Starhub Investment Report

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Technology Sector, Wireless Communications Industry
Singapore Stock Exchange (SGX) Ticker: CC3.SI
MARKET PROFILE RECOMMENDATION HOLD
Closing Price $3.60 TARGET PRICE: $3.56 DOWNSIDE OF 1.07%
52-week price range
(S$)
$3.40 - $4.46 CURRENT PRICE: $3.60 DATE: 30/10/2015
Average Volume (3m) 1,839,380 HIGHLIGHTS
Shares Outstanding 1729.8 million We issue a Hold recommendation on Starhub Limited
(Starhub) based on a one-year target price of $36.56,
suggesting 1.07% downside from its closing price of $3.60 on
30th October 2015. Our recommendation is primarily driven
by:
Market Capitalization
(S$)
$6.23B
Dividend Yield 5.59%  PROVEN STRATEGY - Starhub pioneer service,
Hubbing, has been very successful since year 2002, providing
integrated bundle of all their services. It is proven to increase
revenue and total dividend payouts.
P/BV (mrq) 40.0
P/E (ttm) 17.14
Share Price Movement
Source: Yahoo! finance
 STABLE DIVIDEND INCOME - Starhub is a matured
company. Despite of its low growth rate, Starhub shows that it
is a stable company from year to year. It has a focused
strategy (Hubbing) and continues to develop its business,
which is evident by keeping itself updated with the latest
technology and also the formation of new partnerships.
Moreover, Starhub pays a consistent dividend with a value that
is considered as quite high among other blue chip stocks in
Singapore.
 VALUATION – Intrinsic value of $3.56 per share indicate
that Starhub is currently slightly overvalued. Starhub are
currently focusing their market on Singapore. We evaluated
Starhub’s intrinsic value primarily though a discounted cash
flow analysis and a relative multiples valuation.
 MAIN RISKS TO STARHUB – The
telecommunications industry is highly competitive and is
currently affected by the entrance of a new threat to the
company. Innovations of applications will cause decrease in
revenue. Adverse economic conditions affects the industry.
RECENT NEWS
 StarHub Q1 net profit falls 12.4% - 15 May 2015: Broadband service revenue decreased 10.8
per cent to S$48.1 million for the quarter, largely impacted by price competition which lowered
subscription revenue from both re-contracting and new customers.
 StarHub announces 5% higher profit in Q2 – 15 AUG, 2015: Revenue from fixed network
services, which contributed 16.4 per cent of sales, was up 5 per cent from a year earlier to S$96.7
million, mainly due to the higher take-up of data and internet services.
 M1, StarHub face steep profit drop as fourth telco threat looms large - 14 Sep 15: UOB
Kay Hian expects M1 and StarHub’s 2019 net profit to decline by 32% and 25.8%, respectively, if a
fourth telco manages to break into the Singapore market by 2017
Key Financials and Ratios 2013 2014 2015 2016 2017 2018 2019
Total Revenue(million) 2369.60 2387.20 2373.13 2394.89 2417.42 2440.75 2464.87
Net Operating Income(million) 473.50 476.70 491.67 507.11 523.04 539.46 556.40
Net Profit Margin 16.02% 15.52% 16.57% 17.02% 17.48% 17.92% 18.00%
Operating Margin 19.98% 19.97% 20.72% 21.17% 21.64% 22.10% 22.57%
Dividend per Share($) 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Earning per Share($) 0.22 0.21 0.23 0.23 0.4 0.25 0.26
Fixed Asset Turnover 1.67 1.58 2.18 2.14 2.15 2.19 2.19
Quick Ratio 0.66 0.53 0.48 0.49 0.48 0.46 0.44

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FIGURE A: HISTORICAL REVENUE OF
SERVICES BREAKDOWN ($M)
Source: Starhub 2014 Annual Report (AR)
FIGURE B: APPROXIMATE MOBILE
MARKET SHARES IN 2014
Source: Respective Companies’ 2014 AR
FIGURE C: REVENUE BREAKDOWN BY
SERVICE IN 2014 ($M)
Source: Starhub 2014 AR
BUSINESS DESCRIPTION
INTRODUCTION
Officially launched in 2000, Starhub Limited is an info-
communications company based in Singapore that offers a range of
communication, information and media services for the consumers
and corporate markets. It is a group with 8 domestic and 3 foreign
subsidiaries, all of which the company the company holds 100%
equity interest.(Appendix 1) Listed on SGX main board in October
2004, Starhub is a component stock of Straits Time Index (STI) and
MSCI Singapore Free Index.
SERVICES
Pioneer service “Hubbing” of Starhub is the provision of an
integrated bundle of all their service. Starhub provides 4 main
services; Mobile, Pay TV, Broadband and Fixed Network. Starhub
majors largely on their Mobile services (Figure AFIGURE ),
providing 4G and 3G services. Being one of the 3 biggest tele-
communications company in Singapore, Starhub holds
approximately 30% of the total mobile market share. (Figure B)
Managing an island-wide hybrid fibre-coaxial (HFC) network, there
are multi-channel Pay TV services and high speed residential
Broadband services. Also, Starhub delivers data, voice and
wholesale services to business users through their Fixed Network
line.
KEY DRIVER OF REVENUE
In FY2014, the greatest revenue generator for Starhub is their Mobile
services at 52%. (Figure C) Starhub services Pay TV, Broadband
and Fixed Network contributes 16%, 9% and 16% respectively out of
the total revenue of $2388 million, including 7% of Equipment Sales.
STRATEGY
The company's strategy focuses on the following:
A. Expand post-paid base (Mobile) [2014 AR]
As mobile revenue takes up a big part of Starhub’s total
revenue, expanding postpaid mobile base means there will
be more revenue.
B. Enhance depth and breadth of contents (Pay TV). [2014 AR]
C. Loyalty Reward System [2013 AR]
D. Big Data Platform, Smarthub [2013 AR]

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FIGURE D: NON-EXECUTIVE DIRECTORS’
REMUNERATION BREAKDOWN
Source: Starhub AR 2014
FIGURE E: BOARD STRUCTURE
Source: Starhub AR 2014
MANAGEMENT & GOVERNANCE
CORPORATE GOVERNANCE
Starhub has been awarded recognition for its good practices of
corporate governance over its years of operation. The firm strongly
commits to uphold high standards of corporate governance in aspect
to the principles and guidelines of the Code of Corporate
Governance (2012) issued by the Monetary Authority of Singapore
(MAS). The company practices and promote transparency,
accountability, integrity and applying consistent and effective risk
arrangement to enhance shareholder value.
The following areas shows the strengths of Starhub's corporate
governance:
1. BOARD (Figure E)
Additional board committees may be established when
necessary by any changes of business functions. There are
seven members appointed that are independent of
management. (Appendix 3)
2. REMUNERATION (Appendix 4APPENDIX 4: )
The transparency in development of remuneration policies,
level and mix of remuneration of non-executive directors and
executive directors. (Figure D)
3. SHAREHOLDERS (Appendix 7)
The shareholders are well-informed of the assessment of firm's
performance, position and prospects in the quarter and full-year
operating performance and financial results. Every
shareholder's right is treated equally, given their entitlements
and reached out through regular, effective and non-
discriminatory communication with the firm
Through evaluation by using Governance and Transparency Index
(GTI), it is concluded that the degree of threat, based on Starhub's
corporate governance, is relatively low to its shareholders. (Appendix
5)

