Good evening, everyone. I hope you can all hear us okay. If you cannot, leave us a message. Thank you for joining us this evening. As usual, we have with us Nikhil, our CEO.
Hi, everyone.
Dennis, our CFO.
Hi.
Johan, who heads up our consumer business, and Kit, who heads our enterprise business. As usual, Nikhil will start off with some opening remarks, and we will go through the deck pretty quickly, and then followed by Q&As. Nikhil, over to you.
Yeah. Thank you, Amelia, and good evening to all of you, and thank you for joining us for our first half 2024 numbers. Without further ado, I will go over to the financial highlights. Starting, as always, with service revenue, we were up 2.4% for the year. This was driven largely by our enterprise business, which grew about 10.8% overall, with StarHub being managed services, which grew 33% year-on-year. This was offset to some degree by mobile overall, which ranked about 20%. Service EBITDA went up 2.9% for the first half year-on-year. This was a reflection of service revenue growth, as well as a little bit of early cost efficiencies, I would say. But not really coming from the DARE+ bucket, which is where we expect harvest really moving into next year. That is still to come.
On the net profit side, as always, our net profit growth was in excess of our service EBITDA growth. Our net profit growth year-on-year for the first half came in at about 8.7% year-on-year. The fact that, as always, it was above our service EBITDA growth was a function of a number of things. Number one, with DARE+ our ongoing move to asset light and shifting CapEx to OpEx, which has the benefit of achieving our goal to improve our total shareholder return and our return on equity.
As we move from 2024 to 2025, I will reiterate that we expect our DARE+ spend to come down significantly. We expect to complete the last bulk of our DARE+ spend at the end of this year. Also, as we move into next year, we hope to start harvesting cost efficiencies from DARE+ by decommissioning legacy systems. Last but not least, we hope to start making money with new platforms enabled by the transformation, DARE+ transformation, new platforms building. We externally might say, Kit, do you want to talk about a little bit of that?
Yes, please.
Now, what is not on this page is our strong free cash flow, which has been consistently above our net profit, increasing our cash leverage. This, of course, gives us the ability to support what has been, as you know, a rising dividend for us. It also gives us firepower for three things, really. To be more aggressive in the marketplace, in what is obviously a competitive marketplace. More important, number two, to drive our organic growth platforms. Then number three, to extend the organic opportunities available, we hope to acquire across the business. With that, I will move into the key segments. The mobile market overall experienced attrition, as you know. As you have seen from some of our competitors elsewhere, the year-on-year follow-up was actually quite dramatic.
We did have a bit of ARPU deflation, which Johan will talk about later, coming from the reduction of excess usage. Our goal for this segment is to maximize our revenue market share, to preserve and grow our gross profit, to minimize our revenue attrition, and really, we remain focused on monetization. We hope to do this by driving what is increasingly a multi-brand strategy, which again, Johan. On the broadband side, we were actually stable year-on-year when you extract the fact that we had zero margin premiums and promotions that we did at this time last year. Absent that, we were flat year-on-year for broadband. Versus competition, which is a good result again, increasingly in the marketplace.
One of the things that we are doing as a cornerstone of our strategy in this segment is to drive ultra-speed packages, so 3 Gb, 5 Gb, 10 Gb, very aggressively. This is taking our ARPU up in slow increments, and also it will take up our gross profit. Number three, on entertainment, we had a reduction year-on-year. This was a function of a couple of things. We are flushing out low-value promotional subs, which we are actually replacing with high-value bundles. This shift you can see was evidenced in our increased ARPU year-on-year. As we move forward to the rest of the year, we expect our enterprise and entertaining revenues to grow. We have a new PL season coming up. We wrapped up the season in the second quarter this year, and we have a new season starting.
We hope to continue our journey of adding premium subs, but also cross-selling and upselling into broader sports packages. Then last on enterprise, we saw a strong growth, 10.8% year-on-year. Managed services, that was StarHub, 33% growth. Cyber also did very well. We are also containing the attrition in legacy segments, showing high competitive marketplaces. Then last but not least, within regionalized team, we were able to grow our Indonesia business here. With that, I will pass on to our esteemed CFO, Dennis Chia.
Thank you, Nikhil. I will provide an update on our first half results, and our very good set of results against the guidance that we gave at the start of the year. To recap, we started the year guiding to 1%-3% growth in service revenue. I just want to state as a preamble that all these numbers exclude D'Crypt, the divestment of which was completed on 29th of February this year. So in terms of financial statements that you actually see in the financial reports at the MD&A, they include the two months of results for D'Crypt. These numbers exclude D'Crypt results, because going forward, we will not have them as part of the StarHub group results. Against the guidance of service revenue of 1%-3%, we ended the first half with 2.4% growth in service revenue.
