StarHub's payTV business slumps at SingTel's 'aggrressive' moves

It should watch out for these 2 further headwinds.

According to CIMB, it thinks StarHub faces rising competition in both pay TV and fixed broadband which will affect its ARPUs.

CIMB noted that these businesses contribute to 27% of its revenues. It also believes SingTel’s aggressive acquisition of content and customers will continue to erode StarHub’s dominance in pay TV. 

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As for fixed broadband, smaller players such as MyRepublic and ViewQuest are going all out to gain market share from the larger telcos by dangling lower prices for similar broadband speeds.  

We raise our FY13-15 EPS by 2.5-6.4% as we raise postpaid ARPU assumptions by 1.6-4.6%. We assume that 2-4% of users will trade up to higher tiered plans in 2013-15. Our DCF-based (WACC 8.1%) target price rises accordingly.

Our Neutral rating is unchanged as StarHub lacks catalysts at this juncture, in our opinion, while facing competition in pay TV and fixed broadband.

We gather that average data usage per user has doubled to 1-2GB/month from >1GB/month last year. This is not surprising, as content has become richer over the Internet and consumers become more comfortable with data usage.

Going forward, the take-up of 4G/LTE devices will spur usage further and there are now more affordable and more choices of 4G handsets in the market than the era of 3G.

Based on this, we are positive on data usage, which should increase further with users starting to trade up to higher-tiered data plans.

We understand that StarHub has begun talks with FAPL for rights to broadcast the Barclays Premier League (BPL).

No decision has been taken but we reckon it may be too late for StarHub to maximise returns from BPL considering that SingTel has a 6-month lead to sign up sponsors and subscribers. Also, the timeframe is tight to plan an effective marketing campaign given that the 2013-14 season will start in Aug.