StarHub CEO rebuffs talk of merger with M1, says keen on boosting profit of cyber-security unit

M1 chief executive Manjot Singh Mann (left) with his StarHub counterpart Peter Kaliaropoulos after signing an exclusive agreement to cooperate on a joint bid for a 5G licence.
M1 chief executive Manjot Singh Mann (left) with his StarHub counterpart Peter Kaliaropoulos after signing an exclusive agreement to cooperate on a joint bid for a 5G licence.PHOTO: M1

SINGAPORE (THE BUSINESS TIMES) - Mainboard-listed StarHub chief executive Peter Kaliaropoulos rebuffed speculation of a possible merger between the telco and its 5G bid partner M1 at its virtual annual general meeting (AGM) on Friday (May 22).

He also said StarHub is working to grow its cyber-security arm's top and bottom lines, after Ensign InfoSecurity turned its first quarterly profit in the three months to March 31. StarHub held its AGM with investors over live webcast, with shareholders required to submit questions and votes in advance.

Reading from prepared remarks, Mr Kaliaropoulos said that "we take a serious view on improving Ensign's profitability".

Queries on the performance and prospects of StarHub's cyber-security business, which delivered year-on-year revenue growth of 79 per cent in 2019, were among the "substantial and relevant questions" picked for Mr Kaliaropoulos to address.

The cyber-security business clocked a full-year turnover of $145.7 million in the 12 months to Dec 31, 2019, but also chalked up losses of $21.8 million.

Ensign - a pure-play joint venture with Temasek set up in late-2018 - spent its first full year in the red on the back of operating expenses from "significant investments in (research and development) and human capital", according to StarHub.

This year's profitability could also take a hit from the novel coronavirus pandemic, which StarHub noted has led to cautious corporate spending, as well as project and tender delays.

But Mr Kaliaropoulos said: "We maintain a long-term view on business strategies and will continue to strike a balance between accelerating growth and enhancing profitability."

Manufacturing and healthcare clients offer short to medium-term cyber-security growth opportunities, even as Ensign looks to grow in the Asia-Pacific, he added.

The addition of cyber-security services to the group portfolio "has resulted in tremendous capability for our company, in terms of growth and market share", and Ensign now holds a roughly 16 per cent share in its home market of Singapore, Mr Kaliaropoulos estimated.

He also said: "With strong foundations in place, it plans to aggressively grow its top line and benefit from scale so as to optimise margins."

 
 
 

As for StarHub's role in the upcoming 5G wireless market, Mr Kaliaropoulos reiterated that it is too early to share plans and forecasts until a full licence is awarded later this year.

But he quashed the notion that StarHub is angling for a merger with Keppel-owned M1. While the two telcos are set to share the costs in a joint roll-out of 5G network infrastructure, Mr Kaliaropoulos stressed that the partners "will launch their own offerings and solutions for customers with separate go-to-market strategies".

"Mergers depend on market conditions, are subject to regulatory approvals, and (are) driven by value-creation requirements for stakeholders," he added. "Beyond the 5G strategic collaboration, no intent or discussion of any kind is under way at this stage that may lead to a merger."

Mr Kaliaropoulos, who kicked off a strategic business transformation with layoffs when he took the helm in mid-2018, also gave an update on the "Hello Change" consumer drive.

"We are accelerating our digital efforts," he remarked, while noting that some 690,000 post-paid mobile customers are on the simplified plans.

More than 260,000 cable subscribers were also migrated successfully to fibre, which is expected to shake up the pay-television business.

 
 

Mr Kaliaropoulos, who has pushed for pay-TV media content providers to charge StarHub on a variable rather than fixed-cost model, added that "most" providers are now doing so.

The management also reassured shareholders that StarHub's dividend policy remained in place, recent yanked guidance notwithstanding.

Just one quarter into the year, the company withdrew its financial guidance, as Mr Kaliaropoulos said the Covid-19 pandemic made accurate forecasting nearly impossible for the short term.

This included a payout pledge of nine Singapore cents a share, which was trimmed in 2019 from 16 cents before. Still, StarHub said that it is committed to returning 80 per cent of underlying net profit to shareholders.