Starhub announces their Q2 2012 results.
The presentation slides is [here]
The full results release is [here]
Overall, the result are status quo. Current Investors can look forward to another SGD$0.05 quarterly dividend payout. Starhub did not indicate that they will raise their quarterly dividends.
Due to that, the current dividend yield is around 5.3%. Its earnings yield is around there as well. (Refer to the Dividend Stock Tracker)
This leaves a PE of 20 times and an EV/EBITDA of nearly 10 times.
As sound and defensive is this telecom business, 20 times probably means, if earnings doesn’t grow, you would expect to recuperate the money in 20 years.
And we have seen in the past three years that the growth rate of Starhub is around 1-3%.
Most of the cash flow improvement were due to lower capital expenditures and minor optimizations. There are many misconceptions that smartphone will make them more profitable.
On the contrary, the more expensive the smartphones, the telecoms have to subsidize the consumer, which means higher expense in the short run for the telecoms.
This price is pretty rich, unless you expect that your dividend grows like 5% per year, which would probably make it a fair investment. Certainly, you are at the mercy of more capital downside then upside.
How can Starhub grow
It’s a given that voice and SMS will go down, and Starhub hopes that the loss is minimize by tiered data pricing (following Singtel’s footsteps)
To make up and grow, Starhub have to show their ability to
- ramp up fixed network services
- leverage the pipe to sell VAS (value added services)
- charge application vendors like Skype, Whatsapp, Viber to give a portion of their revenues to them
- ramp up mobile payment
Starhub SmartWallet – venturing into mobile payment
The news this week have been littered with the massive massive collaboration between payment startup Square and Starbucks. Square will enable the consumer cash less payment in all starbucks.
In fact, the consumer do not even have to take out his wallet or handphone.
The square register Starbucks casher uses is able to detect that the customer has activated payment in the smartphone in his pocket. She can then charge the purchases to his face or name.
Square also will process all the credit card payments and earns 2.75% of each transactions.
The future of mobile payment, credit card rewards, security is going to change. And Starhub as a telecom is part of this fierce fight between the payment handlers VISA, MASTERCARD, the new payment handlers that rides on them, Paypal, Square and Google Wallet and the telecoms.
Last week, Starhub unveiled Smart Wallet, in collaboration with DBS, EZ-Link and Mastercard:
StarHub’s SmartWallet will allow its mobile customers to enjoy the convenience of using three contactless payment cards on an NFC enabled smartphone – DBS One.Tap, NFC ez-link purse and NFC FEVO Pre-paid MasterCard.
SmartWallet will offer users a virtual DBS MasterCard PayPassTM card called One.Tap. With just one tap of the smartphone, customers can pay for goods or services quickly and securely at more than 20,000 DBS and MasterCard PayPass merchant partners in Singapore. Existing DBS cardmembers can apply for One.Tap at any time through DBS Internet or mobile banking.
“DBS regards the mobile platform as an important customer touchpoint. The introduction of more highly sophisticated NFC enabled smartphones will make it easier for our customers to adopt this new technology. As Singapore’s leading bank with over four million customers and more than one million downloads for our mobile banking apps, we are proud to add NFC to our comprehensive suite of mobile banking solutions that include online banking, protection, rewards and payments. Through our ongoing innovation, we are well-positioned to drive the adoption of NFC islandwide and are very excited to launch DBS One.Tap, our new NFC virtual credit card, later this month. We believe this initiative will further enhance our customers’ experience and offer them greater convenience,” says Mr Sim S Lim, Country Manager of DBS Singapore.
SmartWallet users can also tap their smartphones to make retail payment with NFC ez-link purse wherever EZ-Link card payments are accepted, as well as to make payment at MasterCard merchant locations for NFC FEVO Pre-paid MasterCard issued by EZ-Link.
“Singapore ranks first amongst 34 countries in the MasterCard Mobile Payment Readiness Index, an indication that the foundation is firmly in place for mobile payments to take off. With MasterCard PayPass on mobile devices in Singapore, cardholders can look forward to enjoying the benefits of contactless mobile payments,” says Ms Julienne Loh, Vice President and Country Manager, Singapore, MasterCard Worldwide.
“With the integration of the NFC-enabled ez-link and FEVO MasterCard prepaid purses into SmartWallet, StarHub customers can now use their mobile phones with ease to access a wide range of retail services, making payments across any of the EZ-Link and MasterCard merchant acceptance points,” says Mr Nicholas Lee, Chief Executive Officer, EZ-Link Pte Ltd. “EZ-link is proud to partner with StarHub to equip our consumers with this technology which opens a whole new world of diverse lifestyle possibilities for them.”
Contactless Lifestyle Services (Coupons)
The SmartWallet app makes browsing, downloading and redeeming virtual coupons a seamless experience for customers. They can redeem coupons to enjoy discounts and deals instantly with just one tap of the smartphone, while making a purchase at DBS and MasterCard partner merchants, such as Comfort Taxi, G2000, Pasta Mania, Watsons Convenience Stores, FOX Apparels, Pumpkin Patch, Toys R Us, PastaMania, Popeye’s Louisana Kitchen, Quiznos, Coldstone Creamery and Shaw Theatres, among others.
“Shaw Theatres has been embracing new cinema technologies such as the IMAX Digital Theatre System to offer our patrons better experiences. Our partnership with StarHub to offer NFC services will allow us to improve payment modes on our ticketing platform. We hope this will give our technology savvy customers more options in their transactions with Shaw Theatres," says Mr Mark Shaw, Executive Vice President of Operations, Shaw Theatres.
Additional payment functionalities will soon include the use of SmartWallet to apply for, store and manage cards from various payment schemes, including those offered by DBS, EZ-Link, MasterCard and Visa, from the smartphone anytime, anywhere. In addition, a whole host of new lifestyle services will soon enable customers to buy and download electronic tickets to movies and events, earn and redeem loyalty points, top up StarHub Mobile pre-paid cards, and pay for bus and train trips, among others.
SmartWallet and its contactless payment and lifestyle services will be commercially launched later this month. To start using SmartWallet, customers with an NFC enabled smartphone will need to convert to a StarHub NFC SIM card and subscribe to the free StarHub NFC value-added service. They can then go to Google Play to download the SmartWallet app.
Sony Xperia Sola (carried exclusively by StarHub), Samsung Galaxy S lll and Sony Xperia S are three NFC enabled Android smartphone models approved for secure NFC payment service by various global payment standards authorities. The list of NFC compatible smartphone models will be expanded progressively. For customers’ convenience, StarHub will pre-load the SmartWallet app in approved smartphone models sold at StarHub Shops and authorised dealers.
For customers to experience contactless lifestyle services, StarHub will offer a new way to instantly enjoy StarHub Music Store goodies at launch. SmartWallet users will just need to tap their NFC enabled smartphone on StarHub’s Smart Posters displayed at selected StarHub Shops and StarHub’s roadshows to download a mystery music track for free.
This would probably mean the Starhub customers need to change to a NFC sim card and they can make payment with their mobile phone like their ez link card.
Starhub as part of the consortium could probably earn “a little bit” as part of this. I personally think it is not gonna amount to much.