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StarHub teams up with M1 but is it too late to counter the TPG threat?

The Editor
The Editor • 2 min read
StarHub teams up with M1 but is it too late to counter the TPG threat?
SINGAPORE (March 9): UOB KayHian has cut StarHub to “hold” and advises investors enter at $2.80 with a target price of $3.10 in mind.
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SINGAPORE (March 9): UOB KayHian has cut StarHub to “hold” and advises investors enter at $2.80 with a target price of $3.10 in mind.

The downgrade comes on worries that the telco will be more susceptible due to its larger base of 473,000 residential broadband subscribers when TPG launches its fibre broadband services as early as 2H17 as a prelude to its mobile launch.

StarHub expects TPG to launch its fibre broadband services in 2H17 as part of its branding buildup before it launches mobile services in 2H18.

TPG in currently hiring to build its Singapore team. Its planned capex of $200-300 million is perceived to be “not aggressive”. TPG is expected to offer SIM-only service plans, given its no-frill branding and culture in Australia.

Offering bundled packages with subsidised smartphones would place a heavy burden on working capital, hence StarHub believes TPG would only focus on retaining customers in 2017 and 2018 via providing existing customers with vouchers and discounts.

To counter the TPG threat, StarHub intends to streamline and rightsize its operations to reduce operating expenses, says UOB analyst Jonathan Koh in a Thursday report.

In 4Q16, it started to outsource certain finance functions, resulting in retrenchment and one-off provision of $9 million for restructuring. The company will continue to explore other avenues to reduce operating expenses.

More importantly, StarHub and M1 intend to share the base stations and backhaul transmission of their 3G, 4G and 5G networks. Although negotiations are expected to be protracted, Koh expects a definitive deal to be concluded only by 4Q17.

Shares of StarHub are up 2 cents at $2.87.

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