MAINBOARD-LISTED telco StarHub saw its first-quarter earnings continue to slide, on the back of lower service Ebitda and losses in fledgling enterprise units, according to a business update on Tuesday.

 

Net profit fell by 24 per cent year on year to S$30.5 million for the three months to March 31, while revenue was down by 3.8 per cent to S$487.1 million, stymied by the consumer mobile business and fewer security projects.

 

Service revenue came in at S$375.7 million for the quarter, lower by 7.2 per cent, when equipment sales were excluded.

 

Chief executive Nikhil Eapen said in a statement that the quarter " remains challenging with ongoing travel restrictions and headwinds from the global pandemic" .

 

Consumer mobile service revenue dropped 20.8 per cent to S$129.6 million, which StarHub attributed to the impact of " intense" competition.

 

Postpaid mobile average revenue per user (ARPU) stood at S$28, against S$34 in the year-ago period, while the subscriber base shrank to 1.42 million, from 1.47 million before.

 

Pay-TV income contracted by 4 per cent year on year as the number of customers decreased from 327,000 to 306,000.

 

Broadband service was the only consumer segment to post growth, as revenue increased by 12.6 per cent on lower subscription discounts, despite a decline in users from 502,000 to 495,000 lines.

 

The enterprise business managed an uptick of just 0.9 per cent, to S$154.2 million - even though previously-deferred projects were re-committed for 2021 and beyond, which lifted network solutions income.

 

That' s as StarHub' s cybersecurity revenue - which is underpinned by Ensign InfoSecurity, a joint venture with Temasek Holdings - shrank by 32 per cent on project delays.

 

Cybersecurity and the newly consolidated regional infocomm technology arm recorded operating losses to the tune of a combined S$4.1 million.

 

Overall, StarHub reported free cash flow of S$97.4 million for the three months, lower by 18.2 per cent year on year, while the net debt-to-Ebitda ratio improved to 1.29 times, compared with 1.41 times as at Dec 31, 2020.

 

At its annual general meeting last week, the board had reaffirmed guidance for a full-year payout of S$0.05 a share, the same as the year before - though dividends have declined from S$0.09 in 2019 and S$0.16 before that.

STARHUB expects to see some improvements in its mobile business, especially as 5G products and services come on stream. In the meantime, the mainboard-listed telco is doubling down on its ongoing transformation strategy and eyeing inorganic enterprise business expansion.

 

" Of course, we plan to grow through 5G across consumer and enterprise," StarHub' s chief executive Nikhil Eapen said at his first annual general meeting since joining from parent company ST Telemedia on Jan 1.

 

During the live webcast, he said 5G technology is " key for us" and " the first pillar of delivering market-leading experiences" .

 

Sidestepping a question about whether StarHub could opt for consolidation, he suggested that mergers and acquisitions (M& A) might be used to support the enterprise business instead.

 

" We intend to support the growth of Ensign and Strateq and, in addition, pursue further M& A to build our enterprise business and capabilities and continue regionalisation," said Mr Eapen. Ensign is a cybersecurity joint venture with national investor Temasek. Strateq is a Malaysian information and communications technology services provider that StarHub picked up last year.

 

Citing consolidation in the global telco industry, such as the recent merger proposal between Malaysian telcos Celcom and Digi, shareholders had asked if there is " any plan to do the same, considering the over-saturated/crowded market condition" in Singapore.

 

StarHub had replied in a bourse filing that such actions need regulatory approval, but " we want to ensure that we are in a favourable position to capitalise on emerging opportunities" .

 

That' s in line with Mr Eapen' s message in StarHub' s latest annual report out last month, where he told shareholders: " We do not intend to change our strategy significantly - our transformation strategy is the right strategy and our team has delivered on our transformation targets."

 

He also noted in the report that StarHub would like to acquire more businesses like Strateq, which he said would " establish growth beachheads for our enterprise aspirations" .

 

Before serving as head of the infrastructure technology group and in other roles at ST Telemedia, Mr Eapen was an investment banker at Citigroup where, among other duties, he oversaw M& A deals across the Asia-Pacific and United States.

 

Recent years' price competition in the mobile market " is not sustainable in the long term" , StarHub said in its bourse filing, even as it told shareholders that it is trying to balance keeping customers and " protecting business profitability" .

 

Shareholders had asked about the prospects for the mobile business with one investor saying: " I am concerned about the loss of StarHub' s mobile subscribers and market share" .

 

M1 last year pushed past StarHub to rank second in terms of Singapore postpaid subscriber numbers, behind Singtel.

 

Touting a fivefold annual growth in subscribers, however, Mr Eapen called StarHub' s sub-brand Giga a " digital fighter brand" in the fierce mobile consumer market.

 

" Our focus is to sell the fastest and best 5G connectivity, but we also want to drive the customer 5G experience," he said at the meeting, adding that " comprehensive 5G plans integrated with entertainment and gaming" carry a higher premium and " have grown well" since launch last year, with plans to add more content.