Is StarHub being overly-conservative with its FY2021 guidance, given the expectation of a year-on-year decline in Service EBITDA margin? What are StarHub’s views on the pace of recovery in FY2021?

While we see some early signs of recovery, we remain cautious about the pace of recovery in FY2021. We expect higher contribution from our Cybersecurity and Regional ICT Services segments,  offset by lower revenues from Network Solutions, Mobile and Pay TV. With the ongoing travel restrictions, we have factored in some roaming recovery in late-FY2021, compared to one quarter of roaming revenue recorded in 1Q2020. In consideration of the prevailing business environment, we expect FY2021 service revenue to remain stable.

Our expectation of a year-on-year decline in FY2021 Service EBITDA margin is a result of a change in revenue mix; lower Job Support Scheme (JSS) payouts; and initial investments related to our IT Transformation, 5G infrastructure and data centre rollouts in FY2021 to fuel future growth.  We continue to drive greater cost efficiencies in the last year of our D.A.R.E. transformation programme and identify further cost optimisation from our ongoing investments in transformation initiatives. We expect our operating margins to improve in the medium term.

Despite a challenging year, we have generated strong cash flow, maintained low leverage and kept our funding costs low while maintaining adequate liquidity for financial flexibility to fund growth initiatives. Regarding our dividend guidance for FY2021, we continue to maintain a sustainable and sensible approach to optimising the level of our dividend payout to optimise shareholder value. For FY2021, we will take into consideration factors including the impact of the ongoing COVID-19 pandemic, our ongoing investments in our digital transformation, and returns from our transformation initiatives.

StarHub’s FY2021 capex guidance excludes 5G and spectrum. Could you provide some guidance on the expected 5G capex required for FY2021? How will the joint venture company with another operator (“JVCo”) be accounted for in StarHub’s books?

In mid-FY2020, we guided that StarHub expects to invest approximately $200 million in 5G over the five-year rollout period. This includes (i) StarHub’s 50% share of investments into the JVCo; (ii) StarHub’s 50% share of the 3.5GHz spectrum fee; and (iii) StarHub’s own investments beyond the JVCo. Additional 5G investments beyond the guidance may be considered, and will be driven by business demand.

In terms of the pace of our investments, 5G Capex will be front-end loaded, alongside the pace required to meet regulatory obligations of attaining 50% nationwide 5G standalone coverage by FY2022. We have paid our 50% share of the 5G spectrum fee in 4Q2020 and will continue to invest in 5G over the next few years.

In terms of the accounting treatment for the JVCo, we will apply the equity method. Hence, we will incur a wholesale fee to the JVCo (Opex) instead of consolidating the JVCo’s Capex into our books. StarHub’s share of profit and/or loss from the JVCo will be reflected in the profit and loss statement under the “Share of gain/(loss) of joint ventures” line item.

For more information, please refer to note 3.1(v) in the Notes To The Financial Statements of the Annual Report.