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FIGURE F: SWOT ANALYSIS
Source: Team Estimates
FIGURE G: INDUSTRIAL CAPACITY
Source: IDA Singapore Website
FIGURE H: PORTER’S 5 FORCES
INDUSTRY OVERVIEW AND COMPETITIVE POSITIONING
TELECOMMUNICATIONS INDUSTRY
PORTER’S 5 FORCES (Figure H)
The intensity of competitive rivalry and threat of a new entrant, My
Republic will affect Starhub’s ability to earn revenue in the near
future. To stay competitive, Starhub need to differentiate themselves
from the competitors. (APPENDIX 13)
SWOT ANALYSIS (Figure F)
It is evaluated that even if Starhub has many strengths, there are
also a high level of threats existing from either internally or externally
that might bring an impact to the company. (Appendix 12). One of
the threats that is highlighted is the recent emergence of the new
telco company, which might impact greatly to Starhub.
DEMAND DRIVERS
The demand drivers for Starhub's services mainly come from the
customers. The mix is segmented into four groups which includes,
residential households, commercialized businesses, students and
military. External factors are analysed to understand how it will
impact Starhub.
The following factors are an integral part to investments:
ECONOMIC GROWTH
The Gross Domestic Product (GDP) in Singapore has risen rapidly
over the past decades. Some factors such as improving
infrastructure, natural connectivity, skilled workforce, political
stability, favourable tax regime and strong rule of law contributes
greatly to Singapore's competitive advantage. Hence, improving its
economical state. From the year of recession, year 2008, till current
year 2015, there is a display of an upward trend. (Appendix 9). An
upward trend of GDP for Information & Communications industry can
also be seen over the past 4 years. These strengths of Singapore's
economy brings a positive impact to Starhub.
DEMOGRAPHICS
As Starhub’s target population derives from the 4 main customer
groups, population growth, household types and business sizes in
Singapore are factors that brings a direct impact to Starhub.
(Appendix 10).
TECHNOLOGY PENETRATION
Due to the uprising technological needs of people, people have a
need to own more than one mobile subscription. It is shown that at
the first quarter of 2015, the mobile penetration is averaged at 148%.
This means that 1.48 mobile subscription is owned by each person.
(Appendix 11APPENDIX 11: technology penetration)

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INDUSTRY SUPPLY
Over the past years from 2011 to 2014, the total capacity in the
telecom industry has multiplied up to 4 times the number (Figure G).
The capacity is likely to keep increasing to meet the growing demand
of the consumers.
RECENT TRENDS
In recent years, there has been a trend for more demand in the industry:
 There has been more demand for data roaming, as subscribers tend to travel overseas for work or
leisure more frequently.
 There is also more demand for pay TV channels that meets the needs for all ages, from the young to
the old.
 Convenience is one of the key factor that consumers consider important in this technological era. That
is the ability to watch and use the services anywhere, anytime and anything.
 Demand from businesses are also increasing for better quality services from IT & communications
service providers. This is especially required for businesses that deal with real-time information, they
can't take any risk from weak broadband connections or from poor infrastructure.
 Demand for better network, such as 5G, is also one of the recent trends in the industry.
 Change in consumers’ usage habits brings about more demand to suit their daily lives with new and
better technologies, such as a better camera quality, speed of mobile processor, high speed
broadband and better mobile coverage.
Starhub must keep up with these recent trends to stay competitive in the industry.
INVESTMENT SUMMARY
We issue a Hold Recommendation on Starhub Limited with a target price of $3.56 utilizing a Discounted
Cash Flow Analysis, a Relative Multiples Valuation, and a Dividend Discount Model. This valuation are
based on various merits as well as concerns are taken into consideration below:
MERITS:
Stable Business with High Dividend
Starhub is a matured company. Despite of its low growth rate, Starhub shows that it is a stable company
from year to year. It has a focused strategy (Hubbing) and continues to develop its business, which is
evident by keeping itself updated with the latest technology and also the formation of new partnerships.
Moreover, Starhub pays a consistent dividend with a value that is considered as quite high among other
blue chip stocks in Singapore.
Good practices of corporate governance
Starhub practices good corporate governance and is evaluated to be a highly transparent company, that
brings a relatively low degree of threat to investors. The board of directors consists of experienced with solid
industry expertise, technical depth and company tenures. The company has achieved multiple awards for
best Investor Relations (IR) Officer, Ms Jeannie Ong, and being ranked the 16th company in the governance
and transparency index.
Excellent Customer Service
Starhub has been recognized for their excellence in customer service by providing a 24 hours customer
service hotline that can assist consumers with any problem around the clock. In addition, on their Facebook
fan page, they reply to feedbacks and responses on their page and reaching out to consumers through
social media. The company has been rewarded with Bronze: Best Use of Social for Loyalty & Engagement
Awards.

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CONCERNS:
Highly-Leveraged and Illiquid
Starhub is highly financed by debt. Financial crisis might have a big impact for Starhub, especially when it
comes to paying financial obligations (debt principal and interest) due. In addition, the high leverage might
make Starhub difficult to get additional borrowings to finance its operations in the future.
Decrease in broadband competitive advantage:
Broadband revenue is seen to have decreased 11% as compared to year 2014. In year 2014, the revenue
has also decreased by 16.5% as compared to year 2013. The decrease is due to the price competition in
the next generation nationwide broadband network (NGNBN) services.
Over this few years, it shows a downwards trend and this is likely to continue decreasing in value in future
years. It must be noted that the revenue might further decrease due to the entrance of the new telco, My
Republic, which might offer better broadband services or cheaper broadband services compared to Starhub.
Consumers will very likely port over and this will cause a great impact to the company. Starhub will have to
come out with new ideas and solutions to gain more revenue from other services such as mobile, pay TV
and fixed networks in order to remain the same financial status.
Emergence of 4th Telco
With a new entry of a 4th telco, My Republic, into the market. The amount of shares amongst of Singtel,
Mobile 1 and Starhub is likely to be affected and decrease in percentage. This gives an disadvantage to
Starhub, as it might lose some of its shares. In addition, as the new telco propose services that meets the
demand of consumers, this puts great pressure on the other telcos to reconsider their current existing plans.
It will impact the margins as well as the infrastructure investment.
FIGURE I: CASH AND BORROWINGS FROM
2010-2014
Source: Starhub’s earnings report
FINANCIAL ANALYSIS
HIGHLY-LEVERAGED & ILLIQUID
Starhub's Debt-to-Equity ratio has been decreasing significantly in
the past 3 years from 2931% in 2011 to 461% in 2014 due to
increasing value in Shareholder's Equity. This in turn boosted the
Return-on-Equity of Starhub, which fly above 200% in 2014 but was
the lowest compared to the past 7 years.
In addition, its quick ratio, current ratio, and cash ratio in 2014 are
slightly lower than 2013 which indicate that the company's liabilities
has increased relative to the assets. This can also be shown from
the decreasing Net Changes in Cash Flow and Interest Coverage
Ratio in 2014 compared to the previous year, which indicates that
there's a decline in Starhub's ability to serve the financial obligations
(i.e. interest payments and principal amount of outstanding debt),
and thus determine the company's solvency.

