Earnings Call: Q4 2021

Feb 10, 2022

All right. Good evening, everybody. My name is Amelia, and I take care of StarHub's investor relations. Thank you for joining us this evening for StarHub's second half and FY 2021 results update call. We have a larger group than usual today, we'd really appreciate it if everybody could mute yourselves while when you're not speaking to minimize interruptions during the call. This evening, we have with us our Chief Executive, Nikhil Eapen, Dennis Chia, our CFO, Charlie Chan, our Chief of Enterprise, and Johan Buse, Chief of Consumer. We'll start off with opening remarks and an overview of our performance from Nikhil, followed by Dennis on financials, and then Johan and Charlie on business highlights. We will open the floor to questions thereafter. Nikhil, over to you, please. Thank you, Amelia. Thank you, everyone, for joining us on this evening, to talk about 2021, and the second half of 2021, which was a milestone year for us. First, as I always do, I would ask you as we go through these results to keep in mind a few things. Number 1, for accurate comparison, these numbers exclude the effect of JSS. Number 2, this was not an easy year. We had escalating hyper competition and low pricing, lower pricing, and price competition continues. Number 3, when you compare 2020 to 2021, you would recall that in 2020, we had about 3.5 months of roaming pre-COVID. In 2021, we did not, but we hope for recovery. First of all, looking at revenue and service revenue, both revenue and service revenue rose year-on-year in fiscal 2021 as well as in the second half. This was due to growth primarily in broadband and Ensign, and also Strateq, offset by the roaming that I talked about within postpaid, but also some erosion in prepaid and network solutions. Net net up moderately. Looking at Service EBITDA. Service EBITDA grew quite well year-on-year for fiscal 2021. Ending 2021 at close to SGD 480 million. For the second half and Q4 2021, the growth rates were actually even higher as we grew margin against a stable and improving revenue base. Turning our attention to net profit. Net profit for 2021 grew strongly over 2020, ending 2021 at almost SGD 150 million and up 17%. The second half was also up strongly, in fact, by 27.5%. Last, whilst not on this page, Dennis will talk about, I will touch on free cash flow generation, which for 2021 was extremely strong, with strong operating cash flow offset by higher OpEx payments. We generated free cash flow of SGD 485 million for 2021, which was up 25%, and that consequently reduced our leverage down to almost 1x. In closing, for this page, what I'd like to say is this positions us very well to take on the upfront transformation expense for DARE+, that we have been talking about in 2022, as well as continue our dividend obligations, as well as continue our M&A program. With that, can we move to the next page? I'll touch a little bit on our segmented numbers, which Johan Buse will elaborate on in a little bit more detail. Looking at mobile. Mobile was down year-on-year due to roaming erosion and prepaid erosion. As you can see, down only marginally for the second half as we grew postpaid revenue, you know, continuously over the last three quarters with continued subscriber addition across both the StarHub brand as well as giga!, continued ARPU increase, maintaining very low churn. Now, this driving of ARPU is a good leading indicator of our Infinity Play strategy, our DARE+ strategy, as we were able to drive 5G adoption, consumption of OTT and other services on mobile to drive, as we've always been talking about, not just connectivity, but connectivity experiences. Shifting to broadband. We grew broadband strongly over 2020, up 10% year-on-year, driven by an ARPU increase that was even higher at about 13%, and again, very low churn. This ARPU increase was driven by strong adoption of Infinity Play OTT streaming, which in turn, drove upgrade to 2 Gig packages. Mm. One of the other points which Johan has talked about is we are done with the elimination of discounted subs and looking forward are now positioned to grow not just ARPU, but subs, but judiciously in an economic way, in an economic manner. The last point is that we expect to close the acquisition of MyRepublic Broadband within quarter 1. These numbers, going forward, will then be reported with the inclusion of MyRepublic Broadband, and you will see that they will all be materially higher. Again, shifting to entertainment. Revenue was down 4% year-over-year due to erosion in linear pay TV, offset by rising ARPU and a growing StarHub TV+ base. ARPU continued to grow year-over-year with an increasing skew towards HomeHub+ bundle plans, while churn continued to moderate downwards. Overall, when you look at entertainment, subs grew despite the linear TV erosion. Hybrid TV Plus doubled. OTT on mobile and broadband grew five times. This drove consumption and upgrade on 5G for mobile and 2 Gig plans on broadband, which are not reflected in the entertainment numbers, but reflected in those segments. Total entertainment subs as a whole increased due to the factors that I've been talking about. Now, enterprise. Enterprise continued to grow ending 2021 at SGD 706 million, up 9% year-on-year. Cybersecurity grew 22%, and we consolidated for the full year Strateq, which