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StarHub cuts dividends for FY2019 after Q4 earnings miss

STARHUB is slashing its dividends for 2019, while earnings for 2018 fell below street forecasts.

The telco is switching from a fixed to a variable dividend policy from 2019, and will distribute at least 80 per cent of net profit each year.

It intends to pay a quarterly cash dividend of at least 2.25 Singapore cents per share for the 2019 financial year, down from four cents per quarter in 2018.

Chief executive Peter Kaliaropoulos said he understands that investors are hungry for dividends, but said StarHub needs to invest in more capabilities for the future.

He said over an earnings call on Thursday: "Monetisation remains a challenge and we need to understand the realities of a saturated market in Singapore."

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StarHub posted a net profit of S$19.8 million in the fourth quarter, down 61.8 per cent from the same period a year earlier.

Total revenue for the three months ended Dec 31 fell 9.8 per cent or S$67.4 million to S$620 million, as mobile revenue slipped 13.7 per cent or S$30.8 million to S$194 million.

This was due to lower IDD, voice and data usage revenue, lower subscription revenue due to higher phone subsidies given to customers, and a higher mix of SIM-Only plans.

Average revenue per user (ARPU) for post-paid mobile customers fell S$3 quarter-on-quarter to S$41 in the fourth quarter.

StarHub also made higher provisions for customer loyalty programmes during the quarter, as it expects redemption rates to rise. It also made a catch-up adjustment for contract asset provision as a result of the higher subsidies given.

Excluding the one-time provisions and catch-up adjustment, mobile service revenue would have fallen by S$16.6 million or 7.6 per cent.

Total revenue for 2018 dipped 2 per cent to S$2.36 billion, while net profit for the full year fell 26.2 per cent to S$201.5 million.

Total service revenue for 2018, which excludes equipment sales, fell 2.5 per cent to S$1.83 billion. StarHub expects service revenue to grow by zero to 2 per cent this year.

Asked about his long-term outlook for the consumer business, which accounts for 60 per cent of StarHub's revenue, Mr Kaliaropoulos said: "We don't see consumer revenues growing dramatically, if at all."

He noted that consumers want more choice and technology for the same if not lower ARPUs. "It doesn't mean we won't win back customers. You can offer customers a lot more capability at home, they're not predisposed to pay for it."

Mr Kaliaropoulos also noted that the enterprise business offers more "high-value" customers, though margins are lower there.

Faced with high overheads and shrinking profits, he said that he is open to talk to any operator about network sharing. "We think the smart business model for the future is not building alternative infrastructure (which) very quickly gets commoditised.

"We should be coordinating with everyone at the infrastructure level. To build four 5G networks I think is very challenging, we look forward to working with one or two or any number of companies to make that happen."

Last year, StarHub announced cost-cutting measures aimed at achieving S$210 million in cost savings over a three-year period starting 2019. These savings "will not drop directly into bottom line", Mr Kaliaropoulos said. "Some will go to growth, some will go to digitisation of process ... If you look at the business now, our call centres, everything is done in a very old-fashioned way."

Fourth-quarter earnings per share was one Singapore cent, down from a restated 2.9 cents a year ago.

Net asset value per share was 31.9 Singapore cents at the end of 2018, down from a restated 34.8 cents at the end of 2017.

A final dividend of four cents per share for the fourth quarter of 2018 will be paid in May.

StarHub shares rose one Singapore cent or 0.53 per cent to S$1.90 before results were announced on Thursday.

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