StarHub Announces Q2 Earnings And Interim Dividend

The listing of the shares of StarHub Ltd on the SGX-ST was sponsored by Credit Suisse First Boston (Singapore) Limited and UBS AG, acting through its business group, UBS Investment Bank.

Singapore, 3 August 2005 - StarHub Ltd ("StarHub" or "The Group") today announced a net profit of S$52.7 million for the quarter ended 30 June 2005. This compares favourably against a net loss of S$10.4 million for 2Q2004. The Group's operating revenue totalled S$382.6 million, up 15.8% from S$330.4 million a year ago. For the half-year ended 30 June 2005, its net profit was S$83.1 million compared to a net loss of S$46.6 million over the same period in 2004. This was achieved on the back of 1H2005 operating revenue of S$757.4 million, versus S$654.5 million for 1H2004.

StarHub's EBITDA for the second quarter grew by a robust 46% to S$115.3 million, compared to S$78.9 million in the prior year period. EBITDA as a percentage of service revenue margin achieved a new quarterly high of 31.8%, 6.8 percentage points higher as compared to last year's 25.0%. On a half-yearly basis, EBITDA surged 50.6% to S$214.6 million from S$142.5 million previously, while EBITDA margin as a percentage of service revenue expanded from 23.0% to 30.1%.

StarHub's free cash flow for the quarter remained steady at S$45.7 million compared to S$45.8 million in 2Q2004. Capital expenditures increased from S$46.1 million to S$98.7 million for the latest quarter. This is mainly attributable to payments made for the 3G mobile network and other network capacity expansions. For the half year ended 30 June 2005, free cash flow rose significantly by 162.8% to S$95.0 million, up from S$36.2 million previously.

In line with the Group's change in depreciation rates for certain network assets with effect from 1 January 2005, there was a reduction in depreciation charges by $18.9 million in 2Q2005 and $48.0 million in the half year ended 30 June 2005.   

During the quarter, on a year-on-year basis, three of the Group's four lines of business recorded double-digit revenue growth. Broadband grew the fastest at 43.3% due to increases in customer base and ARPU. Mobile services grew 17.9%, driven by a larger customer base and strong ARPU, while Cable TV achieved a 14.3% year-on-year growth rate made possible by an increase in customer base, and strong ARPU generated in part by a significant uptake in Digital Cable services.

For the quarter ended 30 June 2005, earnings per fully diluted share were 2.46 cents, up from a negative 0.49 cents in the prior year.

Financial Highlights

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1H2005 Financial Highlights

• Contributions to the revenue mix from Mobile, Cable TV, Broadband, Fixed Network Services and Sales of Equipment were 52.8%, 16.7%, 10.9%, 13.8% and 5.8%, respectively.
• Mobile revenue grew 17.6% to S$399.7 million from S$339.7 million, as a result of a 25.0% increase in our customer base to 1.287 million. Post-paid mobile services revenue rose 9.4% year-on-year to S$325.4 million, accounting for 81.4% of the Mobile revenue mix. Pre-paid mobile services revenue grew 75.2% to S$74.3 million. Post-paid ARPU held relatively steady at S$71, while pre-paid ARPU grew 6.5% to S$24. Non-voice services contributed 16.6% of blended ARPU mix.
• Cable TV revenue grew 18.0% to S$126.7 million due to the larger customer base and 11.6% growth in ARPU to S$45 from S$40 previously. This came about from greater channel and service take-up by Digital Cable subscribers and an increase in Sports package pricing in 4Q2004. Average monthly churn rate remained relatively unchanged at 0.9% from 0.8% a year ago. 
• Broadband continued to register the strongest growth rate at 45.8% to S$82.5 million compared with S$56.6 million previously. This was achieved on the back of a larger customer base and improved ARPU which grew 7.7% to S$57, compared to S$53 for the year-ago period. Overall, there was a greater mix of customers subscribing to the higher tier price plans. 
• Fixed Network revenue decreased 10.3% to S$104.8 million. This was primarily due to planned lower revenue from traditional international voice transit services, where margins had declined.

1H2005 Business Highlights

• Mobile customer base grew 25.0%, representing a 31.5% mobile market share as at 30 June 2005. StarHub's share of the market net adds for the half-year was 57.2% as the mobile market penetration in Singapore touched 96.3%. 
  > GPRS traffic almost doubled to 1,372.4 gigabytes, while MMS traffic grew 87.6% to 7.7 million messages as at 30 June 2005. 
• Cable TV customer base grew 7.7% to 424,000 as at 30 June 2005, amounting to a household penetration of 38.2% compared to 36.3% in the prior year period.  Strong take-up in Digital Cable services resulted in a healthy growth in Digital Cable customers, thereby ending 1H2005 with a customer base of 117,000, which accounted for almost 28.0% of total Cable TV customer base. 
• Residential Broadband subscription-based customers jumped 37.6%, closing the half-year at 247,000 customers. Based on the IDA statistics (which includes pre-paid and wholesale customers), the total Broadband customers represents 49.2% residential broadband market share, an increase from 43.9% as at 30 June 2004. The monthly churn rate was maintained at an all-time low of 1.0%.
• StarHub's unique Hubbing strategy continued to gain wider acceptance. The percentage of StarHub customers who subscribed to any two or more services rose from 39.2% a year ago to 44.8%. During this period, the total number of households subscribing to at least one service also grew to 690,000 households.

"StarHub's second quarter performance continued to show that its revenue growth is delivering greater operating efficiencies and expanding margins. Each of our Mobile, Broadband, and CableTV businesses delivered double digit growth. In view of our first half performance, we are upgrading our guidance on full year revenue growth from high single digit percentage to the low-teens," said Mr Terry Clontz, President and CEO of StarHub.

"We are also delighted to report that the number of households who subscribe to two or more services from StarHub increased by 20% to 309,000 households over last year, indicating that more people are discovering the quality service we deliver and taking advantage of the value and convenience that hubbing with StarHub offers them."

"In view of StarHub's current cash position, free cash flow, profitability trend, and distributable reserves, we reaffirm our plans to pay a recurring minimum annual cash dividend of eight cents per share. In keeping with those plans, we are declaring an interim dividend of four cents per ordinary share, payable on 9 September 2005. In addition, shareholders will be pleased to know that StarHub is immediately adopting a quarterly dividend payment schedule, with the next regular dividend to be announced with the third quarter results ending 30 September 2005," added Mr Clontz.

 
Outlook for Year 2005
While competition remains keen in the mobile market, StarHub will continue to focus on customer retention and encourage subscribers to experience and enjoy the non-voice, lifestyle mobile contents that are available across its multiple platforms. The Group will also continue to drive broadband penetration in Singapore. On the Cable TV front, StarHub will strive to introduce more value-added services to stimulate more take-up of Digital Cable services. Other initiatives, such as IP telephony services, are expected to be rolled out in the next nine months.

Based on the current outlook, and barring any unforeseen circumstances and changes in economic and market conditions, the Group expects the growth in operating revenue for fiscal year 2005 to be in the low teens. EBITDA, as a percentage of service revenue, is expected to approach 30%, while Capex, as a percentage of operating revenue, is targeted to be in the mid-teens.

For more details on the Group's performance for 1H2005 and outlook for FY2005, please visit www.starhub.com/ir. Materials available at this website include the presentation and unaudited results for the second quarter ended 30 June 2005.