contributed SGD 76 million of revenue and grew modestly in tough circumstances. Network solutions was down year-on-year by about 7%, but we did see quarter-on-quarter stabilization since the second quarter. This is a business, as we've talked about, we are slowly pivoting towards a convergence of cloud, cyber and connectivity, bringing together the power of our platform. With that, I'll hand off to Dennis to talk about our financials in a bit more detail. Thanks, Nikhil, good evening, everyone. Thank you for joining us. Moving on to slide number 7 on a few key highlights. On the back of the walk-through of the segmental revenues, I just want to highlight that in these numbers for 2021, we've registered improvements in margins on the broadband line of business in terms of the transmission of the operating model for the broadband line. Notwithstanding the decline in the TV revenues, our TV line of business registered improved margins as a result of the rationalization of the content costs as well. In terms of all the other lines of business, we continued to negotiate hard in terms of the inter-operator tariffs and registered savings in terms of traffic costs as well. Along with that, the ongoing discipline, cost management that we've undertaken as part of DARE 1.0, which we completed the 3-year journey in October 2021. We did register savings in almost all discretionary lines of operating expenditure, and these are reflected in these numbers. The net profit for the half year, second half, therefore was SGD 81 million, representing 27% increase on a year-on-year basis. For the full year, it was SGD 1.8 million, representing about a 17.5% increase on a year-on-year basis. These numbers are compared to the 2020 numbers without the Job Support Scheme grants. SGD 1.8 million of net profit attributable to shareholders represents SGD 0.081 on the EPS basis. Our full year cash, free cash flow was SGD 485 million or SGD 0.279 per share of free cash flow. Moving on to the next slide. As a result of the strong cash generation from operating activities and the balance sheet, cash and cash equivalents of SGD 832 million of cash and cash equivalents on our balance sheet, our net debt to EBITDA is 1.04 times. The cash from operating activities generated from in 2021 versus 2020 was represented 13.6% in terms of a year-on-year increase. If you look at our free cash flow, which includes the capital payments, it was an increase of 25%. This is also as a result of some timing differences in terms of payments and capital expenditure commits, which will be reflected in 2022, and we will take that through when we go through the guidance. With that, I pass the floor back to Nikhil. Thank you, Dennis. Looking at our performance versus our guidance, we exceeded our guidance on all fronts, and in fact, even our revised guidance. On revenue in February 2021, we had guided to stable revenue, but we grew slightly, beating that by 1.4%. On EBITDA margins, if you recall in February, we guided initially to 24%-26%. Now, we raised this after our Q3 earnings to at least 26% and are now ending the year at almost 30%. As Dennis talked about, this reflects the operating efficiencies cost and the discipline, as well as some of the delay in anticipated DARE+ costs, which we will be incurring in 2022. On CapEx in February, we initially guided to 9%-11% of revenue. We upgraded this to 7%-9% of revenue after Q2, and we have now ended the year under 4%. With this, and the net profit and the cash flow that we generated, we are declaring a 2021 dividend of SGD 0.064 in line with our stated policy to pay the higher of SGD 0.05 or 80% of net profit. We are quite pleased with this comprehensive set of results across revenue, EBITDA, free cash flow, bringing down our leverage to 1.0 times as we enter 2022, and an investment phase for DARE+. Handing off to Johan to talk about consumer in a bit more detail. Good evening, everyone. I'll go and take you through mobile first, then home broadband, then going through entertainment. On mobile, you can see that we have been traveling quite nicely north in terms of ARPU. ARPU has been benefiting a little bit from higher roaming as well as a higher uptake of entertainment costs. We did see on the other side, a minor impact of lower plan subscription. Those are mainly due to SIM-only. We still see a very good traction on 5G, which helps us quite a fair bit. We've added 26,000 customers to the base. Quite a fair of those come through the giga! customer base, but also on the StarHub brand, we have been doing quite well. We believe we are in a very good shape in terms of 5G. We clocked over 300,000 customers on our 5G plans and network end of 2021. Churn rate year-on-year lower, 0.8%, which in light of the hypercompetitive market is a great achievement and is lower than last year. Prepaid is a more challenging market segment, remains, I would say. Two reasons for that. Number one is obviously the quite intense competition on post-paid SIM-only, and the second is the lack of tourists and workers coming into the country. ARPU, nevertheless, remains stable, and as you can see, we actually added 10,000 customers to the prepaid base in Q4. That shows that in Q4, we had a 3.1% uplift in terms of revenue, and the data usage on the back of that continues to grow. We actually ended up on 12.7 Gig