Get a glimpse of what's dragging StarHub's traffic costs down

Lower costs will boost gains by 2%.

According to DBS, StarHub is a member of Conexus Mobile Alliance which has many telco members in Asia.

Here's more from DBS:

Vodafone partnership, on the other hand, is more useful in bringing traffic from Europe and US where Vodafone has many partners.

Local peer M1, for example, is part of a smaller alliance called “Asia Mobility Initiative” which might not have worldwide flat-rate roaming plans for data services.

Being part of a bigger alliance is helpful as it allows flat rate roaming plans between member telcos. These flat rate plans are often cheaper for the end customer and encourage higher roaming voice and data.

Member telcos, generally book the cost of net outgoing traffic after exchanging outgoing traffic with the incoming traffic. It appears to us that StarHub is witnessing higher incoming traffic from Conexus members and Vodafone partners due to flat rate plans for voice and data.

This is also reflected in declining traffic costs at StarHub for the last two years. We assume that traffic costs will trend at 10.2%/10.5% in FY12F/13F versus 10.5%/11.0% earlier, benefitting FY12F/13F earnings by 2%/4% each.