05 June 2006

~ Cancellation of 306 million shares representing 14.3% of its total issued share capital ~



Singapore, 5 June 2006 – StarHub today announced a proposed capital reduction exercise, which will involve a payout of approximately S$652 million to shareholders.


Based on StarHub’s total issued share capital as at 31 May 2006, comprising approximately 2.14 billion shares, the proposed capital reduction will involve the cancellation of about 306 million shares or about 14.3% of StarHub’s total issued share capital.


The proposed capital reduction exercise will involve one StarHub share cancelled for every seven StarHub shares held by each shareholder.


For each StarHub share cancelled, shareholders will receive S$2.13.  The per share amount is based on the average closing price of StarHub shares that were traded on the Singapore Exchange from 25 May 2006 to 31 May 2006 (both dates inclusive).


"This capital reduction exercise is in keeping with our capital management policy to operate within an efficient capital structure and to return surplus cash to shareholders as soon as practical.  StarHub will continue to review its capital structure in light of its cash flow trends, cash operating requirements, and investment needs.  We will make further adjustments to StarHub’s capital structure when appropriate,” said Mr Terry Clontz, President & CEO of StarHub.


Subsequent to the proposed capital reduction, StarHub’s total group share capital will be reduced to approximately S$227 million comprising 1,837 million shares.  With a 14.3% reduction in outstanding shares, the Group’s return on equity (ROE) will be enhanced.  On a proforma basis, based on the audited financial statements for FY2005, this capital reduction would have increased the ROE of the Group from 23% to 67% and the Net Debt to 1.6 times of the FY2005 EBITDA.


After the capital reduction, the Company’s financial position is expected to remain strong.  Cash flows generated from operations are expected to support the stated dividend policy of not less than 10 cents per share in fiscal year 2006, adequately service the expanded debt level, and cover operating and investment needs.


The proposed capital reduction is contingent on approval by the SGX-ST, regulatory authorities and shareholders at an Extraordinary General Meeting, which will be held in July 2006.  Approval from the Singapore High Court is also needed for the capital reduction exercise.  Subject to these approvals, StarHub expects that shareholders will be paid the cash distribution from the capital reduction by end September 2006.


“Some of the statements in this news release constitute "forward-looking statements" that do not directly or exclusively relate to historical facts. These forward-looking statements reflect StarHub Ltd’s current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside StarHub Ltd’s control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Because actual results could differ materially from StarHub Ltd’s current intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward-looking statements contained in this news release with caution."