We had guided to 22% of service EBITDA margins. We ended the first half at 22.8%, which is a slight increase from last year if you look at the margins year-on-year. CapEx commitments, which tend to be relatively lower in the first half of the year compared to the second half. Notwithstanding that, we had a first half CapEx commitment of SGD 7.7 million-SGD 10 million, which includes all the 5G investments as well as our DARE+ investments. Against the commitment of SGD 0.06 , at least SGD 0.06 of dividends, or 80% of net profit after tax, whichever is higher, the Board has declared interim dividend of SGD 0.03 for the first half of 2024. Just some key numbers on slide seven. We ended the first half with revenues of slightly under SGD 1.1 billion, and service revenue growth, as mentioned, of 2.4%.
Service EBITDA margins of 22.8% against an EBITDA of about SGD 227 million. Our net profit after tax attributable to shareholders was SGD 83.3 million, and that represents SGD 0.046 on the EPS basis. SGD 101.6 million is the free cash flow that we generated for the first half, representing SGD 0.059 per share. We ended the first half with SGD 564 million of cash and cash equivalents. A leverage ratio well below industry average of 1.23x on the back of very strong and positive working capital changes. With that summary, I hand over to Johan.
Yeah, thank you very much . Good evening, everyone. Nikhil was so kind to go through most of the important parameters. So I will just give you some color and context here and there, also anticipate some of the questions you may have. The drop in ARPU is mainly a result of the shift from devices only and to a lower revenue from the outside of bundle VAS and usage, which you will understand in this market where data bundles have become solar bundles. Customer base, you see there a nice uptick in the quarter, and year-on-year, we are up 22,000. That is mainly driven by SIM-only and the fact that we have onboarded a few MVNOs. In the current climate of the market, which is quite competitive in mobile, we managed to keep the churn modest, low, almost similar to the previous quarters.
Prepaid is a bit more seasonal. ARPU is flat, customer base is flat, so you can do the match yourselves. Not going to elaborate for that. That results in a slight drop in terms of service revenue, and that's on the back of an increased data usage. That's for mobile. If we then move to broadband, which is on the next page. Ta-da. Broadband ARPU is flat. You will see a decline in revenue, service revenue, at the bottom of a little bit more than 1%. That's fully the result of a lower premium revenue that's related to tactical promotions.
If you peel that off, actually, the service revenue just on connectivity is stable, and actually, the ARPU is inching up a little bit because we have been seeing a more than expected traction of customers picking up and taking on the higher speed plans, the 5 Gb and the 10 Gb, the ultra-speed plans, as we call them. You can see that the churn remains really at more or less the same level, 0.7%. That's really well managed by the team. Last section to cover is the most exciting, as always. For sure, you'll get a lot of questions on this one. Yes, we will. Entertainment. We had a real great Premier League season, and that's reflected also in the ARPU uplift from 45 to 46.
Then you may be wondering, h ey, that's great, but we do still see a decline in terms of subs. That's, to a large degree, a result of ending a number of tactical promotions, and a decline in revenue is to a large degree due to commercial advertising. If we look at the subscriber base, we see continuous interest in sports packages. It continues to grow. Also, our Premier League sub base has been continuously growing, and we do see a strong flow-through of entertainment customers latching onto broadband and entertainment. On that note, I'll hand over to Johan so he can give you a bit more-
You've got one more slide.
Oh, one more slide.
Not so fast, Johan.
Keeping forgetting my slide. Sorry about that. That is actually the exciting part, which I was just explaining. You may have been tracking us over the last couple of years on giga!. We had a big shift on giga! last quarter. We launched 5G on giga! and eSIM, and that resulted in a very strong growth for giga! on the back of a continuous, I would say, strong performance on that from Q4. Also on the StarHub brand, we have been pushing what we call Tier 2 services, which are cybersecurity services, smart protection services, and that has resulted in a double-digit growth in terms of, yeah, those vertical revenue streams. Broadband. Sometimes you have discussions with people who think, hey, broadband is all the same. Anticipating some of the questions. You could not be further from the truth.