per sub on average in Q4. Moving on to home broadband. Next page. Home broadband had a real strong performance in 2021, as Nikhil already alluded to. We increased ARPU. There is a accounting adjustment for Q3, Q4. If you would take that into account, as you can see here, the ARPU would have been flat Q-on-Q, so around 33, and then there's a decimal, which is a solid performance. It's also noteworthy to see that the decline rate following the adjustment of, I would say, freebies and that sort of things in terms of subs has subsided, and we only lost 1,000 customers, and we've come to the end of their journey, and we expect to go into growth of the customer base going forward. The churn rate remains very low at 0.7%. If you keep in mind the accounting adjustment for ARPU, and obviously for revenue, that's the same story. Adjusted, that would be actually flat quarter on quarter, around SGD 49 million, and that basically represents a 10.4% growth compared to the year before, which is a good performance. Entertainment. Entertainment also there you can see that we are growing ARPU. The reason for that is that we see more customers taking on higher bundles, 2 Gig bundles and more content. That's, I would say, a testimony to our strategy where we believe in hybrid, which is linear and OTT jointly together, so that's benefiting our ARPU. The subscriber base on linear TV continued to decline, although the decline is getting lesser and lesser, and that's also something you can see being represented in churn percentage, which is coming down. On the other side, you can see there is a very strong growth on the OTT subs. We ended the quarter of 444,000 OTT subs. Despite that, I think you can see that we had a real solid set of numbers for TV and entertainment. SGD 44.5 million revenue, which is around 1% lower compared to the previous quarter, and that is mainly due to lower commercial revenues and advertising revenues. That's from my side in terms of the consumer, and I'll hand you over to Charlie for a state of our enterprise. Thank you. Thanks, Johan. As Nikhil shared, the enterprise business ended 2021 with year-on-year growth of 9.4%, led by Ensign and Strateq, with its first full year of consolidated results in StarHub. The network solutions segment maintained two consecutive quarters of growth, driven by our voice and data services. On a year-on-year basis, it declined given a large one-off data and internet transaction in 4Q last year, and overall for FY 2021 from managed services and voice services. Cybersecurity came in lower quarter-on-quarter, given a major project delivery in 3Q 2021, while our year-on-year grew strongly as we saw good traction in our overseas markets, example, in Malaysia's financial services sector. Finally, our original ICT services unit was lower quarter-on-quarter, given one-off data relocation work done in 3Q of 2021. In its first full year with StarHub, Strateq clocked almost 20% of quarterly growth year-on-year from our increasing focus in data analytics engineering and solutions. That wraps up the picture for the Enterprise Business. I'll now hand you over to Dennis for the next segment. Thank you, Charlie. Just as recap on DARE+, this is something that we unveiled during our investor day in late November 2021. Having completed our DARE 1.0 in October 2021. At that time, we shared that we were going to be looking at upfront investments to generate SGD 500 million of margins and cost transformation outcomes over the five-year period. This constitutes SGD 220 million of margin uplifts coming from increased revenues and growth initiatives, as well as SGD 280 million of further cost transformation initiatives coming primarily from our digital transformation journey. The three-year investment, which will be front-loaded primarily in 2022 and 2023, would be approximately SGD 270 million, and this was something we guided at that point in time. We then expect to generate SGD 80 million of after-tax margins, which will go to our bottom line on a steady-state basis starting from FY 2026. Moving on to the next slide. In recognition of the significant investments that we're making for this digital transformation journey and our ongoing cost initiatives, growth initiatives as part of DARE+, and then also in consideration of the higher utilities, costs that is surrounding our current operating environment and our ongoing 5G rollout, we are guiding to a 10% or at least 20% Service EBITDA margin for FY 2022 on the back of an at least 10% growth in our top line, which is the revenue, service revenue. This takes into account the fact that we would be consolidating for the full year, JOS, which we completed on 3rd January of 2022, and the MyRepublic transaction, which we also expect to complete sometime in Q1. We also continue to expect growth in our cybersecurity business and in some of the other lines of business with a modest recovery in roaming revenues assumed in these staff numbers. For 2023, we expect the outcomes from DARE+ to start coming through in 2023. This would be the start of the outcomes that we expect to generate and achieve. The result of that would be an uplift in margins by 3%. As such, we are providing an outlook of at least a 23% Service EBITDA margin, which represents an improvement from 2022. What we endeavor and target to achieve would be an