Enterprise segment picks up consumer slack at StarHub; telco remains open to industry consolidation: Maybank
Company has likely paid and taken delivery of the 700MHz spectrum, report adds
[SINGAPORE] StarHub’s enterprise segment is a key strength for the telco, analysts said.
Its cybersecurity arm, Ensign, continues to deliver double-digit revenue growth, said Maybank Research.
In a report released on Monday (Jul 7), Maybank Research analyst Hussaini Saifee noted that other than Ensign’s revenue growth, key wins for the enterprise unit – such as JTC’s Punggol Digital District – reflect execution strength and are viewed as replicable in other markets.
RHB analysts, in a separate report released on Tuesday, also see the enterprise segment as the “bright spot” for the group.
“The consolidation of the Singapore and Malaysia businesses in late 2024 saw regional enterprise growing by 10.2 per cent year on year in Q1 2025, with managed services revenue up 20.2 per cent year on year,” the analyst team from RHB noted.
RHB noted that cybersecurity revenue fell 13.1 per cent year on year on bigger project recognitions in Q1 2024.
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“Overall, enterprise momentum is expected to remain firm,” said Maybank’s Saifee, although he added that the segment’s structurally lower margins, as compared to the consumer segment, could weigh on group profitability.
Consumer
StarHub management expects the consumer shift from premium services to value-plans to persist through 2027 and 2028, Saifee noted.
“Management reiterated that Singapore’s mobile and fixed broadband markets remain intensely competitive, driven by four mobile network operators and seven mobile virtual network operators.”
StarHub has gained consumer subscriber share across all three market segments, the premium, digital, and value markets, noted analysts from Maybank Research.
“Management has attributed the outperformance of its mobile business (relative to peers) to its multi-segment/brand strategy,” said analysts from RHB.
Maybank’s Saifee noted that the telco has widened its market share gap against M1 to six percentage points.
“We believe the still-stiff competition at the low- and mid-end of the market will continue to pressure the average revenue per user in the medium term,” said analysts from RHB.
Industry consolidation
“StarHub is open to industry consolidation, but it says there is no timeline or details,” noted Saifee.
“A market consolidation would alleviate the sharp competition and drive cost synergies,” RHB said, adding that the market consolidation remains a key re-rating catalyst.
There was heightened speculation last year about a possible merger between StarHub and M1. There was also talk that if there was a deal, it would be closed before June 2025, so as to avoid the payment of the 700MHz spectrum fees.
However, Saifee believes that StarHub has likely already taken delivery of the 700MHz spectrum.
It looks like StarHub may not have taken all its allocated lots as according to RHB, StarHub paid S$188 million for 20MHz (paired) of the 700MHz spectrum in June for a 15-year validity.
The quantum was lower than the initial S$282 million outlay for 30MHz as it returned 10MHz to the regulator, RHB said.
“The market may still view the smaller spectrum procured as a pre-emptive move ahead of a market consolidation,” it noted.
Both RHB and Maybank Securities expect more information regarding the spectrum payment during the 1H 2025 results release in August.
The 700MHz spectrum is a frequency of radio waves used to carry mobile broadband signals.
RHB said StarHub’s focus would be “harvesting the benefits” of the transformation programme, Dare+, with the benefits likely to pick up only in 2026.
StarHub’s Dare+ is an initiative that builds the telco’s 5G network and other IT expenditures as part of its five-year growth map.
StarHub’s management flagged its healthy balance sheet, which has a net leverage of 1.3 times and about S$600 million in cash, as supportive of acquisitive merger and acquisition, said the analyst from Maybank Research.
“That said, we expect cash to decline following the 700MHz spectrum payment,” Saifee added.
Maybank Research maintained its target price for StarHub at S$1.10, with a recommendation of “hold”.
RHB also maintained its target price at S$1.14, with a recommendation of “neutral”.
Shares of StarHub closed at S$1.17 on Tuesday, down 0.8 per cent or S$0.01.
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