There are common parts between ISPs when it comes to broadband connectivity delivery. We have been investing quite a fair bit of money in a new XGS-PON network. We are the first in the market, and we see very strong NPS on those products and we see a very strong growth. You basically see on the right-hand side that we have grown that particular base on the highest speed plans by twelvefold, and that is obviously helping us on the ARPU side. We combine that also with Wi-Fi 7 to enable customers to have not only a wider coverage at home but also much faster connectivity. So that is good there. On entertainment, we have been continuing our expansion on sports. I would really dare to call us the home of sports. We have added Premier League, and we have good reasons to believe that will do us good.
We had a first in the world end of last quarter when we ended the Premier League season, which was an event where we broadcasted the final round 10 games simultaneously. We had over 5,000 visitors, and they all rated us extremely high. We started off last week with the first game in, if I can call it that way, British football, Premier League football, which was a Community Shield, which went perfectly well. We got good customer feedback, and that again flows through in the core business. That is it from my side. Now this time I really have to hand over to Kit Yong. Thank you very much.
Thank you. From an enterprise front. Nikhil has mentioned that we are having good growth in the enterprise business, right? Starting with the network solutions, managed services. When we got the value change in what we offer in our managed services from a product, we managed to provide a service and a solution. This is the outcome of when we transformed our operating model in the past year from service line rather than product groupings. We are able to deliver more solutions that is relevant to the market, especially enterprise market. We are putting together the core services, plus the enterprise services coming together in order for us to create a value proposition that is differentiated in the market, right? The client will value these services that we offer. We move to cybersecurity.
For Ensign itself, they have a good order book last year, and it is now turning into revenue for them as they deliver the projects. These are the drivers for growth, right? When it comes to digital ICT services, Strateq is doing well, year on year growth. Versus Department of Statistics Malaysia, which is on end-user computing services. Last year they have a good order book, right? The client is now evolving the inventory that it takes. It is now at the downside of the buying cycle or the current cycle. Hence, the performance is weaker in the end-user computing. Having said that, Department of Statistics Malaysia has also moved into the network solution business, like what we do here in Singapore, leveraging on the same customer base that they have in order to grow their business. Next. NUS, right?
You may have seen us on the news, having MOU with NUS to support them in their vision to be a Borderless University. This enablement to our services and solutions is powered by our 5G and Cloud Infinity platform, right? NUS will get a differentiated dedicated data networking and using eSIM to enable seamless connection and access to their own enterprise network. We are doing a bit of enterprise services and cloud core integration on the mobile side to enable this so that the outcome they want to deliver is a seamless experience for the students, researchers, lecturers in accessing their electronic seamlessly, whether in campus or whole island wide.
That is a goal that we are coming together to overcome and provide them a secure communication connectivity between their secure enterprise network where their electronic research is confidential, but seamless connectivity when they are outside the university. That enables a secure borderless access. Through this initiative, we can also collect data through the eSIM to look at the performance, to look at new data insights that will enable us to have a very data-driven decision-making process to introduce new services such as AR/VR, real-time data analytics. This is a new possibility that we can offer using our network connectivity and Cloud Infinity platform. With that, I finish my presentation.
Nikhil, any closing comments before-
Yes, I would just leave for you to consider and to have at hand our strategic priorities for the rest of the year. I do not want to dwell on it too much, as these are consistent with the priorities that I laid out for you for the year in the past. We will be providing an update on these priorities as we go through our Q3 results in November, and we reach near the end of the year. We can talk more then. Amelia, back to you, and I suppose we have some-
Yes
...quite a lot of time for Q&A, right?
Yes, we do.
So-
As usual, if you have a question, please raise your hand and then you can unmute yourself and converse directly with management. First up, we have Hussaini. Hussaini, could you please unmute yourself?
Yeah, sure. Thanks, and good evening, everyone. Thanks for the opportunity. I have five questions, and probably I am hijacking the call. The first is on the spectrum payments, which is due for 700. Any color on that side? Given the fact that 5G is mostly being rolled out in Singapore, is there a way or there is potential for the telcos to optimize the payment on that side? That's question number one. The second question is on the managed services. There was a very strong growth. I just wanted to understand, how should we see the growth going forward? The nature of the business is that it is going to be lumpy, or is it more sustainable in nature? The third question is on the postpaid churn rate, which has inched up.
I just wanted to understand, are there areas of concern or is still quite okay? The fourth question is on the CapEx side, wherein the CapEx run rate in first half is much lower than the full-year guidance. I just wanted to understand, should we expect to see it accelerating in the second half? Finally, on the dividends, and correct me if I'm wrong, that when I compute your EPS, it is coming to around SGD 0.046-SGD 0.0 47 . 80% of that is a higher number compared to SGD 0.03 . I just wanted to understand and if I'm missing anything over there. Thank you.
