Here's why StarHub may be losing the television race to SingTel

SingTel threatens StarHub's 157 channels.

According to CIMB, with the addition of FOX to its line-up, SingTel substantially narrows its gap with StarHub's 157 channels. This will reduce StarHub's differentiation and dominance.

Here's more from CIMB:

StarHub still has exclusivity on movie channel HBO and the Cantonese drama channel TVB. It also has the upper hand in English movie and lifestyle channels and Chinese drama.

Although StarHub lost BPL rights in 2010, it experienced very low churns and its EBITDA held fairly steady despite declines in pay TV revenue and ARPUs.

This was because SingTel was not a good alternative to switch out to as its content line-up was very limited. But this is changing with FOX and the addition of more football content.

To defend its turf, StarHub is offering its over-the-top (OTT) StarHub Everywhere service to differentiate itself as well as continuing to broaden its non-sports portfolio. However, we think SingTel will eventually introduce its own OTT service.

Despite our view of its longer term market share erosion, we continue to like StarHub for its potentially higher dividends. Its recent S$220m bond issuance will pave the way for StarHub to either raise its dividend payout or declare a special dividend/undertake a capital repayment in our view.

Although StarHub’s existing dividend yield of 5.3%, one of the highest among its regional peers, is already quite attractive, we assume DPS will rise to 24 cts in FY13, implying an even more impressive yield of 6.4%.

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