StarHub rosy on 5G launch, despite virus hit to Q3 earnings

Singapore

STARHUB is on track to have a new chief executive by early next year, according to a business update on Friday evening, even as the mainboard-listed telco turned in another quarter of double-digit profit declines.

Management blamed the Covid-19 pandemic, which has shut borders and starved travel-related revenues, for the drop in third-quarter earnings.

Net profit came in lower by 23.3 per cent year on year to S$44.5 million for the three months to Sept 30.

Overall revenue fell by 14.5 per cent to S$489.7 million, while service revenue, excluding equipment sales, shed 10.6 per cent to S$388.7 million.

The core mobile business tanked turnover, with revenue down by 29.4 per cent to S$134.1 million. Postpaid average revenue per user (ARPU) fell 26.9 per cent year on year, or 5.4 per cent quarter on quarter, to S$29.

Still, the rollout of 5G consumer services - albeit non-standalone, for now - is expected to be a key factor in stabilising the mobile segment, consumer business chief Johan Buse indicated on an evening earnings call.

He applied the word "encouraging" several times to the initial take-up of 5G-ready handsets, despite the later-than-usual launch of the new iPhone, which was only in the fourth quarter.

Despite the early stage of 5G, and a diverging trend between 5G and SIM-only customers, "there is actually an associated ARPU uplift", he added.

To an analyst's question on how 5G mobile services can be priced against legacy 4G, Mr Buse replied: "Obviously, we are keen to be able to justify a small premium for a significantly better experience on the network."

Enterprise business services have continued to cushion the blow to the top line, posting revenue growth of 11.4 per cent, to S$162 million.

But this was supported by StarHub's fledgling cybersecurity division, as well as a newly acquired regional infocomm technology unit. Contributions from the tent-pole network solutions business, on the other hand, shed 7.7 per cent year on year.

StarHub also warned that its enterprise customers will likely defer their new investments into the next financial year, which "will impact consumption of traditional telco connectivity services until there is greater clarity on the economic recovery".

When asked if he expects pent-up project demand as business improves, Charlie Chan, head of enterprise business, said that clients are expected to take a "measured approach". He added: "We do expect a gradual recovery in demand, although I wouldn't say it would spike."

For the nine months, net profit was down by 19.6 per cent, to S$121.9 million, on a 15.8 per cent decrease in revenue, to S$1.45 billion.

Service earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin will likely be weaker in Q4 than in Q3, StarHub said, citing continued pressure on revenue, and a seasonal year-end rise in operating expenses.

The group added in its outlook statement that it expects to maintain its earlier guidance for FY2020, which projected a service revenue decline of between 10 per cent and 12 per cent.

Friday's was the first briefing since the departure of Peter Kaliaropoulos, who stepped down as CEO on Oct 31.

With a global search for his successor, StarHub is now on a shortlist of fewer than 10 candidates, said chief corporate officer Veronica Lai, who hopes to name the new StarHub CEO by the first quarter of next year.

But she added that the appointment could take until the second quarter, on factors such as his or her current job, and regulatory approval.

StarHub added S$0.01, or 0.84 per cent, at S$1.20, before the news.