All right. Thank you, Hussaini. Maybe let's start with the spectrum payments. Nikhil, would you like to take that?
Yeah. On 700 MHz, just to recap a little bit, as you know, the 700 MHz spectrum was auctioned and to some degree allocated, I believe in 2018 or 2019.
2018.
2018. Thank you, Dennis. Well before my time. The circumstances were quite different at the time. It was allocated for 4G. 5G had not been planned for at the time, and spectrum for 5G had not been awarded. And of course, it was different market circumstances, right? I think the fourth operator had either not entered into the market, but was fairly imminently poised to do so. Ticking through all of those three things and where we stand today, the use of 700 MHz spectrum obviously it's got to be 5G, not 4G. Having said that, 5G rollout is extremely advanced, and we have been hitting our coverage requirements in line with regulatory constraints and serving our customers with 5G for quite a period of time now. Also rolling out enterprise use cases. Then on the last factor, obviously the market circumstances are quite different.
With that in mind, we are obviously in active engagement with the regulators around some of these nuances and complexities. But at the same time, obviously we are planning and doing our network planning and our business planning and our optimization as well as our monetization planning for 700 MHz and what it allows us to do. That's a complicated exercise that is complex. It is underway, and it's something that we're engaged with the regulators on. Beyond that, I can't really comment because those discussions are obviously something, the nature of those discussions are between us and the regulators and not privy to share details of those discussions.
Okay. Kit, on managed services growth.
When it comes to managed services growth, it's been growing on a double-digit growth year-on-year, and we expect it to continue to grow. We have grown from strength to strength from a normal silver tier partner with the technology partner now to a gold partnering partnership. We are seeing good pipelines ahead of us replacing incumbent technologies with our unique value proposition that we are creating that integrates not just the enterprise network but also telco services to create a new value proposition. The question, is it lumpy or monthly recurring? Actually, we provide flexibility to our enterprise clients. There are clients who prefer to do it on a CapEx model and become lumpy product services, and there are clients who prefer to be on a monthly recurring or multi-year contract with us.
We give the flexibility for the client to decide, based on two of where their comfort zone is based on their business considerations in terms of business model they want to engage with us. That's how we are growing the managed services. Giving flexibility, giving agile, challenger mindset, give a value proposition that integrates it with our partner's briefing. That's how we're going to continue to grow the managed services.
Okay. Nikhil?
All right. On the third question, thank you very much for that one, is whether we are concerned about the marginal increase in the postpaid churn rate. The answer is no, and it's perfectly well explainable. As the market shifts from the device contractual three-year plans to SIM-only, it is unavoidable and logical that there is an inching up on the postpaid churn rate. That's a function of the fact that SIM-only always has a slightly higher churn rate than contractual device plans, and that's well within boundary and being monitored. So no concern at that point in time. Thank you.
Okay. Dennis, maybe the last two questions on CapEx and dividend.
Okay. Hi, Hussaini. On your question on CapEx commitments, as I had mentioned, Typically in the first half of each financial year, the CapEx commitments are relatively lower in the second half. As we go through the year, our management continues to look at our CapEx and OpEx spends and investments, and we rationalize it along the way. So typically in the first half, it would be relatively lower. We expect to then catch up in the second half as we look to completing as much of our DARE+ spending in 2024 and leaving behind a very small portion in 2025. That is consistent with the guidance that we have been giving up to this point. On your fifth question on dividends, the 80% of net profit after tax or SGD 0.06, whichever is higher, is applied to the full year results.
As at the half year mark, we had committed to SGD 0.06 as the minimum, and therefore, on that basis, we are just declaring half of that SGD 0.06 at SGD 0.03. When we complete and announce our full year results, typically in February of next year, depending on what the net profit after tax number will be at that point in time, we will then apply that dividend policy in declaring our final dividend. Therefore, the total dividend for the year will then be applied at that point in time. I hope that answers your question.
Yes, very helpful.
Hussaini , I hope we have addressed all your questions.
Yes, very helpful. Thanks a lot.
Thank you. Next in line we have Arthur.
Hi, Arthur.
Hi, good evening. Thanks for the opportunity. Three questions, please. Firstly, just to clarify on the margin. 1H was trending ahead of your targets. Are these basically back-ended spending on DARE+ and IT upgrades, or are you actually finding new areas of efficiency at this point? Second question I had is with regard to spectrum again. I know you may not be able to disclose much on this, but are there any options on rejecting the 700 band at all, given that you've fully rolled out on 5G anyway? When will the payments actually come due for this? Third question is on broadband. I know that your competitor, SIMBA, had been very aggressive on consumer and enterprise broadband plans. Is this a cause of worry for you, or do you find trends to be stable given the bundling activity? Thank you.