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FIGURE J: FINANCIAL LEVERAGE
Source: https://www.fool.sg/2013/06/13/singapores-
most-efficient-company-where-does-the-efficiency-
come-from/
FIGURE K: FREE CASH FLOW VS.
DIVIDEND PAID 2010-2014
Source: Starhub’s earnings report and fool.sg
Hence, our analysis indicates that Starhub is highly leveraged and
illiquid (Figure J). We forecast that this condition will remain in the
future as telecommunication company requires a large capital to
finance their projects.
SLOW GROWTH IN DIVIDEND &
EARNINGS PER SHARE
Starhub is relatively popular among investors as one of the blue chip
companies which pay out high dividends. Its Dividend Per Share of
S$0.2 per share is the highest among its competitors and this value
has remained unchanged for the past 5 years. It has not missed
paying a dividend since 2005. However, its Dividend Yield has been
in the decreasing trend for the past 5 years. Starhub had traditionally
paid out most of its free cash flow to shareholders in the form of
dividends. However, the telco’s free cash flow in the past 2 years has
fallen behind the amount it needs to fund its dividends (Figure K). Its
Dividend Payout Ratio of 93.2% in 2014 also considered quite high,
which means that share prices are unlikely to appreciate rapidly
since the company had passed its initial growth stage. In addition,
Starhub's Earnings Per Share is rather constant because the
increase in profitability was followed by similar proportion of increase
in weighted average of shares issued each year (Appendix 21).
We expect that this trend of slow growth will continue in the near
future, with Dividend Per Share remain at approximately S$0.2 per
share and Dividend Yield at around 5%.
FAVOURABLE DEMOGRAPHIC TRENDS
STRENGTHEN GROWTH PROSPECTS
The increasing population density over the age of 15 in Singapore
alongside with the rise in household access to broadband, presents
an attractive opportunity for Starhub. The increase is mainly
attributable to higher revenue from equipment sales—driven by
increased handset sales after the launch of new iPhone models in
late September 2014. Its total revenue grows in line with the
increasing trend of household access to broadband in the past 5
years (Appendix 10).
We forecast that these trends will continue in the near future and
thus contribute in the revenue growth.
REVENUE & PROFITABILITY CONTINUE
TO GROW IN A DIMINISHING RATE
The group service revenue of S$2217.5 million was 1% lower
compared to 2013, mainly due to a decrease of 16.5% in Broadband
service revenue, which is affected by the price competition in
NGNBN service. In 2014, Starhub's pre-paid business also slowing
down with revenue growth of 0.33% in total Mobile revenue, which is
far lower than the growth in the past 7 years. This is partially
contributed by the new policy—each person can only hold three pre-
paid SIM cards across all service providers, and the change in users'
consumption pattern—more mobile data usage and less phone calls.
In addition, Starhub's profit margin has formed an uptrend for the
past 4 years, although the growth is small.
We expect that the company will still continue to grow in the low-
single digit range, due to its Hubbing strategy (Appendix 23), the

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introduction of Crowdtivate (Appendix 24) and StarHub TV which has
been leading the market.
INCREASE IN ASSET EFFICIENCY
Starhub had a lower total asset turnover from 1.91x in 2007 to 1.23x
in 2014 while achieved a higher fixed asset turnover from 1.74x to
1.58x over the same period. This suggests that the company is
efficient and can utilise its assets to generate revenue effectively.
Both the total asset turnover and fixed asset turnover of Starhub are
the highest among its competitors, partly due to the high operating
efficiency and energy efficiency (Appendix 25). Its return on asset of
0.19x in 2014 also the highest among its competitors. Moreover, the
recent partnership with ST Telemedia will help Starhub lower its
future capital expenditure (Appendix 26).
Thus, we forecast the efficiency level of Starhub will continue to rise
in the future, which allows its asset turnover and return on assets to
increase.
FIGURE L: WACC ANALYSIS
FIGURE M: PROJECTED 5 YR CAGR
GROWTH
Segment Growth
Mobile Revenue 1.20%
PayTV Revenue -0.05%
Broadband Revenue -3.49%
Fixed Network
Revenue
2.85%
Service Revenue 0.90%
Sale of equipment 2.00%
Aggregate 0.96%
FIGURE N: SINGAPORE 5-YEAR INFLATION
RATE
Source: www.tradingeconomics.com | Statistic
Singapore
VALUATION
VALUATION PRICE TARGET: $3.56 RECOMMENDATION: HOLD
3 valuation methodologies were utilized in deriving a target price for
Starhub. This including a 5 year Discounted Cash Flow Model, a
Relative Multiples Valuation & a Dividend Discount Model.
DCF MODEL
A discounted cash flow analysis was used to estimate the intrinsic
value of CC3's share price due to predictability of unlevered future
cash flows in relation to minor growth. While deriving unlevered free
cash flow, the following 5 years forecast assumption are made in
relation to Starhub FY 2015 2Q outlook:
 Revenue: Maintain service revenue growth in the low single-digit
range
 EBITDA: Maintain EBITDA margin on service revenue to be
about 32%
 CAPEX: Maintain cash capex to be about 13% of total revenue
 Dividend: Declare 2Q-2015 dividend of 5.0 cents per share
Intend to maintain annual cash dividend of 20.0 cents per share
for FY2015
Our 5-year DCF model which generated a price target of
$3.56(Appendix 27). DCF is sensitive to the following factors, the
derivations of which are explained below:
WEIGHTED AVERAGE COST OF CAPITAL (WACC)
The Group WACC is 6.47%(Figure L). It was calculated using its
current capital structure and the following inputs: Cost of debt 3.29%,
cost of equity 6.88%. Cost of equity was estimated using CAPM with
adjusted Beta of 0.6, market risk premium 7.5% and risk free rate
equal to 2.375% based on 10 year Singapore Government bond
yield (October 2015. Singapore government security).
REVENUE GROWTH
We forecasted 2015 revenue using 1st
half year earning. Revenue
growth for Starhub's service revenue based primarily on increasing

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population and number of household. Starhub has shown low single
digit growth in service revenue over the past several years.
Mobile Revenue are its major revenue source and the 5 years CAGR
growth of 1.2%, as it has been driven the demand for mobile data for
smartphone and table.
Fixed Network services have growth potential of CAGR 2.85% as it
has started transforming its existing core and access network to
open, cloud-based networks using software-defined networking
(SDN) technology.
PayTV revenue have its CAGR of -0.05%, we believe that the
transformation of technology enable user to watch their source of
media via internet. Starhub are looking closely at delivering an
programme across multiple platform in order to retain its subscriber.
Broadband Revenue for the quarter has sharp decline which fell 10.8
per cent to $48.1 million. Projected with a negative CAGR of 3.49%,
IDA allows free market entry for telecommunication industry, threat
of new entrants and price competition are recognise.
Aggregate Revenue growth are 0.96% as close as Starhub 2nd
quarter outlook of low - single digit (Figure M).
TERMINAL GROWTH
As Starhub are facing rising wages and deflation in Singapore, This
rate will recover and reach a terminal growth rate to mean expected
inflation of 0.6% (Figure N), which was accounted in the Terminal
Value of DCF model was account in 5 year DCF model. (Appendix
27)
DDM MODEL
Starhub has a strong history of dividend payout ratio to shareholders.
They are required to pay out approximately 90% of earnings as
dividends & maintain its quarter 5 cents per share since Q4 2009.
The forecasted calculates an intrinsic value of $3.10 that have a
CAGR of 0.04%, which reaffirms of Hold recommendation.
(Appendix 28)
Relative Valuation
Relative valuation was primarily focused on EV/EBITDA &
EV/Revenue (Appendix 29). As both analysis leads to an intrinsic
value of $3.58, for Starhub, a 0.55% lower than the current trading
price. Due to the small different in percentage, we remain confident
that this valuation conveys our Hold recommendation and justify our
target price $3.56