absolute EBITDA generation, dollar generation in 2023, which is approximating the level that we generated in 2021. As a recap, the EBITDA that we generated in 2021 on a total basis was approximately SGD 500 million, and we endeavor to achieve that SGD 500 million or better in 2023. If you look at capital expenditure, we're looking at on a business as usual basis on our base business to maintain the levels of capital expenditure between 7%-9% on an ongoing basis, bearing in mind that we ended 2021 on a relatively lower number of 4% due to some timing differences in terms of capital expenditure commitments. We expect to incur approximately another 4% of IT transformation or digital transformation investments in terms of our digital platforms that we intend to roll out. This therefore brings our CapEx guidance for 2022 and for 2023 to be approximately between 12%-15%. In terms of our dividend policy, we will maintain our higher of SGD 0.05 or 80% of the net profit that we are generating in each of the years of 2022 and 2023. We therefore believe that taking into consideration the plans and the achievements and the targets that we expect to get from the DARE+, that this dividend will be sustainable and in fact, perhaps even better in the coming years. As a result, for the next two years, we are providing assurance that we'll pay at least SGD 0.05 or the 80% of the net profit number. With that, I pass the floor back to Nikhil to articulate the priorities that we have as management for 2022. Nikhil? Yes. Thank you, Dennis. Our agenda setting for 2022. Number one, Infinity Play is something we've talked about a lot, and this journey is already well underway with 10 OTT streaming platforms, cloud gaming, and last week, we launched our consumer CyberProtect. You should expect more OTT, more gaming, more product, more verticals, and all of this pretty imminently over Q1, Q2, and much more to come over the year. Number two, we have talked about super app and full self-serve digital engagement. Now, we have a world-class digital platform already, giga!, which we are focused on growing even more. We also are, as we spoke about, launching a super app on our cloud IT stack with a data lake to enable real self-serve across the entirety of Infinity Play and drive upsell with both new product as well as existing product and keep adding product on a rapid cycle. Number three, we've talked about enterprise converged capabilities. We are the only player in Singapore or the region, in telco or outside telco, to have leadership businesses in each of cyber, cloud, and connectivity, the three Cs as we like to call it. We are building digital platforms that bring together all three, which we intend to scale both in Singapore and across the region. Of course, 5G is key to all of the above. We are focused on our network platform, a superfast network, a superior network to give our customers access to the richest digital experiences, not just connectivity, but and also transformational digital services anytime, anywhere in the home, in the workplace or out of the home. Of course, everything that we wanted to do is with efficiency. We do this because everything that we're doing from product to engagement to IT to systems is focused on digital and cloud. We will realize natural efficiencies and cost savings alongside and together with the growth to get to that SGD 80 million of incremental after-tax profit that Dennis talked about. Last, but not least, we have done M&A well, and we will continue to do M&A as a cornerstone of our growth focus. This is for consolidation in key segments to grow footprint and scale, to grow capabilities, to drive digital product and platforms across our base, and of course, to harvest efficiencies and synergies and realize value for our shareholders. With that, in closing, I'd like to finish and hand it back to Amelia to open up for questions. I see Sachin has raised his hand already, maybe half an hour ago. Thanks, Nikhil. We'll now open the floor to questions. For the benefit of everybody, to join the question queue, either click on the Raise Hand button or indicate your name and organization in the chat box. I'll call upon your name when it's your turn to speak, and then you can unmute yourself and converse directly with our senior management. Sachin, please get the ball rolling. Please unmute yourself. Sure. Yeah. Hi. Thanks for the chance. My question again is, I think it's an often asked question on dividend policy. Yes. When you say it at least 80% of the net profit, excluding non-recurring and adjusted for one-off, could you explain, you know, would that exclude some of the extra CapEx depreciation, extra OpEx, and hence, you know, some of these issues which are here, how to define the recurring profit, which is used for dividend calculations? That's number one. Number two question is, when I look at your CapEx and the OpEx for digital transformation, there's a 29% margin, you are guiding for 20%. That's about 9 percentage impact. You're talking of 4-5 percentage point rise in CapEx. That's almost about, we're talking of, you know, 14% of your revenue And, which is around SGD 2.2 billion kind of range. That's quite higher than your SGD 270 million. Your SGD 270 million is the digital transformation cost over multi years. Are we saying that everything will be done