Dennis, maybe the first question on margins.
Okay. Hi, Arthur. Good evening. On margins, on an ongoing basis, the management team continues to look at areas of what we call strategic cost management. This is applied across the entire group, not just telco operating units, but also in our subsidiaries, our regional ICT business as well. Across the company, we had undertaken this initiative a couple of years ago, and this is an ongoing exercise.
Through that exercise, we've been able to then rationalize certain areas of our spends to then manage the margins and obviously with a view to improving the efficiency and cost efficiencies, as well as the operating margin. That's something that we continue to do. As we tail off the DARE+ spending into the first half of 2025, we expect to then generate the outcomes from these investments into 2025 and into the outer years as well. This is the trajectory that we expect to be able to continue and improve over a period of time.
Nikhil, the question on spectrum for you, please.
Yeah, Arthur, I apologize for this. I am trying to differentiate the nuance of your question from the one before. Could you maybe just repeat that?
On the 700 band spectrum, I am just wondering, are there any options from actually just walking away from it?
Oh, yeah.
given that this was taken in the context of 5G and that you've already fully rolled out on that side? When do the payments actually come due for this?
Yeah. On the first question as to whether there are options to return the spectrum, there are no real viable options to return the spectrum. The spectrum was auctioned. We and others participated in auctions. The spectrum bands were awarded and allocated. So there are no real feasible alternatives, certainly from where we view the situation, to return the spectrum per se. Now, in terms of timing and optimization of payment, I'll put that in the bucket of discussions that we continue to have with the regulators, which we'll update you on in due course.
Understood.
Okay. Johan, the question on broadband, on SIMBA.
Oh, that one. Yeah. Look, sorry, I was distracted a little bit along with you. I have got so many things in my brain these days. I think we discussed it last quarter as well. Broadband is a fundamentally different business than mobile. Broadband is not something people like to. As a customer, you cannot experiment with broadband as you can with mobile. For mobile, you can just buy SIM-only, you can try it out. You like it, you like it, and blah, blah. Broadband, not. Your minimum commitment is 12 months, and it is typically a service people do not like to gamble with because there is too much at stake. It is important to have good connectivity at home for work from home, studying, and so forth. That is number one.
Number two is that broadband, unlike mobile, does require, in certain cases, at least for the peace of mind of customers, the mental reassurance that you can fall back on a well-established service operation if needed. And that is what we are known for. The second point. Third, today still a large majority, not a majority, a large part, let me be very careful what I am saying here. A large part of the customers opt for what we call HomeHub+, meaning combining broadband and entertainment, because as you know, we aggregate quite a fair bit of OTT, and we have made entertainment very relevant in today's context of households. And that is driving, obviously, differentiation and uptake from a customer perspective.
Fourth, it is almost like I am doing a sales pitch here, but I am just giving you back what we see from research and listening to customers, is that CPE, customer premise equipment, matters more than ever before. Customers are very aware about the quality of routers and ONTs, and they basically base their decision, in a lot of cases, on those as well. Fifth, I want to take away a myth today. A lot of people think that because of NLT, all the broadband is the same. Wrong. Myth dispelled. And I will explain you why. There is part of the infrastructure which is common, which is delivered by NLT. There is also a significant part of the infrastructure which is operator owned, and we have invested as, the first to market, by the way, the XGS-PON network.
Not only that is a differentiator, also the way we build resilience redundancy in the network and enable international gateways and access to overseas servers, which delivers a very different experience altogether. So, not all the things are the same, and we are in a good position to be differentiated, and that is also what we have seen specifically the last two quarters, with a very significant amount of customers opting in for our higher speed plans. And that has helped us in terms of NPS as well as in terms of underlying ARPU. So, that was a holistic answer, quite detailed. I hope that serves the purpose. Thank you.
Can I maybe just add a sort of fairly, one or two specific comments on this matter to follow up on Johan's point. We believe the parties that are most vulnerable to SIMBA competitive incursion, are parties which don't focus on ultra-speed or high-speed plans and don't have that capability, but focus instead on low-speed plans, 500 Mbps and 1 Gb, which they sell for legacy high prices and are therefore vulnerable to undercutting. Parties that don't focus on service delivery, don't focus on technology delivery, and certainly don't have the ability to put together broadband with compelling MVNO propositions. I think you've seen some of those signs in the market, particularly in the last quarterly reporting, where there's been dramatic falloff in broadband subscribers.