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FIGURE O: REAL WAGE TO
COMMUNICATIONS CPI % CHANGE
Source: MOM, Singstat
FIGURE P: LIQUIDITY RATIOS
Source: Team Calculations
FIGURE Q: NATIONWIDE OUTDOOR
SERVICE 4G % COVERAGE
Source: IDA
FIGURE 13: RISK MATRIX
INVESTMENT RISKS
ECONOMIC RISKS
RISING WAGES & DEFLATION IN SINGAPORE [ER1]
Singapore is facing tight labour market due to government regulations
which limit entrance of foreign workers. This would in turn increase wages
of the labour market. Singapore has been slowly increasing in wages over
the years. Wage contributes to operating expenses. Together with deflation,
which means that price of goods and services are decreasing, which means
that profit decreases for companies in Singapore. (Figure O) When profit
decrease, profit margin decreases as well.
SLOWDOWN IN ASIA ECONOMIES [ER2]
Economic slowdown in Asia may put a pressure on sales growth as people
might cut down on spending.
LIQUIDITY RISK
LEVERAGE RATIOS [LR1]
Using the quick, current and cash ratios, we can see that Starhub is
overleveraged. There is a decrease in all 3 ratios (Figure P), which mean
there might be a risk of the company becoming insolvent when they are
unable to pay their debts.
MARKET RISK
GROWING POPULARITY OF OTT SMARTPHONE APPLICATIONS [MR1]
Free calling features from smartphone applications leads to consumer using
more of them instead of existing voice call services, posing a threat.
COMPETITIVE RISK
LIBERALISATION OF THE TELECOMMUNICATIONS SECTOR [CR1]
IDA plans to set aside a third of the 900MHz band spectrum at a heavily
discounted rate to facilitate the entering of the 4th telco. The current
spectrum rights expire in March 2017, which means that the 3G mobile
customers may see a degradation in services. This will make the already
highly competitive telecommunications sector even more challenging with
the declining market share and price decrease in products and services.
OPERATIONAL RISK
FAILURE OF NETWORKS AND SYSTEMS [OR1]
Starhub may malfunction or have outages in networks due to natural or
man-made causes. Such losses or damage may significantly disrupt their
operations which may materially adversely affect their ability to deliver
services to customers. Starhub has been fined for such occasions.
REGULATORY RISK
STRINGENT REGULATION [RR1]
Starhub faces strict regulation by IDA, like monitoring 4G coverage. (Figure
Q) Non-compliance of regulation may have reputational impact and the
company may incur financial penalties.
TABLE 1: RISK & MITIGATING FACTOR Source: Team Estimates
RISK MITIGATING FACTOR
ER1 Monitor of budgets and expenditures periodically to minimise the risk of over-investment. Continue cost
management programmes for cost structure improvements.
ER2 Its price inelasticity may cushion this impact.
LR1 Increasing value in Shareholder's Equity
MR1 No more unlimited data plans, Starhub earns from higher data charges. Starhub gains from collaboration with
these applications to offer specific data plans. VoLTE technology providing superior voice and video quality to
protect existing voice revenues
CR1 Starhub, unlike Singtel and M1, is not based on the 900MHz spectrum. And IDA has yet to come up with a
decision as the plan may come at an expense of the consumers.
OR1 Starhub rolls out commercial trial of Lampsite indoor coverage solution in collaboration with
telecommunications solutions providers to increase better coverage indoors and areas that are unable to get
coverage. Also, heterogeneous networks (Hetnets) are rolled out by Starhub to can optimize the quality of
mobile experience at crowded places, hard to reach areas and special events. Scheduled maintenances are
done periodically to ensure that the infrastructure and network services are functioning normally.
RR1

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Disclosures:
Ownership and material conflicts of interest:
The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company.
The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might bias the content
or publication of this report.
Receipt of compensation:
Compensation of the author(s) of this report is not based on investment banking revenue.
Position as a officer or director:
The author(s), or a member of their household, does not serve as an officer, director or advisory board member of the subject company.
Market making:
The author(s) does not act as a market maker in the subject company’s securities.
Disclaimer:
The information set forth herein has been obtained or derived from sources generally available to the public and believed by the
author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or
completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This
information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report
should not be considered to be a recommendation by any individual affiliated with CFA Society Singapore, CFA Institute or the CFA
Institute Research Challenge with regard to this company’s stock.
CFA Institute Research Challenge

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APPENDIX
BUSINESS DESCRIPTION
APPENDIX 1: SUBSIDARIES OF STARHUB
StarHub Mobile Pte Ltd
StarHub Mobile Pte Ltd operates a mobile network that provides 4G, 3G and 2G
services. It also offers a comprehensive range of mobile price plans and value-added
services to users.
Since its inception in 2000, StarHub Mobile has been recognised for its service
innovations and customer-focused offerings, including market-shaking features such
as free incoming calls, per-second billing, free IDD calls to selected
destinations, price capped data plans, flat roaming rates, pfingo
services and more. StarHub Mobile offers Singapore's most
comprehensive range of mobile TV channels for customers, who
can watch news, documentary, sports, lifestyle and
entertainment programmes on the move. In addition,
StarHub Mobile is a member of the Conexus Mobile
Alliance, one of Asia's largest mobile alliances aimed at
developing and enhancing international roaming and
corporate mobile services for its members' customers.
Although the last entrant in Singapore's mobile market, StarHub Mobile
has grown rapidly to become the island-nation's second-largest mobile
service provider.
StarHub Cable Vision Ltd
StarHub Cable Vision is a media and infocomms company with a $600 million nationwide broadband network built in
Singapore. As a testament to the strategic importance of this network, which was completed in September 1999, the
company was designated a public telecommunications licensee by IDA in April 2000. StarHub Cable Vision is also the
first in Singapore to be awarded the ISO 9001:2000 certification for both its media and info-comms operations.
Currently, StarHub Cable Vision offers StarHub TV, the multi-channel pay TV services (including HDTV, multi-screen, on-
demand services) launched in June 1995 and also offers pay TV through IPTV to commercial entities.
StarHub Internet Pte Ltd
StarHub Internet aims to be the preferred Internet Service Provider in Singapore. Our focus on customer satisfaction
ensures that we make the Internet work for our customers, by providing quality corporate and personal Internet services.
StarHub Internet was previously voted the winner in CNET Singapore's "Incredible Service Provider" polls in 1999 and
2000. StarHub Internet was also recognised as the "Best ISP Of The Year" in the inaugural Internet World Asia Industry
Awards 2000. Today, StarHub Internet provides Internet services, innovative multimedia applications, and fixed and
mobile convergent services, in a complete info-communications package customised to fit the needs of our customers in
Singapore.
StarHub Online Pte Ltd
With its flagship service, MaxOnline, StarHub Online Pte Ltd is a fast-growing Internet Service Provider in Singapore.
MaxOnline is the first "always-on", unlimited, plug-and-play residential broadband Internet access service launched in
Singapore. It also offers MaxInfinity fibre broadband service over the Next Gen NBN, providing download speeds of up to
1Gbps and symmetrical bandwidth for downloading and uploading. StarHub residential broadband customers can enjoy
"Anytime TV", StarHub TV’s on-demand library of more than 6,500 TV shows and movies as well as complimentary pay-
TV channels.
Nucleus Connect
Incorporated on 14 April 2009, Nucleus Connect is responsible for designing, building and operating the active
infrastructure of Singapore's Next Generation Nationwide Broadband Network (Next Gen NBN). Nucleus Connect offers
comprehensive and flexible services that will help Retail Service Providers select and deliver broadband connectivity
services to their target markets quickly and seamlessly, bringing a more enriching experience to the end-users.
Source: Starhub’s Website

13
APPENDIX 2: STARHUB STRATEGIES
On the corporate front, we see the potential to grow this segment. We have solutions like Content Delivery, Clean Pipe,
Managed Security Service and Enterprise Mobility Management to meet our customers' network and mobility security
needs. We have also introduced the SmartBusiness cloud ‘market place’, which let SMBs have easy access to various
applications and computing resources and thus be more competitive.
We are confident that our brand, technology and assets, and more importantly, our ability to build close partnerships, will
help us drive and capture this emerging business. Right now, our revenue mix is mainly contributed from the consumer
segment. We believe this ratio will change over time to reflect a higher contribution from the business sector.
With Hubbing, we bring value; with superior customer service, we bring satisfaction. Superior customer service is a strong
belief we hold close to our hearts. We will leverage big data to understand our customers’ trends and preferences, and
anticipate their needs better. This will translate into loyalty and sustainable growth in value for all.
Besides continuing to build the exciting StarHub brand to surprise and delight our customers, we also want to be a
responsible corporate citizen in this wider community too. To achieve this, StarHub’s operations, brand value and ethos
are constantly guided by Ethics, Corporate Governance, Human Rights, Environmental Responsibility and Civic
Mindedness.
We are committed to conducting business in a sustainable manner and are working with industry partners in e-waste
recycling. We have also introduced electronic billing and our new carrier bags can be reused many times. We will
continue to drive more of such sustainable practices and are pleased that our on-going efforts in these areas have been
recognised.
In January 2014, we were named 29th in the Corporate Knights’ Global 100, a highly-regarded global benchmark of the
top 100 sustainable corporations. It is a huge improvement from our 66th place in 2013. While we are honoured to be
among the four Singaporean companies and only local telecoms operator to make the list, we want to be even better.
Customer's loyalty reward system. Formation of a new division called i3. Formed in February 2013, i3 stands for
‘innovation, investment and incubation’ and the team is responsible for new forms of service consumption, new markets
and new platforms so that we can effectively compete against disruptive entrants into the market. The division will be
responsible for forging new partnerships, forming regional think tanks and incubating new ideas from innovative
entrepreneurs the world over. These new products and services will then be brought into the traditional lines of business
as part of our service offering, or spun out as independent services. The initiatives will also be underpinned by our big
data platform, SmartHub. As part of our innovation continuum strategy, we initiated the MediaHub project at the end of
2013, at one-north near Buona Vista. MediaHub is positioned to be our hotbed for innovation and future business and will
house both the i3 and SmartHub teams. [2013 AR]