in just one year and nothing left? Again, I see CapEx being higher in FY 2022. Could you just update us on that change in plan in terms of digital transformation costs? It seems pretty high in FY 2022 and even in FY 2023 actually based on your outlook, and doesn't really go with the SGD 270 million as the additional cost. Yeah. Okay. Maybe I'll start forward, start Sachin and maybe give you a simple answer on the dividends, and then Dennis can take the more complicated pieces with respect to some of the adjustments that you are talking about, and also carry on into the transformation expenses. We are entering into an investment phase, but we intend to maintain our dividend commitment and keep the same formula. And the formula is, as you know, the higher of SGD 0.05 or 80% of net profit, whichever is higher. For the last year, you know, for 2021, we are declaring, as we talked about, SGD 0.064. We made SGD 485 million of cash flow, as Dennis talked about. That's about SGD 0.275 per share. This is of course, combined with 1x leverages, which is where we ended the year. We are maintaining our dividend commitment to pay no lower than SGD 0.05. We will maintain that over the next two years. We are highly confident of being able to fulfill that commitment, given the strong cash flows over the year. The difference between the SGD 0.275 and what we're paying, the SGD 0.065, is more than enough to fund a dividend over the next two years, in addition to the cash balances that we have. That's a simple answer. With that, the dividend remains sacrosanct with the commitment strong. With that, I'll hand off to Dennis to perhaps delve into your question on accruals and non-recurring items as well as investment cost. Okay. Sachin, in terms of non-recurring costs and income, I'll just give you some examples. For example, in 2018 when we undertook a restructuring of our organization, there would be restructuring provisions that would be required in tandem with the activity, and that's considered one time. If we've got certain legal cases and there are settlement expenses related to that would be considered one time. Similarly, in terms of income, if we have grants for certain activities that we undertake, sometimes from government organizations, so forth, those would be considered one time. Of course, the Job Support Scheme that we received in 2020 primarily would be then considered one time as well. Those would be examples of one-time items that would be not considered as recurring, and therefore would be backed off, depending on whether it's an income or expense item, it would be added or, yeah, deducted from net profit to derive the net profit, not including the non-recurring items. I hope that answers your question. Okay. Okay, yeah. Sure. Yeah. Okay. In terms of the specifically to the debt, to the investments for IT transformation, the margins are the 9% or 10% difference between the margins for 2021 and 2020 is not all coming from the upfront investments. There's approximately a 3% decline in margin coming through from increase in utilities costs, based on current utilities rates versus average rates that we had seen, saw in 2021. That's a function of the current operating environment and the inflation that we're seeing, and that's been baked into our numbers. There is a portion that's attributable to the digital transformation journey that we're undertaking, and there is a part of the investments coming through from 5G wholesale cost. Bearing in mind that the JV that we have with another operator is on a non-consolidated basis. Whatever wholesale cost that we pay for the radio rollout for 5G is considered as an operating expense, and therefore that's been baked into our numbers. That in combination accounts for the margin re-rating. The other part of it is obviously the mix in revenues. You do see that in mix of revenues and the fact that we are consolidating JOS for the first time this year in 2022, as well as the ongoing increase in Ensign InfoSecurity's cybersecurity performance, as well as the managed services and ICT that we have as part of the Charlie Chan's enterprise business, plus Strateq ongoing growth in Malaysia as well as in the region, is the mix of revenues that we are seeing in our top line, and that's also accounting for a re-rating of the margins. That, that is in relation to the margins. To your question regarding the SGD 270 million of investments of CapEx and OpEx, it is front-loaded, primarily in the first part of 2022 and some part of 2023, tapers down in 2023. A lot of it is going to be baked in this year. Yeah. Dennis, just a follow-up on your first question, first reply. According to what you have told me in the past, it doesn't seem like any of the extraordinary CapEx or OpEx due digital transformation is eligible, as one time cost, right? This is definitely not one year. It's at least two years kind of cost. Yeah. Yeah. Okay. Got it. That's correct. In the dividend policy that we have for 2022 and on an ongoing basis, you know, we have said that we will pay SGD 0.05, a higher SGD 0.05 or 80%. Some of these upfront investments for transmission will be considered one-time. Some of these will be one-time. There will be ongoing costs in relations to software licenses and so forth. Those are actually ongoing requirements, and so those will not be considered