We hope that's clear, Arthur.
Very clear. Thank you.
Thanks, Arthur.
Thank you. All right, next we have Paul.
Hey. Hi. I think everyone-
Hi, Paul.
Hey. Hi. Thanks, everyone, for the presentation. I have five questions. No, I only have three. I'm not so hard working. My first question is just on mobile. Mobile service revenue declined in first half. I'm just wondering, where is competition hurting mobile? Be it the roaming, or is it, as usual, the low end and so forth? My second question, just on, again, the usual update on DARE+ spending, and maybe could you also narrow it down to which line of the OpEx?
Of course, it's a bit harder to see this time because of the D'Crypt exclusion, but at least which part of the OpEx line is where this DARE+ the operational part has been included? My last one is just on entertainment. You touched a bit, I think, on some additional revenue streams, if I'm not mistaken. I'm just wondering what, be it additional revenue streams or bundling opportunities that you're going to do for at least this upcoming new EPL season. Thank you.
Thank you. Johan?
Okay. I'll take question one and three in one go, if that's okay with you, Paul. Thanks for the questions, by the way. The mobile service revenue, you sort of alluded it to yourself, is at the low end of the market. It's definitely the result of an ongoing process of customers moving from three-year device plans to SIM-only. And then obviously in the SIM-only space, you do have quite a fair bit of pressure on the low end in particular, because even in SIM-only you can debate there's a range from SGD 10 all the way to SGD 40. So that is definitely there. That's also why you probably have observed that we have become definitely more aggressive deploying what we would call a MVNO multi-brand strategy, where we start positioning certain MVNOs in relation to those segments.
That basically, you know the game, typically first comes with an increase of customers then your revenue, which you're basically seeing a customer update for the quarter. Having said that, we're very mindful to deliver quality subscribers on the MVNOs which we tie up with. That's why we play that very mindful to make sure that we balance it out. StarHub is a premium brand. It is being seen by customers like that, we will do everything needed to make sure that it continues that way.
So that's on the mobile service revenue. On entertainment, you asked me, as a more commercial person, a heartbreaking question because I would love to explain you in all the details what we have in mind for the next two quarters. I can't, but what I can allude to is that we will continue the path of smart bundling of relevant pieces of content together with a number of features. So, I have to ask a little bit of forgiveness and patience on this one. I would basically like to ask, watch this space for the next four months and see what comes out of that.
But Paul, I just wanted to clarify, were you also talking about a lot of the Infinity Play stuff outside of entertainment? So for instance, We have been seeing very good traction and strong build up in the SmartSupport and cyber.
Correct.
But that doesn't fall within entertainment.
No. I can allude to that to give full context. We have entertainment, both ideas, one on the category and so on, and then we've got SafeHub+, GameHub+, and LightHub. We have seen double-digit growth both on SafeHub+ as well as on GameHub+ year-on-year. We've expanded our GameHub+ proposition from the cloud gaming, NVIDIA, including some other things, and I would love to say what is coming, but need to bite my tongue here. On SafeHub+ also, there is a lot of developments. We saw really good, strong growth there as well. We have bold plans in the coming quarters to expand that further. That's definitely, to Nikhil's point, a space to watch.
Yeah.
We are really greatly positioned to latch that back to home, mobile, and different shade of connectivity, which is relatively fascinating.
Yeah, so stay tuned. We're going to be doing that in a way which is, I think, very goes against the conventional telco wisdom the conventional telco way of doing things. So stay tuned.
Yeah.
Sorry, can I follow up? So sorry to interrupt you. Is it okay, just a quick follow-up? I missed that part when you mentioned, how does having aggressive MVNOs complement the overall strategy of Apologies if I didn't understand that part. Yeah.
No apologies needed, Paul. Thanks for that clarification question. Let me think how I best phrase that answer. Let me try to give at least the way we look at the mobile market at the moment. The mobile market you can cluster in three distinct segments at the moment. You've got premium bundle play, which is ourselves and a competitor not to be named. Then you have the digital space, which is for us, giga!, and then, I can't spell them out, but you can probably map two other brands against them. And then there is the real price-sensitive segment, which is driven by usual suspects. That segment, unlike what people think, is not particularly an online segment. A lot of activity happens in that segment on an offline basis. And part of those segments are related to, I would say, topography more than anything else.
