (marketing, staff costs)
• Hubbing scorecard continues to be good (uptick in multi-hubbing)

My favourite part of such earnings call is always the Q&A. So here's what I found interesting this time:

Rationalising expenditures
Marketing and promotion expenses were down quarter on quarter due to tapping of data analytics which enabled StarHub to manage their spend and rationalise such costs. I think we can expect their marketing costs to be kept low following the positive impacts of their data analytics.

Netflix!!!

• Expectedly, they were bombarded by questions surrounding Netflix. 
• Expectedly, StarHub cannot comment too much as discussions are still carrying on with Netflix.
• Netflix partnered with Softbank in Japan. Under the deal, Softbank will allow customers to sign up Netflix via their sales channel. Payment for Netflix will also be consolidated with their existing Softbank bills. Softbank also pre-installs Netflix app onto smartphones (I'd assume this excludes iPhones).
• They're really quite tight-lipped on Netflix. But I got a feeling they're rather positive on the development with Netflix on the partnership and this might put StarHub in a better position.

Growth driver: Fixed Services

• StarHub, apparently, is aggressively pursuing growth in their Fixed services (serving mainly the corporate customers). 
• StarHub has been building their own fibre networks (apart from NGN) as they've deemed owning their own networks to be crucial in getting corporate customers and also retaining them. (According to them, better quality than NGN it seems.
• This fibre network also helps strengthen their mobile segment to "better backhaul"
• Management seems bullish about this segment and has coined it their new "growth driver".
• StarHub aims to be the alternative provider for the Smart Nation vision. They do not think relying on 1 provider (Singtel) is the way forward and they're really building the foundation for the long-term now.
• Has already overtaken PayTV in terms of revenue contribution (2nd largest now, after Mobile)

What about your flat revenue for the past 3 years?

Ouch, that hurts. Yet, StarHub seemed to have handled this well and provided some insights:

Overall, yes it looks flat, but underlying they see growths in the right segments

Mobile

• Post-paid mobile customer base has been growing. StarHub views this as something that provides them with long-term loyalty. 
• Offset by lower pre-paid sales due to less foreign workers.
• New SIM-only plan hopes to bring some prepaid customers over.

PayTV and more Netflix!!

• Resilient numbers for quite a while despite having OTT being present. (vs a drop in PayTV revenue in other countries like US)
• AppleTV/Netflix is available for a while now (via VPN) and StarHub managed to keep their PayTV services resilient.
• Attributed to wide content: Asian and Sports content that isn't available from OTT. Netflix alone is able to substituted the English content in places like US. 
• Singapore being a multi-racial country, has customers that has different needs. That's currently what's defending the PayTV business.

63% of mobile customers are on tiered plans, ONLY

And they can't seemed to get that percentage to move up for a while now. StarHub alluded that it's tough and they will continue to do all they can to entice customers over to the tiered plans.

Chairman provided a further insight on StarHub's plan for the challenges

Challenges:

• Regulatory policies (looks at IDA hehe)
• Wifi substitution (very true, I've been seamlessly connected to Wireless @ SGX and CapitaLand Mall Wifi as well)
• Facebook/Google/Apple by passing mobile operator (very possible. Even had rumours of Apple creating their own SIM card and Google rolling out its own Wifi network)
• OTT players (Global and more localised ones)

Their strategy:

• Move from Household Hubbing to Personalised Hubbings (through data analytics)
• Engage more on Enterprise segment given the small market share

I'm quite interested in their "new" Hubbing strategy and how it pans out. Good to know management is actively looking to prepare for the challenges ahead. This is especially when a lot of those may eventually come true, sooner rather than later.