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StarHub to Guard Market With Sticky TV Content: Southeast Asia

StarHub to Guard Market With Sticky TV Content
StarHub is defending its market share as the number of residential broadband Internet subscribers reached 1.2 million in the first quarter, exceeding the number of households in the city-state, according to Infocomm Development Authority of Singapore’s data. Photographer: Munshi Ahmed/Bloomberg

StarHub Ltd., Singapore’s biggest broadband Internet and cable TV operator, is adding new content to make them “stickier” and stop customers from moving to rivals including Singapore Telecommunications Ltd.

About 1.2 percent of Starhub’s pay TV customers switched operators in the third quarter, the highest since the year-earlier period, the company said in a slide presentation last week. It lost 1.5 percent of its residential broadband subscribers in the three months, it said, exceeding the average in the past year.

“The main strategy here is to link the customers with broadband with the TV customers,” StarHub Chief Executive Officer Neil Montefiore said in a Nov. 2 interview. “It makes them stickier and should reduce the churn going forward.”

StarHub is defending its market share as the number of residential broadband Internet subscribers reached 1.2 million in the first quarter, exceeding the number of households in the city-state, according to Infocomm Development Authority of Singapore’s data. Singapore is also rolling out a nationwide network that may threaten Starhub’s position as the market leader as more customers switch service providers.

“Definitely it would be increasing because other than SingTel, they are the only other player in town with residential broadband, so people are switching from the old fixed broadband to the new fiber broadband,” said Gregory Yap, an analyst at Kim Eng Securities Pte. in Singapore. “But eventually it will be made up for by additional connections on fiber.”

TV Strategy

The company, which is also Singapore’s biggest phone company after SingTel, introduced a service that allows customers to watch TV on their smartphones and tablets to build loyalty. Montefiore estimates his company has more than half of residential broadband Internet market in Singapore, which has operators including SingTel and M1 Ltd.

Starhub said Nov. 2 its third-quarter profit climbed 27 percent to S$96.2 million, exceeding the average S$82.9 million estimate of three analyst estimates compiled by Bloomberg. Operating revenue increased 2.4 percent to S$585.9 million.

The number of pay TV customers dropped to 541,000 in the third quarter, down from 543,000 in the previous three months, StarHub said. SingTel has 380,000 cable TV subscribers as of June 30 and is scheduled to release details of its quarterly performance on Nov. 14.

StarHub is also fighting back with new content, Montefiore said. The company yesterday unveiled Sony Max, its ninth Hindi channel featuring Bollywood movies ahead of the Deepavali Hindu holiday next week.

Differentiating Itself

“They don’t want to match the low price that the new entrants are coming in at,” said Kelvin Goh, an equity analyst at CIMB in Kuala Lumpur, referring to new broadband Internet service providers. “Starhub wants to differentiate itself with better service offering.”

The company may also be willing to forgo low-paying broadband customers who usually switch when there’s a cheaper offer from its competitors, said Carey Wong, an analyst at OCBC Investment Research in Singapore.

“These kind of customers typically are price sensitive and they don’t stay, they don’t trade up,” Wong said. “They’re typically quite price sensitive and they don’t subscribe to more than one service. It’s a business decision that they let them go.”

StarHub shares climbed 26 percent this year, exceeding bigger SingTel’s 2.9 percent advance and a 4.8 percent gain in M1. The Singapore benchmark Straits Times Index increased 15 percent.

Most Expensive

The stock jump made Starhub the most expensive among the three telecommunications companies. The shares traded at 17.4 times earnings, exceeding SingTel’s multiple of 12.6 and 16.5 times for M1.

A veteran with more than 35 years of experience in the telecommunications industry, Montefiore joined StarHub in January 2010 as its CEO. Before that he was the head of M1, the country’s No. 3 phone operator. Montefiore is a permanent resident of Singapore, according to the company’s website, and has lived in the city for 16 years.

“We’ve already introduced quite a number of new channels onto the system,” he said. “We’ve also launched our TV anywhere strategy that allows people to view the content across all our platforms and across all devices within the household so that’s what we hope will maintain our customer base.”

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