Starhub analysis Essay Example for Free

Starhub analysis Essaygeneric Characteristics of Telco manufacturingMarket structure is either aMonopolyNatural monopolyOligopolyDominated by a handful of big players utmost capital expenditure (capex)Absolute fixed cost is high b arely fixed cost per user is real let looseTelco may be very cash flow rich if capex is controlledLow operating expenditure (opex)Average cost per user is very, very, VERY low.Generic Characteristics of Telco sedulousnessLines of noteVoiceTraditional fixed lines overtaken by runnySome households do not even have fixed linesi.e. M1 gives free fixed line with fibre planLucrative international dialing business is largelygoneReplaced by selective information i.e. Skype, VOIP etc.Generic Characteristics of Telco IndustryLines of businessDataEscalating bandwidth demand (geometric growth)Some business models have failed as a resultUnlimited mobile data plan replaced by tieredpricing plansReasonably priced unlimited fixed broadband/fibrestill available in s ome countries (not so in the US).Price differentiation among home and business dataplansSub segment differentiation exists gamers (lowlatency)Telcos need data to make up for loss revenue in voicebusinessGeneric Characteristics of Telco IndustryLines of businessPay TVTelcos offering pay TV not common for allcountries. Exists in Singapore.Always a balancing act between controlling costof content and charging viewers moreCost is increasing for developed countries Not so for developing countries.. icon on-demand new business modelDont pay for a whole channel, just pay for theTV program you wantMio TV vs air TVGeneric Characteristics of Telco IndustryStrategy for non-saturated marketsBuild out infrastructure and reportage whilecontrolling capexGain market sh atomic number 18 by grabbing customersEspecially in underserved marketsAttempt to lock in existing customersIncrease revenue by offering differentiated priceplansTiered data plans (both mobile and fixed)Sell supplementary services Caller ID, low latency etc.Generic Characteristics of Telco IndustryStrategy for mature and saturated marketsInfrastructure and coverage largely built so there is little capexControl opex tightlyGain market sh be by poaching customers fromcompetitorsAvoid price warf areSame as beforeAttempt to lock in existing customersIncrease revenue by offering differentiated price plansExpand into oversea marketsAny economies of scale?Industry Life Cycle Analysis porters atomic number 23 ForcesThreat ofNewEntrantsBargainingPower ofprovidersCompetitive contestWithin theIndustryThreat ofSubstitutesBargainingPower ofBuyersPorters Five ForcesThreat of New EntrantsHow easy is it for new players to enter the industry?What are the barriers to entry?Loyalty to existing brandsStickiness and incentives (e.g. loyalty points)High switching costsHigh capex and fixed opex costsScarcity of resourcesGovernment restrictions and licensingTechnology and intellectual retention rightsPorters Five ForcesPower of Su ppliersHow much pressure stomach suppliers keep on thebusiness?Single or few suppliers (monopoly or oligopoly)few or no substitutesSwitching to new supplier is costly or timeconsumingSuppliers product is extremely importantSuppliers industry has higher profitability thanbuyers industryPorters Five ForcesPower of BuyersHow much pressure can buyers exert on thebusiness?Single or few big buyersPurchases are in large volumesSwitching to a different competitor is easyNo stickiness or loyaltyBuyers are price sensitiveCompanys product is not importantPorters Five ForcesAvailability of SubstitutesHow likely are customers to switch?Few or many similar products on the market?Switching cost is low and easy to doDisruptive technologySecular changes in consumption patterns andlifestylesPorters Five ForcesCompetitive RivalryHow intense is the competition in the industry?High competition means low marginsNumber of competitors and sizeAny dominant company?Little differentiation between competitor sproducts and servicesIndustry life cycleYoung market means all firms grow as overall pieexpandsMature market means competitors grow by takingmarket share from other companiesApplying Porters Five Forces to StarhubThreat of New EntrantsGovernment license is required and need to bid forairwaves in political sympathies auctionIs Singapore government issuing new telco licenses?What is the availability of airwaves?Auction prices cheap or costly?High capex and fixed cost..but very low opex cost per userLoyalty and sticknessSome stickiness due to subscribe to obligations (earlytermination penalty) and incentives (handset upgradesubsidies)Low switching costs if not under contractNo cost and retain old mobile numberApplying Porters Five Forces to StarhubPower of SuppliersPressure from handset manufacturersHandset subsidy recouped by locking incustomers into contractsBig difference in price of handset without contractApple able to negotiate for higher pricesTelcos subsidize more. Costs pa ssed vote out toconsumers.Pressure from content providersCable TV pays HBO, Fox etc for contentSpecial events like EPL cost much moreCosts have been escalating lately..Applying Porters Five Forces to StarhubPower of BuyersMany retail customers (Starhub is no. 2 in SG)Extremely price sensitiveLittle brand loyalty and stickiness respective(prenominal) customer have zero powerEasy to switch out to competitors offeringsProduct is important but not tied to StarhubE.g. can get same handset and data plan fromcompetitorsSome tradeoff between monthly price plan and dataAll telcos moving remote from all-you-can-eat data planApplying Porters Five Forces to StarhubAvailability of SubstitutesHandsets are not tied to StarhubVoice and data plans are also not remarkable to StarhubCable TV content is differentiatedCompetes only with Singtel but not directlyDifferent content and pricing contentSpecial events like EPL are hotly contentedApplying Porters Five Forces to StarhubCompetitive RivalryExtr emely high competitionMature and saturated Singapore marketStarhub grows by taking market share fromSingtel and M1Little differentiation between competitorsproducts and servicesBut no direct price competition contempt rivalry, industry margins relatively highLow opex cost per userAverage revenue per user (ARPU) is growingDriven mainly from new tiered data plansKey Ratios for Telco IndustryEarnings Before Interest, Taxes, Depreciation andAmortization (EBITDA)Indicator of a companys financial performanceChurn trampActual rate at which customers leave for acompetitorAverage Revenue Per User (ARPU)Takes into account revenue, capex and opex.As market matures, ARPU drops.THE EQUITY RESEARCH work onPurpose of the Equity Research ReportTo communicate to clients a single messageHow to allocate financial resourcesAll other issues are secondaryWhat are readers looking for?Ideas, ideas and ideasUnique ideas are great but most of the time, ideasgenerated could just be the same as everyone else Herd instinct is safe optionBut no one will remember you..How to Make the Report Valuable?Use the KISS principleInvestors have little time (and patience)Communicate clearly, briefly and get to the point.Have something to sayDoes it lead to an actionable idea?Report is an opportunity to standout and may lead toother revenue generating activities or more brass timewith the client.How to Make the Report Valuable?Issue the report in a timely fashionGiving investment opinion and advise withal late ispointlessBetter late than never fails in this caseTreat your reader with respectReader may be an investment victor herselfDont patronize or condescendTailor tone and language to target audienceHow to Make the Report Valuable?Be dispassionate and objectiveA research report is not an advertisement.Even if you like the company very much, not overhype the company leave that to the IR firmsKnow your stuffBe familiar with both the industry and companyBe brave (but be prepared to face the firi ng squad)The best analysts are willing to take risks with theiropinions