CEO Peter Kaliaropoulos will also revise the Pay-TV model and pursue growth in Fixed enterprises.
StarHub's new CEO Peter Kaliaropoulos held an analyst briefing to introduce a strategy that will be proposed to the company board, UOB Kay Hian and Maybank Kim Eng said in their respective reports.
Kaliaropoulos said he sees average revenue per user (ARPU) as challenged by the proliferation of SIM-only plans. "Concurrently, the regulator imposes stringent quality of service (QOS) requirements," said UOBKH analyst Jonathan Koh.
StarHub sees room for consumption of data to increase as Singapore has not been hit by the "video tsunami" yet (management cited markets where average data consumption is 80GB vs 5GB in Singapore), he added.
Moreover, Kaliaropoulos treats competition from TPG Telecom seriously, the analyst said. "StarHub will protect its base of high-value mobile subscribers against encroachment by TPG. It benefits from StarHub’s trusted branding in an environment where customers are confused by many new brands," he added.
Maybank KE analyst Luis Hilado added that CEO indicated that mobile virtual network operator (MVNO) models on average do not last beyond a few years as telco incumbents make the adstructures and marketing plans.
"TPG will put up a fight but there are few markets where four operators each with significant market shares exist. Also, unlike the past when the MNO incumbents did not react quickly to disruptive promotions, there is not likely to be a long grace period for TPG," he added.
Hilado also noted that whether via MVNOs or directly, the incumbents will react to bring parity. "There is a possibility of industry consolidation two to three years out," he added.
Meanwhile, StarHub is keen on reviewing its pay-TV business models and intends to adopt a variable cost model for content, which is subject to talks with content providers.
"Content providers that are willing to meet as middle ground during upcoming re-contracting periods will be renewed," Hilado added. "Hardline stances like that of Discovery Channel group may end up with a similar outcome of non-renewal."
"StarHub could offer 'skinny' basic bundles of popular content. On top of that, customers have the flexibility to add their preferred niche content on a B2C basis (direct from content providers)," Koh said.
Fixed enterprise is considered the telco's main engine of growth. Revenue from Fixed enterprise (Data & Internet) grew 16.2% YoY in 2Q2018.
Whilst StarHub is "under-represented" in the Fixed enterprise space, it will pursue growth and offer differentiated and bundled solutions like cybersecurity and analytics then cross-sell its connectivity services, Koh noted.
Acquisitions in synergistic spaces that utilize StarHub's connectivity (e.g. the cybersecurity, cloud and managed services) will continue. "The bite-size will not be at levels that will require equity raising as the company remains within its loan covenants," Hilado added.
The analyst noted that overall margins will be diluted by the acquisition of these types of lower margin businesses but they will generate positive returns to the business as they will primarily utilize existing infrastructure rather than generate any significant additional capex.
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