Cyber security eats into StarHub's profit

Singapore

MAINBOARD-LISTED StarHub's redoubled push into cyber security added to the top line in the first quarter - but that growth came with costs.

Net profit was down by 14.2 per cent on the previous year, to S$54 million for the three months to March 31, according to results out on Friday.

Chief executive Peter Kaliaropoulos noted that profits attributable to both shareholders and non-controlling interests, which came in 23.3 per cent lower at S$49.3 million, would have been a steadier S$61 million if not for the cyber security segment.

Overall revenue rose by 6 per cent to S$596.8 million, on cyber security and other managed services' gains, although - excluding equipment sales - service revenue slipped 0.9 per cent.

StarHub continued to suffer the Singapore telecom industry's protracted pain in mobile and pay-television turnover, while broadband was flattish with a 0.3 per cent dip.

As Citi analyst Arthur Pineda noted in a report later: "Revenue challenges remain and losses on new business lines further pull down profit."

Operating losses from cyber security services ran up to S$11.4 million, against profit of S$5.1 million before, as expenses for the division swelled.

StarHub's cyber security unit comprises its 65 per cent-owned D'Crypt, as well as Ensign InfoSecurity, a joint venture with state investment firm Temasek Holdings that combined StarHub's Accel Systems & Technologies and Temasek-owned Quann.

Still, StarHub said in its outlook statement that the enterprise business is growing, driven also by managed services, and added: "We will continue to invest in upgrading our cyber security solution capabilities to address the growing local and global demands for such services."

Asked in an earnings call for what the projected operating costs are, Mr Kaliaropoulos said that "we're investing for growth" and reiterated that the cyber security arm needs talent.

He called the expansion strategy "a very responsible business model" and added: "This quarter's results consolidate the Quann results for the first quarter, which we didn't have last year."

Still, StarHub would not break down the profit-and-loss statements for the segment in more detail.

Otherwise, service revenue from the linchpin mobile segment declined by 5.3 per cent, partly on lower voice and data use, while pay-TV fell by 12.4 per cent as subscribers shrank.

Post-paid mobile average revenue per user (ARPU) was down by S$4 year on year to S$39. Pay-TV ARPU lost S$3 to S$48 on promotional offers.

Citi's Mr Pineda reiterated his "sell" call, writing: "Operating momentum remains weak with declining group service revenues with mobile, pay TV and cable broadband risk remaining in view into the following quarters."

StarHub closed higher by S$0.02 or 1.28 per cent to S$1.58, before the results were released.