StarHub's new big boss dead set on boosting bundling lead

Check out what else is on his checklist.

According to Nomura, they recently met with StarHub's new CEO, Mr Tong Hai Tan, which was his first official day in the new role.

Nomura analysts said they walked away feeling optimistic about the company's ability to protect/gain share across most segments, be able to increase wireless ARPUs, and monetize the broadband segment better including through partnerships with OTT players and targeting more event-based content which can consistently add SGD2-3 in ARPUs.

Mr Tan is very focused on expanding StarHub’s bundling (Hubbing) lead in the market but is cognizant of various challenges ahead too.

Here are takeaways from the meet-up:

Improving brand & service is a strong focus. Mr Tan elaborated that all customer touch points will continue reporting directly to him and various (new) productivity measures have been developed to improve customer service, such as customer recommendations, targets & feedback.

Given his previous COO role, he clearly has a very strong knowledge of networks and various product and services.

We debated the impact of the rise of OTT players. he acknowledged that some of the incremental telephony spend (by customers) will be shared with OTT players, but StarHub is looking to partner with various providers to mitigate this impact and is also looking to create local content to improve stickiness.

Despite StarHub’s appealing content, its ad revenues remain low, and it is looking to address this via some local channels/ partners.

In the wireless business, he expects gradual ARPU uplift post the recent data repricing efforts. We currently forecast a 2% increase in blended APRU to SGD47 (there will be some adverse impact from roaming).

He doesn’t expect any irrational price competition in this segment, but expects solid competition still.

On NBN, without providing any explicit sub numbers on fibre, he stated that StarHub is currently tracking ahead of M1’s total fibre subs of 52k (SingTel is 167k).

StarHub intends to continue to push both HFC and fibre, and again noted that pricing competition in this segment is unlikely to be sustainable (from smaller operators in particular) especially given high international bandwidth costs.

In the Enterprise segment, it appears that winning large corporate customers outright is still slow, but StarHub continues to win more government contracts.

We think this is a function of SingTel being aggressive in protecting share and also due to the NGNBN structure itself.

He expects capex to remain at the current levels of around 13% of sales for the next 1-2 years (StarHub is also investing in some data-centre capacity), but then it should come off.

StarHub is trading at all-time highs at SGD4.20 levels. Our Reduce call is based on expensive valuations of 20x P/E, but we acknowledge its yield is appealing at 4.8%.