14
MANAGEMENT &GOVERNANCE
APPENDIX 3: BOARD OF DIRECTORS
Key
Executive
Position Description Starhub Board
Appointment
Steven Terrell
(Terry) Clontz
Chairman Mr Steven Terrrell (Terry) Clontz was appointed as its first
President and CEO of Starhub in January 1999. He retired
as Starhub CEO in January 2010 but continued to serve as
a non-executive Director and Member of the Company's
Strategy Committee. In July 2015, he succeed Mr Tan
Guong Ching as its Chairman and Non-executive director.
16 Years
Tan Tong Hai
Chief Executive
Officer
Executive Director
Mr Tan Tong Hai was appointed as its Chief Executive
Officer and Executive Director of StarHub in March 2013.
Mr Tan joined StarHub then in 2009 as its Chief Operating
Officer, overseeing the day-to-day operations of the
company.
3 Years
Paul Ma Kah
Woh
Independent
Director
Chairman of Audit
Committee (AC)
Mr Paul Ma Kah Woh was appointed to the Board on 23
September 2015. Mr Ma is the Chairman of its Audit
Committee.
1 Year
Peter Seah Lim
Huat
Non-Executive
Director
Chairman of
Executive Resource
& Compensation
Committee (ERCC)
Nominating
Committee (NC)
Mr Peter Seah Lim Huat was appointed to the Board on 22
July 2002 and was last re-elected as a Director on 14 April
2014.
13 Years
Nihal Vijaya
Devadas
Kaviratne CBE
Independent
Director
Chairman of
Strategy Committee
(SC)
Mr Nihal Vijaya Devadas Kaviratne CBE was appointed to
the Board on 16 August 2004 and was last re-elected as a
Director on 14 April 2014.
11 Years
Sio Tat Hiang
Non-Executive
Director
Mr Sio Tat Hiang was appointed to the Board on 2 July
2012 and was last re-elected as a Director on 15 April
2013.
3 Years
Teo Ek Tor
Independent
Director
Chairman of Risk
Committee (RC)
Mr Teo Ek Tor was appointed to the Board on 16 August
2013.
11 Years
Lim Ming
Seong
Non-Executive
Director
Mr Lim Ming Seong was appointed to the Board on 14
December 2000 and was last re-elected as a Director on
15 April 2013.
15 Years

15
Liu Chee Ming
Independent
Director
Mr Liu Chee Ming was appointed to the Board on 16
August 2004 and was last re-elected as a Director on 15
April 2013.
11 Years
Robert J. Sachs
Independent
Director
Mr Robert J. Sachs was appointed to the Board on 29 April
2012.
10 Years
Rachel Eng
Yaag Ngee
Independent
Director
Ms Rachel Eng Yaag Ngee was appointed to the Board on
4 May 2015.
1 Year
Nasser Marafih
Non-Executive
Director
Dr Nasser Marafih was appointed to the Board on 9 July
2014.
8 Years
Takeshi Kazami
Non-Executive
Director
Mr Takeshi Kazami was appointed to the Board on 13 April
2013.
3 Years
Source: Starhub Company Website
Succession plan:
A recent succession plan took place on 15 July 2015 by Mr Steven Terrell (Terry) Clontz to succeed Mr Tan Guong
Ching. Past succession plans includes the succession of Mr Tang Tong Hai to succeed Mr Neil Montefiore as CEO of
Starhub on End February 2013.The ERCC oversees the succession for the CEO, the CFO and other key officers and
reviews the succession plans for key positions in the Group.
Based on MAS's code of corporate governance, Starhub fulfils the following codes:
 Board Independence: 50% (6 out of 13 members are independent)
 Board competencies: Comprises of individuals with diverse qualifications and backgrounds
 The company discloses all the directorships and chairmanships in listed companies by its directors, both current
and those held over the preceding 3 years.
Both the firm's management and the board works very closely in view to success in the long-term of various businesses
of the Group. The Board Committees facilitates the discharge of its functions, required to make decisions on matters
within its terms of reference and applicable limits of authority. The role is to review and make recommendations to the
course of action to the Board for consideration and decision. The Board reviews the decisions made by each Board
Committee. Each Board Committees and the Board have the role and responsibility to enhance shareholder value. The
company regards board meetings necessary to ensure that all directors have relevant information and up-to-date working
knowledge of the Group's business and operations.
Source:
 Starhub Company Website (http://www.starhub.com/about-us/company-information/corporate-structure/board-of-
directors.html)
 MAS Website (http://www.mas.gov.sg/regulations-and-financial-stability/regulatory-and-supervisory-framework/corporate-
governance/corporate-governance-of-listed-companies/code-of-corporate-governance.aspx)

16
APPENDIX 4: REMUNERATION
The table below shows the annual Remuneration for the Board (in SGD$'000) over the last 4 years.
The table below shows the directors' remuneration (in SGD$'000) over the last 10 years. For CEO, Executive Directors
and Key Personnel, the remuneration is calculated by the total of fixed component, variable cash component, annual
variable bonus (AVB) and share-based compensation. For non-executive directors, remuneration is calculated by the total
of cash component and share component.

17
APPENDIX 5: ANALYSIS OF CORPORATE GOVERNANCE
We analyse the competence of Starhub's corporate governance to conclude the degree of threat to its shareholders by
utilizing the Governance and Transparency Index (GTI).
Board of Directors
The board comprises of very experienced individuals with diverse qualifications and backgrounds. However, it comprises
of close to 50% proportion of independent directors (6 out of 13 members) on board. This means these directors do not
own shares in Starhub and they might not act in the interest of the shareholders or the management as they do not have
a material or formal relationship with the company.
Conclusion: Hence, it brings a certain risk to the shareholders, bringing a significant threat to them.
Transparency and Disclosure of Information:
Starhub releases annual reports which is back dated as early as in year 2004. It reports all board matters, remuneration
matters, accountability and audit, shareholders rights and responsibilities, communication with shareholders, conduct of
shareholder meetings and additional initiatives to enhance corporate governance. Investors can find these reports under
the dedicated Starhub IR website, which provides timely resources for shareholders. All new material price-sensitive
information are disclosed on SGXNET. Hence, this brings an insignificant threat to the shareholders. Shareholders may
request information to the IR team by filling up the contact form on the website.
Conclusion: Starhub practices transparency and a fair disclosure of information to the shareholders. This brings an
insignificant threat to them.
Rights and Obligations of Shareholders:
Starhub keeps the shareholders well-informed regularly on its corporate affairs and activities. Shareholder meetings are
conducted to encourage their participation in the discussion. All shareholders are treated equally and disclosure of
information is released through the website to ensure fairness. Shareholders who hold shares through nominees are
allowed to attend the annual general meetings (AGM) as observers without being constrained by the two-proxy rule. They
are also entitled to vote at the AGM under the two-proxy rule where each shareholder can vote in person or appoint up to
two proxies to attend and vote on their behalf. In the case of absence at the AGM, the shareholder is not allowed to vote
unless they have appointed proxies to vote on their behalf.
Conclusion: Starhub keeps the shareholders in the loop, given their rights and treats every shareholder with fairness.
Hence, bringing an insignificant threat to them.
Security:
Going beyond the requirements of the code, Starhub implemented some policies to enhance corporate governance. One
of the policy is restriction in acquiring any of its shares in accordance to its Share Purchase Mandate, where a price-
sensitive development has occurred or is the core topic of a decision, before the development is publicly announced.
In addition, the board has voluntarily reduce the amount of shares from 20% to 15% of Starhub total issued shared
capital in accordance to the general authority of Starhub's shareholders to the Board. The board also voluntarily reduced
the aggregate amount of share wards from 15% to 8% of Starhub's total issued share capital that can be granted under
Starhub performance share plan and Starhub restricted stock plan. Another policy Starhub adopted is called the whistle
blowing policy. This policy is to encourage reporting of fraud and unethical violations happening in Starhub and
disciplinary actions will be taken against them. This is accessible for all employees and even for public members. Other
policies include Starhub's employee code of conduct, ethics policy, corporate gift and hospitality policy and supply and
vender policy. All these policies ensure good conduct in the workplace, transparency, objectivity and compliance.
Conclusion: This brings an insignificant threat to the shareholders.
Overall Conclusion: Based on the GTI assessment, the competence of Starhub's corporate governance brings
an insignificant threat to the shareholders. Hence, there is a low risk of entrenchment for the company's board of
directors.

