StarHub mobile segment remains under pressure

Post-paid users could decline at a -0.83% CAGR through 2020.

With 100% exposure in Singapore, and with 51.3% of its 9M16 revenue derived from mobile segment, OCBC Investment Research thinks StarHub will certainly feel the impact from the 4th Telco entry, though not as much as M1, which has more than 80% of its 9M16 revenue attributable to mobile segment.

However, with StarHub's enterprise fixed and broadband segments slowly growing, in addition to having PayTV segment (which M1 does not offer), the research house believes the earnings erosion as a result of 4th Telco entry will be lesser than M1 but more than Singtel.

"With already a competitive mobile business environment, a 4th Telco entry will exacerbate the pressures on ARPU (average revenue per user. We believe the most likely strategy the 4th Telco will deploy is to price its plans the lowest in order to win market share, given its lack of network stability at the beginning," it said.

Note that the 4th Telco has up to 54 months to achieve network coverage close enough to match that of the incumbents.

As a result, OCBC Investment Research thinks industry competition will intensify in terms of mobile plans' pricing, and its forecast -2.3% CAGR for StarHub's post-paid ARPU over a 5-year period to FY20.

"We also expect StarHub to lose some market share to the 4th Telco, and project StarHub to register -0.83% CAGR for the number of its post-paid subscribers over the same period," it said.