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StarHub's total profit declines 15% from COVID-19 impacts

The telco's enterprise business arm was the only bright spot compared to the year prior.
Written by Campbell Kwan, Contributor

StarHub's businesses, with the exception of its enterprise business arm, have provided weaker results for the first quarter compared to the same period a year ago, resulting in total profit dropping by 14.6% year-on-year to SG$42 million.

The Singaporean telco said it expected this decline in revenue and profitability would continue in 2020 due to the COVID-19 outbreak and that its priority would be to "maintain adequate financial liquidity", as well as the health and welfare of its employees, customers, and business partners. 

"The group expects revenue declines in most lines of business, to varying degrees, as a result of this crisis and will continue to manage operating expenses, capital expenditure, and cash flow to mitigate the impacts of the revenue decline," StarHub said.

For the first quarter ended March 31, the Singaporean telco earned SG$506 million in total revenue, which was down over 15% from the SG$597 million earned in the same period last year.

This consisted of mobile revenue decreasing by 15%, going from a little over SG$192 million to SG$163.5 million; pay TV losing one-third of its revenue to earn around SG$47 million; and its broadband service earning SG$41.7 million, an 11.4% drop in revenue year-on-year.

StarHub attributed the less than stellar performance of its mobile business to the significant drop in global travel that has arisen from the COVID-19 outbreak.

"The decrease in prepaid mobile revenues was mainly due to lower inbound and outbound tourists due to the impact from COVID-19 measures, lower data subscriptions, prepaid expired credit, and IDD," the telco said.

In terms of its pay TV and broadband arms, the telco said revenue was lower due to continued cable to fibre migration from the previous year.

Meanwhile, its service revenue decreased by almost 9% to around SG$405 million and its equipment sales total was cut by over one-third, amounting to just over SG$101 million.

The sole bright spot of StarHub during Q1 was its enterprise business arm, which continued its upward trajectory by earning around SG$153 million in revenue -- an almost 14% increase year-on-year. This consisted of SG$90.4 million and SG$62.4 million from network solutions and cybersecurity services, respectively.

StarHub also cut operating expenses, which recorded a 14.5% year-on-year decrease to SG$448.4 million from SG$525 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) also decreased by almost 16% to SG$136 million year-on-year, but the telco's cash flow quintupled from SG$21.4 million to almost SG$119 million.

The increased cash flow is the product of StarHub refinancing bank loans that were due for repayment this year, it said, after which there will be no refinancing required until 2022, to address the potential impacts of COVID-19.

With Singapore still enforcing strict social distancing measures, StarHub has 90% of its employees working from home; temporarily closed all but five retail of its stores; accelerated migration of transactions to online; and has been working with regulators on national initiatives to ensure access to connectivity for vulnerable segments. 

Last week, StarHub secured one of Singapore's nationwide 5G licences through its joint bid with M1, while Singtel won the other licence, which left TPG as the odd one out.

The joint-venture consortium between StarHub and M1 will be allocated 100MHz of 3.5GHz spectrum each to roll out 5G networks across the city-state. StarHub will also be given 800MHz of mmWave spectrum.

According to the Infocomm Media Development Authority (IMDA), the StarHub-M1 consortium would need to deploy and own key parts of the 5G network that would then be leased to M1 and StarHub, each of which would continue to operate separately and offer retail services to their respective customers.  

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