Will SingTel's soccer grab crush Starhub?

Singtel may have won the screening rights for the English Premier League soccer, but will it be worth the price? In terms of recouping the rights fees in subscription revenues, most analysts agree this is a lousy deal for SingTel. Analysts estimate the telecom company has agreed to pay around $350 million over three years, but the firm says it plans to charge subscribers just $23 a month. It would need to sell 4.2 million subscriptions to recoup its investment, which is more than there are households in Singapore. The market for cable subscriptions stands at just 630,000 as at June 2009, and of that Starhub had 530,000, of which half are reckoned to subscribe to its sports channel.

Clearly SingTel did not buy the soccer rights just to make money. It hopes to break Starhub’s stronghold on the cable TV market and the best way to do that and gain critical mass may just be to buy market share. So how many subscribers can SingTel Mio hope to claw away from Starhub ? A perhaps overly optimistic analyst from Frost & Sullivan, Adeel Najam, reckons Singtel can add an additional 360,000 subscribers by 2013, which is the end of their rights period, and book $164 million in revenue. “The key risk for SingTel is that this costly investment will make it more challenging for it to turn its pay TV business profitable. On a conservative basis, with average revenue per user of $28 for the EPL content, SingTel will be able to accumulate $164 million in the three years from Mio TV.

Adding revenues from internet and mobile TV platforms this figure can reach around $200 million. This is 43% below the estimated bid price of $350 million by SingTel for the EPL content rights. Other risks SingTel might face are consumer backlash and regulatory scrutiny,” said Najam.

And that isn’t all. Najam believes that even though SingTel has a compelling pay TV package with the sports offering and the US content pack, it is still not enough. “SingTel needs to keep the momentum going and try to acquire premium content that will make its pay TV offering complete. SingTel’s Mio TV service currently covers just over 92% of Singapore. It will need to speed up the roll out of its IPTV network so all EPL fans are able to enjoy their football,” he said. Carey Wong, an analyst at OCBC, also reckons that most of Starhubs 280,000 subscribers to its sports channels will also migrate over to Singtel. If these analysts are correct and a net loss for Starhub is a net gain for Singtel, could Starhub actually see its number of subscribers halved by 2013? There is no way of knowing but the analysts may have overestimated the draw of soccer as part of a cable package.