18
APPENDIX 6: COMPENSATION AND INCENTIVE PLANNING
EVA Incentive Plan (EIP)
 Rewards employees for sustainable shareholder value creation over the medium term achieved by growing
profits, deploying capital efficiently and managing the risk profile and risk time horizon of the business.
Shared based compensation
Performance Share Plan (PSP)
 Long-term incentive to motivate the key management personnel to strive for superior performance and to align
their interests with that of shareholders
 ERCC grant contingent awards on an annual basis, conditional on meeting targets set for three-year performance
period
Restricted stock plan (RSP)
 Objective of motivating managers and key talent to strive for sustained long-term growth and superior
performance in the group
 Aims to foster a share ownership culture among employees within the group and to better align employees'
incentives with shareholders' interest
 ERCC grant contingent awards on an annual basis, conditional on targets set for a two-year performance period
Sources:
Starhub Annual Report 2014
(http://ir.starhub.com/FormBuilder/_Resource/_module/gZSLLgdlcU638zpQWaYGmQ/file/SHL_AR2014_Full_Report.pdf)

19
APPENDIX 7: SHAREHOLDERS STRUCTURE
Sources:
 Starhub Annual Report 2014
(http://ir.starhub.com/FormBuilder/_Resource/_module/gZSLLgdlcU638zpQWaYGmQ/file/SHL_AR2014_Full_Repo
rt.pdf)

20
APPENDIX 8: OUTSTANDING SHARES
Based on the statistics for past 5 years (2010 – 2014), the weighted average number of ordinary shares (in millions) have
shown an increasing trend. It is forecasted to increase further for the next 5 years (2015- 2019). This means that the debt
is very high compared to their equity. If Starhub raises its equity, it will be more beneficial for their situation.

21
INDUSTRY OVERVIEW & COMPETITVE POSITIONING
APPENDIX 9: ECONOMIC GROWTH

22
APPENDIX 10: DEMOGRAPHICS
There are a few indicators of demographics that is likely to affect telecommunication sector.
1. Expected Population Growth
2. Household Type
3. Business Size
1. Expected Population Growth
Over the last 5 years from year 2011, there is an increasing indication of the resident population in Singapore for persons
aged 15 and above. The population experience a slight growth of 0.3%-1.4% (in millions) between every year. However,
for non-resident population due to foreign labor restrictions undertaken by the Government, the statistics fell from 4.0% to
2.9% in mid-2013.
Based on Jan 2013 government white paper, the population is projected to reach to reach 6.5 to 6.9 million by year 2030.
In conclusion, the population will continue growing through the next few years. This will impact positively to Starhub to
reach to a larger base of target population.
2. Household Type:
According to IDA Singapore, the number of household access to broadband shows an increasing trend over the past 5
years. Another set of statistics on the total revenue of the info-communication industry also shows an increasing trend
over the past 5 years. This indicates that the increased number of household access to broadband affects the total
revenue gained of the industry. Since there is an increasing trend of household access to broadband based on the
statistics, it is projected to grow further in terms of numbers, which will in turn increase the total revenue in the industry.
Therefore, this will impact positively to Starhub.

23
3. Business Size
According to the Business Infocomm Usage Survey done over years 2012 to 2014, it has indicated that the business size
of the firms do affect the number of broadband access usage. It has been shown that in bigger firms that has 10 or more
than 10 employees seem to have an upward trend in usage of broadband access, whereas for smaller firms that has less
than 10 employees seem to have a slightly slower upward trend in between each year. Based on these trends, it is
projected to grow even further with more demand from bigger firms and a slight increase of demand of smaller firms on
usage of broadband access.
Sources:
• Singtat Government Website
(http://www.singstat.gov.sg/docs/default-source/default-document-
library/publications/publications_and_papers/population_and_population_structure/population2015.pdf)
• Phillip Investors Report 2014
(http://internetfileserver.phillip.com.sg/POEMS/Stocks/Research/SectorStrategy/SG/Telco20141215.pdf)
• IDA Website
(https://www.ida.gov.sg/Tech-Scene-News/Facts-and-Figures/Infocomm-Usage-Households-and-Individuals)
(https://www.ida.gov.sg/Tech-Scene-News/Facts-and-Figures/Telecommunications)
(https://www.ida.gov.sg/Tech-Scene-News/Facts-and-Figures/Telecommunications/Statistics-on-Telecom-
Services/Statistics-on-Telecom-Services-for-2015-Jan-Jun)
• Business Infocomm Usage Survey
(https://www.ida.gov.sg/Tech-Scene-News/Facts-and-Figures/Survey-Reports)

24
APPENDIX 11: TECHNOLOGY PENETRATION
1. Mobile population penetration
Mobile penetration rates has been on the rise across the globe. Singapore is top few countries with the highest
mobile penetration at 156% as of end 2013. Statistics has also shown that as population increases slowly over the
past 10 years (2004 - 2014), the number of mobile subscriptions increases rapidly up to almost twice the number of
population. As in recent trends, consumers are going towards a duality state, where each consumer can own multiple
subscriptions, there is still a possibility of a further increase in mobile penetration in future years. Hence despite the
decline in the total number of mobile subscriptions in year 2014, post-paid subscriber base continue to rise.
However, the mobile penetration has experienced a slight drop in year 2015. This shows that it has stopped increasing.
Although, the total post-paid subscriptions (4G) and total pre-paid subscriptions (4G) have shown an upward trend over
the 1st half of year 2015, mobile population penetration for the 1st half of year 2015 is averaged at 148% which is about
7% lesser than in year 2014.
In conclusion, the growth of mobile subscribers are expected to slow down, but to stay within 10% increased or
decreased range over the next few years.
2. Higher Mobile Data Consumption
Driving Growth with Higher Mobile Data Consumption
Out of 4.6 million post-paid subscribers, 58% of them switched to 4G lines in year 2014 since year 2012. The lines
offer 3 to 4 times faster speed than 3G speed that makes consumers browse and stream videos much faster.
However, this leads to requiring a higher mobile data usage and encourage higher data consumptions among mobile
subscribers. Hence, this greatly benefits the telcos to increase mobile revenue by charging for more mobile data
consumptions.
Source: IDA, Phillip Securities Research
Residents’ personal usage
According to IDA POI source, there is an increasing usage of mobile data in Singapore through year 2012 to year
2012 2nd quarter. This shows that the demand for mobile data usage in Singapore is also increasing.
Source: IDA Singapore
Source: IDA Singapore

