StarHub axing 10% of staff amid telco industry woes

Singapore

TELCO StarHub is sending more than one-tenth of its staff to the chopping block, with its recently-appointed chief executive saying that the move was necessary as part of a strategic transformation amid "current industry pressures".

About 300 full-time employees are being let go, StarHub confirmed in a statement on Wednesday evening, while other roles will be dropped by "ongoing natural attrition" and a clampdown on contractor positions.

But, at the same time, the company will step up recruitment of cyber security, home and enterprise solutions, and customer care workers. StarHub, Singapore's second-largest telco, now has some 2,500 full-time staff.

Peter Kaliaropoulos, who became head honcho in July, said that the move was needed, on the back of a laundry list of challenges. He cited "the intense competitive ferocity right across the market", with other difficulties including the entry of new players, skinnier broadband margins and high content costs for pay television.

StarHub and content provider Discovery parted ways earlier this year - after renewal talks fell apart without an agreement on carriage fees - only for rival Singtel to then scoop up the full suite of Discovery channels here.

The upcoming layoffs will come with a one-off restructuring cost of some S$25 million, StarHub disclosed, but added that this will not affect the guidance for FY2018. It said the belt-tightening should yield savings of S$210 million over three years, starting next year. Procurement, leasing, network and systems repair and maintenance, and sales and distribution have all come into the cost-cutting crosshairs.

Chief strategic partnership officer Jeannie Ong, who has been with StarHub for more than 17 years, is one high-profile casualty of the cuts. She will leave on Dec 31. Mr Kaliaropoulos said that Ms Ong's job was made redundant by the new position of chief corporate officer, which was filled by former group general counsel and company secretary Veronica Lai.

StarHub's financial statements for the fourth-quarter ended last December, had made provisions for "staff benefits in order to rationalise and retain talent". The Business Times had also reported on Sept 29 that headcount cuts were imminent.

For its latest second quarter ended June 30 this year, StarHub saw a steep drop in quarterly earnings by 22.8 per cent to $61.7 million.

The company's game plan will include investments in areas of focus, such as new businesses, digital customer service initiatives, enterprise-oriented information and communications technology solutions, and wireless and fibre services. StarHub had announced a cyber security venture with state investment firm Temasek in early September, in a deal involving its Accel Systems & Technologies subsidiary.

In a reflection of the tough times for the telco industry, StarHub was moved from the MSCI Singapore Index to the MSCI Singapore Small Cap Index in June and was dropped from the Straits Times Index on Sept 24.

But KGI Securities analyst Joel Ng said in a Sept 27 report that, "as the telcos accelerate their digital transformations and leverage on partnerships with strategic shareholders, valuations may see an upward re-rating over the next few quarters". StarHub is not rated by the brokerage.

Some had hoped last week for a reversal in the industry's fortunes, after Keppel Corp and Singapore Press Holdings (SPH), which owns BT, launched a cash offer for M1 shares.

Just this Monday, UOB Kay Hian anlayst Jonathan Koh, who has a "buy" call on StarHub, raised his target price from S$1.92 to S$2.10. He lauded Mr Kaliaropoulos for "new vigour" and argued that the telco "benefits from change in industry dynamics".

StarHub ended higher by S$0.03, or 1.63 per cent, to S$1.87, before news broke of the retrenchments.