You are talking about specific corridors which either work in Singapore, which have a specific reason to be here and so on. That requires a specific go-to-market approach. For example, I will take what we announced last week together with China Unicom, which is really addressing the Chinese diaspora here in Singapore, students, workers, enabling them a SIM card with two numbers for a great experience. That is a good example which they can do, which we probably cannot do ourselves, and that is complementary. We have got a few other segment MVNOs playing in different segments. That hopefully is answering your question, Paul.
But I would say, whereas in the past we focused on I guess the high monetization segments, which were really the first that Johan talked about, then the digital segment. It is a little bit of a tweak in our strategy, where we want to play in all segments but we do it very scientifically without cannibalization.
The other one, which I do not mind mentioning, is redONE, which is on a network, which is obviously targeting Malaysian segment, and that is again, something they do better than we can.
Paul, I hope that answers your question before we move on to Dennis.
Yeah, thanks. Just on the, again, a quick follow-up on the EPL. Is advertising a large part, of course, it is a pure profit part, but just wondering, is it a large part of either earnings or revenue as well?
Yeah, I do not mind explaining that. Interestingly enough, advertising on the EPL has been doing very well. It is actually the traditional channel advertising revenues which are under pressure. Which again, tells you that in content unfortunately is king. If you are premium content, it is really great to monetize advertising. It is a little bit yesterday's channels, which are unfortunately increasingly difficult to collect money for advertising. But we have got wonderful plans there. Again, would love to talk about it, but maybe when we meet on strategy day, take me aside and we will explain that in detail to you.
Yeah, but Johan, I think it is fair to say it is a traditional advertising revenue despite the minimus.
Yeah.
And obviously, as Johan talked about, we want to skew that towards advertising alongside great and forward-looking content-
Exactly
...like Premier League.
Exactly. So Premier League is doing us very well on advertising.
Yeah, thanks. I find myself watching a lot of your ads actually. Yeah. Okay, but anyway, yeah. Thanks.
Thank you.
You know you have to pay for it, Paul, right?
No, we know who, Paul individual. Take it individual.
But it is not just us, it is you-
Yeah, I think I can name you all the ads, but I won't. But it's in my head somehow. I'm not sure why. I'm okay.
Oh, okay.
Thanks for being a customer.
Thank you.
Okay.
Thank you very much.
Dennis, on the DARE+ spend, where is it visible in the OpEx lines?
Okay. Hi, Paul. If you look at the DARE+, obviously the nature of the investments then depict where we record it. Insofar as, for example, software licenses in terms of new platforms, they are recorded in the line item called repair and maintenance. Insofar as investments in talent to develop new platforms as well as to develop new technologies, they are recorded in staff costs. Insofar as third-party consulting costs that we may partner third-party firms or other partners to develop something, they are recorded in professional fees. It is various lines that capture.
There is no one single line that captures it. It depends naturally on the nature of the investment required. You had a question that is linked to it in terms of the spend. We had guided to SGD 270 million of total spend. In the last earnings call, we had guided to the fact that we expect to incur about 10% of that 270 in 2025. That still very much remains intact. We expect to complete about 90% of that total spending by the end of 2024.
Paul, I hope that answers your questions.
Yeah. Thanks so much, Dennis.
Welcome. Thanks.
Thank you. Okay. Just another gentle reminder, if you have a question, please feel free to raise your hand. We still have quite a lot of time, so we are happy to get to your questions. Which one? This one?
Yeah. This one. Yeah.
All right, Kenneth.
Hi, thanks for the opportunity. This is Kenneth from CGS. Just one question from me. It seems that Ensign's first-half losses seem to have widened. Just wondering what's driving this, and really, what are the levers that we can pull to ramp up profitability ahead? Thank you.
Nikhil or Dennis, would you like to take that question?
Yeah. This question inevitably comes up every quarter. The way we talk about Ensign is, it's an active analysis, and it's really a month-on-month and a quarter-on-quarter analysis. But it's an analysis that keeps in mind a couple of things. One of the things that we keep in mind as we figure out how to actively shift from growth to profitability is the fact that the tailwinds in the security space are strong. Those growth tailwinds are not getting weaker. Unfortunately, those growth tailwinds have to do with the complexity in the cyberspace, and therefore the need for a good leading pharma cybersecurity services provider. But they also come from a fairly complex macro and geopolitical landscape, and a lot of cybersecurity threat activity. Number one, the tailwinds are strong.
