Why StarHub decided to slash its dividends this year

It reduced returns to 4 Singapore cents per quarter.

Given the challenging telco market in Singapore, StarHub decided to introduce a new dividend policy for its shareholders, slashing DPS to 16 cents, or 4 cents per quarter this year.

According to Maybank Kim Eng, this may be due to the threat coming from TPG's entrance to the telco market. The firm said there could be a surprise in costs, which are expected to be structurally higher in the next three years, coming mainly from staff costs as StarHub invests in ways to differentiate customer service.

The telco giant might also have to brace for heavier content costs due to the impact of a stronger USD.

"We have highlighted USD cost of content as a risk before. Capex was maintained at 13% of revenue, but the staff and content costs already comprise almost 30% of revenue," Maybank noted.

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