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8 Quick Things I Learned from StarHub’s AGM 2015

8 Quick Things I Learned from StarHub

The GushCloud marketing scandal went viral recently when Singapore’s largest telecommunications company, Singtel, engaged GushCloud and its bloggers to post negative publicity on social media about its competitors M1 and StarHub.

GushCloud and Singtel have since made a public apology. StarHub and M1 accepted the apology after Singtel dismissed the employee responsible for the unethical and dubious marketing campaign.

So has StarHub suffered any brand damage after this incident? According to the management, they don’t think so. In fact, Singtel shot themselves in the foot and was the one who suffered the greater brand damage. Because of the saga, the cost and effort for Singtel’s recent rebranding exercise seems to have been flushed down the drain.

And is StarHub planning to take any legal action against Singtel?

CEO of StarHub, Tan Tong Hai, said:

“We will leave this matter to the Infocomm Development Authority of Singapore to come out with the outcome of the investigation.”

The GushCloud episode was only one of the concerns raised by shareholders at this year’s AGM. Other concerns like the impact of a fourth telco in Singapore were brought up as well.

So here are the…

8 key points I learned during StarHub’s AGM 2015:

  1. In 2014, StarHub reported revenue of $2.39 billion which was contributed by five business segments – mobile (52%), pay TV (16%), fixed network (16%), broadband (9%), and sales of equipment (7%). StarHub’s risks are well diversified and the company is not reliant on any single cash-generating engine.
  2. One veteran investor and minority shareholder of StarHub, Stephen Chen, raised his concerns about the emergence of smartphone apps like WeChat, WhatsApp, and Line that now offer free calling features and could pose a significant threat to StarHub’s mobile business. In response to this, StarHub and the other telcos no longer offer unlimited mobile data plans. So if consumers use this apps to make their calls, StarHub would still benefit from higher data charges. (Now I know why my data plan is limited to only 4GB!) Next, instead of trying to compete with these apps, Tan believes a better strategy for StarHub is to partner with them. True enough, StarHub already collaborates with Line and WeChat and offers specific data plans for customers who use these apps heavily.
  3. On the impact of the fourth telco in Singapore, the chairman reiterated that competition was nothing new as the company has faced heavy competition since its humble beginnings. In fact, despite the competition, StarHub has been thriving ever since the Singapore government awarded them the license in 1998. Today, StarHub is the second largest telecommunications company in Singapore.
  4. StarHub is not looking to compete by just offering its services at lower prices. Instead, StarHub will continue to use its winning strategy of bundling its core services (home line, broadband & pay TV) together to increase the value of its product offer. Its ‘hubbing’ packages has proved popular and has worked well for StarHub over the years to attract and retain customers. When new players enter the market, they will find it hard to compete as they do not have a range of core services to bundle like StarHub. This year, StarHub also added its mobile services to its bundle to further differentiate itself from the competition.
  5. StarHub’s broadband business segment suffered negative growth with a 16.8% decline over the last four years. As this division only constitutes 9% of total revenue, the management is not overly concerned. They believe their hub strategy will continue to work well for them to boost overall revenues. In addition, the management is planning to bring its hub strategy to the next level by integrating consumer services with enterprise services together.
  6. Moving forward, shareholders can expect revenue growth to be in the single digits. Management thinks pay TV revenues will remain stable while its broadband business will remain competitive which StarHub plans to counteract with its hub strategy. The next key growth drivers for StarHub are its mobile and enterprise business segments. StarHub rolled out its own fiber network in selected buildings to serve larger corporate clients (i.e. banks, government agencies, etc.) and they also increased the price of post-paid mobile plans which the management believes will contribute positively to this year’s performance. (As I am writing this, I just realized I have to pay a higher bill the next time I renew my mobile plan with StarHub. Darn it!)
  7. Using debt-to-equity ratio, StarHub is extremely overleveraged. According to the management, a more holistic approach to measure StarHub’s debt position is to compare its net debt against its EBITDA which is less than 1! Simply said, StarHub could pay off all its debts within a year.
  8. Lastly, StarHub plans to maintain a dividend of 20 cents per share in FY2015! Good news for income investors who invested in StarHub. Especially one gentleman who mentioned during the AGM that he invested in StarHub at 95 cents in 2004. His dividend yield from StarHub right now is 21% per annum. Very nice!

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Robin Han
Rusmin Ang

Rusmin Ang is an equity investor and the co-founder of the online investment magazine The Fifth Person. He is also the co-creator of The Investment Quadrant, an online multimedia stock investment course where students can learn how to invest profitably in the stock market. Rusmin has been featured multiple times on 938LIVE as a guest expert on MoneyWise and is on the speaking circuit for CIMB Securities (Malaysia) and has spoken at events in Penang, Sibu and Kuala Lumpur. Rusmin is also the co-author of Value Investing in Growth Companies which is internationally published by Wiley, Inc. The book can be found in all major book stores worldwide and on Amazon.com,Amazon.co.uk, Barnes & Noble and Apple's iBooks. If you're interested to learn more about stock investing, you can join The Fifth Person Newsletter and receive free weekly insights on how you can generate higher returns and dividend income from the stock market.