Number two, consequent with the tailwinds, we're focused on growing value as a business and expanding the scale of the business. Therefore, we continue to invest in people, in technology, and in platform development. That's what we're doing. So we're focused on growing the set of capabilities, but also growing the book of business. So that's number two. When we see the right inflection point between the growth tailwinds potentially moderating and when we get to a point where we believe the balance should shift more to harvest rather than building capabilities and growing our book of business, then we will shift the business posture towards harvesting more profitability. But for the two reasons that I've mentioned, that time is not today. The nice consequence of the strategy that Ensign has embarked upon is that it's focused on growing value.
So when we assess the value, the enterprise valuation of Ensign based on market comparables against its growth rate and otherwise, the assessments that we have done, and of course, third parties that we involved, is that we're more than double our investment value when we contributed assets into Ensign. But that's kind of how we think about it for now.
Kenneth, I hope that answered your question.
Yes, thanks.
Okay, thank you. Next up, we have Michael.
Okay, thank you. Thanks for the presentation, and I think there have been quite a few questions that I wanted to add that have been asked. Just one question from me. Earlier, I think Nikhil mentioned there was a lot of free cash flow. So I assume apart from CapEx, this will just go into investments, but just wondering, are there any further uses or intentions for the use of cash?
Nikhil?
I am not sure what you may be alluding to, Michael, but I do not think so. I suppose we could repay debt, but we are also already quite underlevered. We are at a net debt to EBITDA of 1.23x. The regional comps are about 2.8x , so we are already quite levered. I suppose, at some point we could re-look at our dividend strategy and our capital return strategy. That is always on the table. But that is not something. I think it is a little bit premature for that. But it is obviously an active discussion. The third thing which I suppose you may be alluding to is obviously inorganic strategies and acquisitions. I would say acquisitions that we would look to make. We are always on the lookout for good accretive acquisitions in the enterprise space, in the nicely consolidation or otherwise.
Yeah, I guess those are the three potential uses of our cash, but beyond our cash, our funding firepower. There could be one other, which is by virtue of hybrid multi-cloudifying our IT as well as our network, that gives us a set of capabilities which, as I've mentioned, we're externalizing and seeing some signs of that. As we get early proof points on our success, which we're already generating, at some point we could put some real scale behind some of those organic growth initiatives.
T o be honest, those don't take up a lot of capital at all because they leverage the core infrastructure investment that we've already made. It's essentially an approach where we're eating our own dog food. We're doing these things for ourselves, and then we're externalizing those platforms. The organic growth and the scaling of the new platforms that we've developed, to be honest, is not expensive at all because most of that spend is already done for our internal needs.
We hope that answers your question, Michael. Or is there something else that-
No. Fully answered. Thanks a lot, Nikhil.
Okay, great. We still have some time to get to more questions. If you do have questions, please raise your hand. We will give you another minute or so. Kit hasn't had any air time, so maybe somebody can give him a question.
Ask him some really tough questions.
Dying to tell you more about our enterprise solutions.
Or we could ask him. Anything else, gents or ladies?
Okay, going once, going twice. Okay, then I think we can take an early end to today's call.
Sorry, one more question.
Oh, is there a question? Oh, in the chat. Okay, Peggy has a question.
Yeah.
Is there any cost savings after the retirement of the 3G network, Dennis?
Oh, yes, absolutely. There is what we call operations and maintenance costs on any infrastructure, whether it is a 3G or whether it is a broadband or a fiber or submarine cable. Any infrastructure that we retire, there will always be savings. Insofar as the quantum of savings that you are looking for, I would not be in a position to share that number. But suffice to say, it is in the millions.
There are two groups of decommissioning savings that we will be exploiting over, I guess, the coming year.
Yep
And beyond. The first group is just infrastructure that is end-of-life infrastructure system that is just, we are phasing out. 3G is a good example. There are others. For instance, things like, you saw us transition from pay TV out of pay TV in the past. We have already launched, and are doing well for a long time, on TV+, which is a hybrid OTT platform, and IPTV is obviously a technology and a platform that will be going down, and is being going down.
That is the first group, and there are some other examples in that bucket. The second group is all the stuff in the legacy systems that we have, which we will be decommissioning as a result of our transformation and move to cloud-based systems. That will start really only in 2025, as early in the year as possible. Stay tuned. We hope to exploit much more value across savings.
Thanks, Nikhil. Okay, last call for questions.
Thank you to you too, Peggy.
Thanks, Peggy.
Thanks. Thank you.
Thanks, all.
Thanks, everyone.
Okay. I think we can end the call for the quarter. Thanks for joining us this evening. As always, if you have additional questions, you know how to reach me. Thanks, everyone.
Thank you.
Have a good evening.
Thank you.
Bye.
Thank you. Yeah.