StarHub to buy majority stake in MyRepublic's Singapore broadband business

The proposed transaction will consolidate and strengthen StarHub's position in the Singapore broadband market.
The proposed transaction will consolidate and strengthen StarHub's position in the Singapore broadband market.PHOTO: ST FILE

SINGAPORE – Local telco StarHub will be buying a majority 50.1 per cent stake in rival Internet service provider MyRepublic’s broadband business for residential and enterprise customers in Singapore. 

For now, the deal is worth $70.8 million.

Announcing this on Wednesday (Sept 22), the two companies said that the proposed transaction will consolidate and strengthen StarHub’s position in the Singapore broadband market by “steering long-term business growth”.

It will also expand StarHub’s Singapore broadband market presence from 34 per cent to 40 per cent. This translates to more than 578,000 residential and enterprise subscribers in total, going by June 30 figures.

MyRepublic, initially started by a former StarHub executive, currently has a 6 per cent share of the broadband market here, and has 89,000 residential and enterprise subscribers. StarHub has 489,000 residential subscribers.

In contrast, competitor Singtel, Singapore’s largest telco, had 655,000 residential and enterprise fixed broadband subscribers for the same period.

StarHub said that it “sees clear synergistic value in MyRepublic’s broadband business in Singapore, which is a profitable and growing business and expected to be accretive to our earnings”.

Mr Nikhil Eapen, StarHub’s chief executive, added that the telco stands to benefit from MyRepublic’s “lean operating model and experiences in regional markets”.

MyRepublic said that the capital raised from the deal will be used to accelerate its plans to expand across the region.

The company’s co-founder and chief executive Malcolm Rodrigues said that StarHub’s investment and partnership with MyRepublic “validate the vision of digital transformation we set out to bring to the industry, in Singapore and beyond”.

He added that the milestone would propel the company forward in its “journey towards an initial public offering (IPO)”.

The IPO has been delayed a few times. In 2019, the company said that it had planned to go public in Hong Kong by end-2020. Earlier, it had pushed back its debut from late-2018 to mid-2020.

The transaction is expected to close by December, subject to the fulfilment of mutually agreed conditions and regulatory approvals.

The Infocomm Media Development Authority (IMDA), Singapore's telecommunications regulator, said that approval from the authority is necessary and that it will assess the proposed consolidation.

On why the companies are planning the deal, DBS Bank analyst Sachin Mittal said that MyRepublic needs financial support and validation from a firm like StarHub.

StarHub on the other hand stands to learn a lot from MyRepublic to become leaner, said Mr Mittal, who is DBS Bank’s regional head of telecom and technology research.

He added that the deal is a very clear sign that a larger telco can learn from and validate a smaller player, which does not happen often.

“It’s quite amazing that the net profit margins of MyRepublic’s broadband business are higher than StarHub’s overall business,” he said, stressing that StarHub is 25 times bigger than MyRepublic.

“There is a lot for them to learn from each other and a lot of infrastructure sharing they can do in the broadband business.”

StarHub shares closed on Wednesday at $1.23, down slightly by 1 cent.

Impact on customers

StarHub and MyRepublic said that they expect MyRepublic’s broadband business to continue to operate independently even after the acquisition.

“MyRepublic’s existing senior management team will continue to manage the local broadband business, with StarHub having an oversight of the business,” they said.

The companies also intend to “work on joint go-to-market strategies and cross-sell products and services between the two brands” to enhance their reach and optimise costs. The details will be discussed later.

MyRepublic said this means that “the experience that customers have come to expect of the brand... will not only remain, but get even bigger and better”.

And in the future, its broadband customer base will stand to benefit from StarHub’s consumer and enterprise business groups, MyRepublic said.

This includes access to a growing suite of products and services offering connectivity, over-the-top content, cloud gaming and other experiences.

Over-the-top services are those offered directly over the Internet such as Netflix, Apple iTunes, YouTube and Facebook. They usually exclude services offered by cable or broadcast providers such as bundled cable TV channels.

Transaction details

The acquisition involves a StarHub wholly owned subsidiary, StarHub Online, buying a majority interest in a new business entity, MyRepublic Broadband, which holds MyRepublic’s broadband business here.

Beyond StarHub’s initial investment of $70.8 million for 50.1 per cent of shares in MyRepublic Broadband, the former will consider investing up to $92 million more if future financial performance matrices are met.

This means StarHub’s total investment in MyRepublic will be up to $162.8 million.

The transaction is a mix of equity and debt and will be funded using StarHub’s internal cash resources.

If the deal goes through, MyRepublic Broadband will become a StarHub subsidiary. MyRepublic will retain the remaining 49.9 per cent stake in MyRepublic Broadband.

MyRepublic also offers mobile services in Singapore, has broadband businesses in Australia and New Zealand, and licensing deals in Brunei and Indonesia.

Asked about these other businesses, StarHub did not say if it was also planning to acquire stakes in them later.

But it said the Singapore deal with MyRepublic is “the start of a long-term partnership, which may open doors to other opportunities for greater collaboration between both companies”.

StarHub has also agreed to refinance $74.2 million of MyRepublic’s debt for three years. This will be through a loan, with interest, from StarHub.

StarHub connection

MyRepublic was started about 10 years ago and launched its broadband services in 2012.

Prior to MyRepublic, Mr Rodrigues was a former vice-president for StarHub's international and wholesale business.

In August, MyRepublic said it had appointed former StarHub veteran Jeannie Ong as its group chief investor relations officer, a new role in the company.

Ms Ong was StarHub’s former chief strategic partnership officer and chief marketing officer. She was part of the team that helped with StarHub’s IPO in 2004 and left the telco after serving 17 years.

MyRepublic had said that Ms Ong would head moves to establish and maintain relationships with investors and stakeholders, with a view of leading the company to an IPO.