The telco’s wireless and pay TV business suffered the heat of new telco players in Q1.
StarHub is set for a rocky year ahead as the increasing market saturation of Singapore’s telco scene is poised to steadily chip away at the company's profitability in the months to come, according to Maybank Kim Eng.
The company’s wireless and pay TV business remained under pressure from competing companies with cheaper plans and packages although the enterprise/fixed network did provide some relief to service revenues in the first quarter of the year.
“With the number of competitors increasing over the next 12-18 months, including StarHub’s MVNO with unlisted MyRepublic, we do not rule out risk to our base-case scenario of gradual revenue erosion,” added Maybank Kim Eng.
The arrival of new players will also put pressure on wireless tariff package rates and data allocations, the report noted.
The SFRS 15 accounting standards being implemented starting this quarterly reporting period has also impacted the restatement of service revenues and handset sales amidst a one-time cash-tax impact from retained earnings changes.
“For restated 4Q17, this resulted in a significant 163% increase in core profit to SGD61m versus the SGD23m under the previous accounting standard. We do not have the level of restated equipment/handset sales for 4Q17 but believe an elevated level of re-contracting sales is the main reason for the profit variance,” it added.
However, Maybank Kim Eng believes that the new account standards are not poised to cause material impact to operating cashflow in the long run as long as billing and collection procedures remain unchanged with current practice.
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