25
APPENDIX 12: SWOT ANALYSIS
Strengths:
 One of Singapore’s most innovative telecommunication service company
 Strong positioning in residential Pay TV market
Starhub has the highest subscription numbers for Pay TV between Singtel and Starhub at 542,000 subscriptions.
 Good customer relationship management
- Starhub provides around the clock customer service for consumers. Hence, problems can be addressed at
any time if required and consumers will feel more secured and will trust the service more.
- Starhub promotes interaction with the consumers via social media like Facebook by replying to their
feedbacks or comments on their page. In addition, they also released an interactive commercial called
Starhub free hub IT that allows the public to interact with them.
- Member schemes, hub club and platinum club, are exclusive only for consumers that subscribe to all their
services. Through these member schemes, Starhub can connect to them exclusively and provide them with
discounts and special privileges.
 Adaptable to changes
To survive in an oligopoly market, Starhub come out with solutions that distinguish them from the other telco
companies in regards to changes. There was a period when all the internet services provided by all the providers
were the same, Starhub distinguished themselves by providing the highest and fastest internet service.
 Anticipate changes
Starhub anticipate changes by coming out with innovative and fresh ideas. They are the first service provider to
come out with Hubbing, putting them ahead of others. Other ideas like student plan with unlimited SMS services,
switching to cloud-based network, exclusive cable TV service and exclusive cable TV service-exclusive channels
are also ideas that put them ahead of the game.
Weaknesses:
 Too focused on Singapore’s market
This causes concentration risk that might impact the company. Growth is limited to the saturated mobile market in
Singapore.

26
 Involvement in an oligopoly market
Decisions and strategies made are affected due to the competitor companies. It is difficult to come out with new
ideas and differentiate themselves, without making a loss. Hence, ideas are often adopted by other telcoes.to
maintain the same level.
 Emphasis on acquiring new customers than on retaining existing customers
Many promotional campaigns are aimed at attracting new customers, but not existing customers. Loyal and long-
time customers have not been rewarded, apart from those who are under membership scheme.
 Low competitive advantage on broadband services
Service revenue down mainly from broadband competition.
Opportunities:
 Expansion into South East Asia markets
Venturing into South East Asia mobile operator instead of just focussing on Singapore market
 Encourage more interaction with customers
More interaction with customers to understand their needs
 Venture into new technologies to improve service
Venturing into new technologies, such as new wireless technology and 5G technologies.
 Focus on fixed network and cable TV
As Starhub has a lower competitive advantage over broadband, the focus could be shifted to other services such as
fixed network, cable TV and broadband services to increase more revenue.
Threats:
 Industry competitors provide similar services
Services provided by Mobile 1 (M1), Singtel and Starhub are similar across the industry and it is difficult to
differentiate which one has more competitive advantage than the other.
 Emergence of the 4th
Telco – My Republic
As demand for data consumption continues to increase, the new telco (My Republic) that is entering the market plans
to propose a service for large data, and this will put pressure on current pricing of existing data plans. This could
impact the margins for the three major telecoms, M1, Starhub and Singtel and their infrastructure investments.
 Threat of substitution of Pay TV
Pay TV contributes to the one of the biggest revenue to Starhub. Substitution for this service holds a big threat for the
company. There is a recent giant video streaming service, called Netflix, which is scheduled to launch in early 2016. It
is very likely that this service will clash with Starhub's Pay TV service and affect greatly to the company's revenue.
 Enter of big global players into the market
Big global players from America or Europe might enter into the Asian market.
 Growing popularity of over-the-top (OTT) smartphone applications
 The government’s restriction
The government impose restrictions on the telco and this will majorly affect the revenue. Recent restrictions by the
government affected the mobile pre-paid revenue, due to a reduction of number of prepaid SIM card allowed
registered to each subscriber

27
APPENDIX 13: PORTER’S 5 FORCES
Bargaining Power of Buyers – LOW [2]:
Many customers renter the market after the term of 2 contractual years, so it seems like the three competing companies
are readily replaceable. But with only such few telcos that have relatively equal quality, the oligopoly market companies
acts like a cartel, when one increases prices, the other will also follow. This is evident when the data monetisation
happened, when all the telco companies cut down free mobile data with the plans and monetize it. Even when the 4th
telco joins, it will take awhile for them to build up market shares, making buyers rely on the current telco plans available.
Also, they may comform to current market practices to survive in the oligopoly as time passes. This is evident when the
data monetisation happened, when all the telco companies cut down free mobile data with the plans and monetize it.
Intensity of Competitive Rivalry – SIGNIFICANT [4]:
Telecommunications sector is divided by geography, and in Singapore, the greatest competitor is Singtel and M1. The
telecom service in Singapore have a high intensity in competition because they try to differentiate themselves with
innovation and advertising instead of just the common services.
Bargaining Power of Suppliers – LOW [2]:
In Singapore, there are many suppliers serving only 3 telecommunication companies, making it low cost of switching
between suppliers for the telcos. This causes suppliers to have lack of bargaining power against the telcos. Only very
minimal suppliers are exclusive ones, and with Singapore as a technology hub, it is much more easier and cheaper to find
alternative supplies. There are exclusive suppliers that were able to bypass this, for example ESPN Cable TV Supplier
with the access to Europe Football League, have to be bidded for the Pay TV. Starhub hold 80% of Pay TV services in
Singapore. If Singtel, the competitor of Pay TV services, gain access to this supplier independently, Starhub will suffer
significant losses, allowing this case to be exclusive.
Threat of Substitutes – INSIGNIFICANT [1]:
Although there are no substantial switching costs from Starhub to other telcos, there are few substitutes in the market.
Technological advances, especially in Singapore, makes it easy to match up new technologies of “substitutes”.
Customers are usually tagged to a 2 years mobile plan, but the outages in mobile network in Starhub may make
customers want to change to a better network of a different company if it’s disruptive to their lifestyle.
Threat of New Entrants – MODERATE [3]:
For the telecommunications sector in Singapore, there are no limits to the number of license given by the Government.
Because of this, there is free market entry and exit unless there are resource and other physical constraints (e.g.
frequency spectrum, land for satellite and cable landing stations). Despite this, there are only 3 telecommunications in
Singapore, which can be due to the high infrastructure costs and the fact that Starhub (and its competitors) are big
companies. Resources allows big companies to do more aggressive marketing and have an advantage over smaller
companies that are unable to make the masses identify with the brands.
However, IDA proposed heavily discounted rate to attract the fourth Telco, and there are contenders for this, like My
Republic. One of the key revenue is data monetization for all the telco now, the entrance of the 4th telco will definitely be
disruptive to Starhub as it’s likely to come in with attractive data package offers. IDA plans to set aside a third of the
900MHz band spectrum. The current spectrum rights for the current telcos expire in March 2017. The entrance of the 4th
telco will reduce Starhub’s current market share considerably, especially if it does very well.
Future Outlook as a Whole – The firm must be able to strategic industry positioning and capitalise on what comparative
advantage they have to survive in the long term.
Sources: Team Analysis, IDA, Straits Times, Today Online, Channel News Asia
LEGEND
0 No threat to Starhub
1 Insignificant threat to Starhub
2 Low threat to Starhub
3 Moderate threat to Starhub
4 Significant threat to Starhub
5 High Threat to Starhub
0
1
2
3
4
5
Intensity of
Competitive Rivalry
Threat of Substitutes
Bargaining Power of
Suppliers
Threat of New Entrants
Bargaining Power of
Buyers

28
FINANCIAL ANALYSIS
APPENDIX 14: CONSOLIDATED STATEMENT OF FINANCIAL POSITION

29
APPENDIX 15: CONSOLIDATED INCOME STATEMENT

30
APPENDIX 16: CONSOLIDATED CASH FLOW STATEMENT

31
APPENDIX 17: STARHUB REVENUE
APPENDIX 18: FINANCIAL RATIO

32
APPENDIX 19: GROWTH TRENDS
APPENDIX 20: CASH FLOW TRENDS

33
APPENDIX 21: EARNINGS PER SHARE
Source: STARHUB 2014 ANNUAL REPORT

34
APPENDIX 22: PROFITABILITY

35
APPENDIX 23: HUBBING IN REVIEW

36
APPENDIX 24: CROWDTIVATE
Source: https://www.techinasia.com/singapores-starhub-launches-worlds-telcobacked-crowdfunding-site/

37

38
APPENDIX 25: EFFICIENCY

39
APPENDIX 26: PARTNERSHIP

40
VALUATION
APPENDIX 27: DISCOUNTED CASH FLOW ANALYSIS
Source: Annual Report, Starhub Limited 2010 – 2014
Fiscal Year Ends Dec 31 2010 2011 2012 2013 2014 2015 E 2016F 2017F 2018F 2019F
Total Revenue 2,237.70 2,312.00 2,421.60 2,369.60 2,387.20 2,373.13 2,394.89 2,417.42 2,440.75 2,464.87
Effective Tax Rate: 16.74%
EBITDA: 603.60 678.10 723.90 745.80 749.90 759.40 766.36 773.57 781.04 788.76
EBITDA margin 26.97% 29.33% 29.89% 31.47% 31.41% 32.00% 32.00% 32.00% 32.00% 32.00%
Operating Income (EBIT): 344.10 400.30 451.40 476.30 478.70 507.41 514.37 521.58 529.05 536.77
Operating Margin 15.38% 17.31% 18.64% 20.10% 20.05% 21.38% 21.48% 21.58% 21.68% 21.78%
Less: Taxes, Excluding Effect 54.30 64.30 72.10 78.00 85.60 84.94 86.11 87.31 88.56 89.86
Tax Rate 15.78% 16.06% 15.97% 16.38% 17.88% 16.74% 16.74% 16.74% 16.74% 16.74%
Net Operating Profit after Tax (NOPAT) 289.80 336.00 379.30 398.30 393.10 422.47 428.27 434.27 440.49 446.91
Adjustments for Non cash charges:
Depreciation & Amortisation 259.50 277.80 272.50 269.50 271.20 251.99 251.99 251.99 251.99 251.99
Other Non-Cash Charges 29.10 0.30 (2.40) (25.80) (15.20) (3.84) (8.66) (11.37) (13.56) (11.55)
Total Non Cash Adjustment 288.60 278.10 270.10 243.70 256.00 248.15 243.33 240.62 238.43 240.44
Changes in Working Capital:
Net Decrease / (Increase) 63.50 38.30 42.00 (17.50) 8.10 7.06 23.25 3.93 22.97 3.18
Less: Capital Expenditure (272.10) (246.50) (272.70) (302.80) (321.60) (308.51) (311.34) (314.27) (317.30) (320.43)
.
Unlevered Free Cash Flow: 369.80 405.90 418.70 321.70 335.60 369.17 383.50 364.55 384.59 370.10
Calculating Fair Value
Discount Rate(WACC): 6.47%
Discount Factor 100.00% 93.92% 88.22% 82.85% 77.82%
Terminal Value $6,342.69
Terminal Growth Rate 0.60%
PV of Terminal Value $4,935.88
Present Value $369.17 $360.20 $321.59 $318.65 $288.01
Explicit Period FCFF $1,657.62
Total Enterprise Value $6,593.49
Less: Total Debt ($687.50)
Plus: Cash $264.20
Implied Equity Value $6,170.19
Share Outstanding 1732.4
Implied Share Price (Intrinsic value) $3.56
Current Share Price(as of 30/10/15) $3.60
Discount to valuation -1.07%
Historical Projected
Starhub - Discounted Cash Flow analysis

41
APPENDIX 28: DIVIDEND DISCOUNT MODEL
Financial Year Dividend Per Share Dividend Paid(m) No. of share(m)
2009 $0.1840 316.7 1720.8
2010 $0.1991 343.1 1723.6
2011 $0.1990 343.3 1725.1
2012 $0.1990 343.4 1725.8
2013 $0.1992 344.2 1728.33
2014 $0.1993 345.2 1732.4
3-Yr CAGR 0.04% 0.18% 0.14%
WACC 6.47%
DDM Pricing Model $3.10
2015E $0.1993 345.8 1,734.8
2016E $0.1994 346.5 1,737.3
2017E $0.1995 347.1 1,739.7
2018E $0.1996 347.7 1,742.2
2019E $0.1997 348.4 1,744.6
DDM Model
The DDM was built assuming to 3 Years CAGR of Dividend Per Share of 0.04%. These historical pay-out has been
consistent with quarterly dividend of $0.05 since Quarter 4 2009.
The DDM calculated a per share price of $3.10(< $3.70)

42
APPENDIX 29 - COMPARABLE COMPANIES AND MULTIPLES ANALYSIS:
Company Current
Asset
Current
Liabilities
Starhub 547.2 1,072.5
Singtel 5,643.2 5,402.2
M1 249.3 576.7
Company Mkt.
Cap(M)
Ent. Val
(M)
Revenue EBITDA Total
Debt
Total Asset Share price
(as of 29
Oct)
Equity Share O/S BV per
Share
Starhub 6,227.3 6,725.6 2446.7 741.6 687.5 1,855.0 3.60 155.0 1,729.8 0.09
Singtel 63,295.7 70,592.0 17283.8 7033.7 8,679.1 42,110.0 3.97 25,319.
4
15,943.5 1.59
M1 2,661.3 3,005.0 1195.544 340.026 351.1 1,057.0 2.84 369.0 937.1 0.39
Company EV / Rev EV /
EBITDA
Debt /
EBITDA
Total Debt /
Asset
P / BV Profit
Margin
Current
Ratio
Dividend
yield
Starhub 2.7 9.1 0.9 37.06% 40.2 16.81% 0.5 5.59%
Singtel 4.1 10.0 1.2 20.61% 2.5 22.37% 1.0 4.41%
M1 2.5 8.8 1.0 33.22% 7.2 16.17% 0.4 6.61%
3rd
Quartile
3.4 9.6 1.1 35.1% 23.7 19.6% 0.8 6.1%
Mean 3.1 9.3 1.1 30.3% 16.6 18.5% 0.7 5.5%
Median 2.7 9.1 1.0 33.2% 7.2 16.8% 0.5 5.6%
1st
Quartle
2.6 9.0 1.0 26.9% 4.9 16.5% 0.5 5.0%
As we evaluating the fundamentals of margin and risk for Starhub and its direct competitors in Singapore, our hold
recommendation are grounded for a various of reasons. Starhub generates a profit margin, current ratio and dividend
yield that are similar to the Medium figure. The P/BV are very high compare to its peer. The merits power is Debt to
EBITDA are lowest, the concerns were total debt to asset are high.

43
EV to Revenue Valuation (in Million) EV to EBITDA Valuation (in Million)
Median EV from Revenue Multiple 6,725.57 Median EV from EBITDA Multiple 6,725.57
Less: Debt 687.50 Less: Debt 687.50
Less: Minority Interest 0.00 Less: Minority Interest 0.00
Plus: Cash and Cash Equivalents 155.00 Plus: Cash and Cash Equivalents 155.00
Equity Value 6,193.07 Equity Value 6,193.07
Fully Diluted Share Outstanding 1729.8 Fully Diluted Share Outstanding 1729.8
Intrinsic Value per Share $3.58 Intrinsic Value per Share $3.58
Current Trading Price(as of 30/10/15) $3.60 Current Trading Price(as of 30/10/15) $3.60
Discount to Valuation -0.55% Discount to Valuation -0.55%
Book Value per Share Valuation (in Million)
CC3 Book Value per Share (MRQ) 0.09
Median Price to Book Value 7.2
Intrinsic Value per Share $0.65
Current Trading Price(as of 30/10/15) $3.60
Discount to Valuation -82.05%
EV/Revenue valuation and EV/EBITDA valuation shows its intrinsic value are very close to its current price. Book value
are off the chart as Starhub P/B ratio are consist very extreme compare to its peers.
Therefore we are very confident in our Hold recommendation on Starhub.

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