as non-recurring. Nothing goes to FY 2024. Everything kind of done in FY twenty. A little bit that will trickle in, into FY 2024, but most of it will be in these next couple of financial years. Got it. Thank you. Sachin, I think the intent is to take, you know, these expenses and spending upfront, while maintaining our commitment to dividends at SGD 0.05. As we harvest to hopefully exceed the SGD 0.05 over time. Got it. Thank you, Nikhil. Thanks, Sachin. We'll now take the next question from Neil. Neil, could you please unmute yourself? Yeah. Hi. Good evening, gentlemen. Thank you, for the opportunity and a good set of numbers. I have a few questions. The first is on service revenues, right? The second half up 2.9%, full year 1.4%. If I had to strip out Strateq and Ensign, what would those numbers be? That would be helpful and sort of a similar kind of comparison for the EBITDA growth numbers if you stripped out the acquisitions. The second question I had was on your slides, you said like, you know, 5G mobile subscribers, 300,000+. I remember in the third quarter that was the number as well, and yet Johan mentioned there's about 25,000-26,000 additions. I'm a bit confused. Is it now 325, 326 or, you know, which is a decent 8%-9% uptick quarter? What is that number? The third, Dennis, you mentioned there was an accounting adjustment which kind of explains why ARPUs were up 10% year-on-year, but subs down just 3% and yet revenue down 1.6%. Is all of that related to the accounting adjustment? My fourth question on CapEx, Sachin has already asked. The fifth question I had was, Dennis, you've got about SGD 220 million due during the course of this year. Should I think of this largely as a refi or will you land up, like retiring the debt? The last question I had was, for you, Nikhil, like SGD 80 million in after-tax to be added with all of these initiatives. Is this from the existing portfolio or should I think there is an embedded component of future acquisitions involved in this contribution? Thank you very much. Can I take the last question first? Yeah, sure. Okay. The SGD 80 million of after-tax profit that we've talked about as a result of the DARE+ is really with the existing portfolio. As Dennis said it all, it doesn't include material roaming recovery, and it also doesn't include synergies from the existing portfolio. It's just the existing portfolio, no synergies, minimal roaming recovery. Okay. Okay. Okay. Dennis, could you please take the question on service revenue if you were to strip out Ensign and Strateq, as well as his question on the SGD 2 million in debt? EBITDA. Yeah. Neil, if you look at MD&A and what we've reported, for Ensign the revenue for 2021 was approximately SGD 270 million. For Strateq, the annual revenue for 2021 was about SGD 76 million. If you add the two components together, it's approximately SGD 345 million. That's the number you strip out from the SGD 1.6 billion number that we reported for the full year of 2021. It does represent, on a base business, it does represent a decline in our organic and base business. This is really a function of the ongoing competitive environment that we all have seen. That's also the reason why we've also diversified our revenue base and undertaken the M&A strategy over the last few years. In terms of the EBITDA contributions from Ensign and from Strateq, these are fairly modest. They're very low contributions from each of these. In total, out of the SGD 500 million of EBITDA that we reported for 2021, the total contribution from both of these is approximately SGD 40 million. No more than 10% of the EBITDA comes from Ensign and Strateq. You will probably ask as to why then we would undertake these other additions to our portfolio. We believe that with scale, primarily and predominantly in our, in the ICT business as well as the cybersecurity business, it will lead to a non-linear improvement in our margins. That's what we're building towards as part of the growth. This is also baked into the SGD 80 million of ongoing after-tax profits that we expect to generate on a steady-state basis thereafter. I hope that answers your question in terms of Strateq and Ensign, in terms of your first question, Neil. Yes. Yes, it does. Apologies, I'm flying blind. I don't have the slides in front of me because I'm working from home. Okay. No, no worry. I think, Neil, what you'll be able to see is when you do get the slides on 14, there's a page on enterprise which looks at the enterprise, the three segments of the enterprise business. Yeah. The answer to your question would be. Ensign InfoSecurity, Strateq Regional ICT. We're going to be adding JOS to that. You'll be able to take a look at network solutions, separated from the other two. All right. To your second question on accounting adjustments, Neil. Yes, the answer to your question is a yes. It is without these accounting adjustments, our costs are flat. These adjustments are primarily what we affectionately call the IFRS 15 adjustments. These were the new accounting standards in terms of how we are required to split the revenues between our lines of business. These accounting adjustments that happen from time to time when we get better clarity in terms of how to allocate this as we do roll out new bundle plans. As Johan and his team very affectionately and enthusiastically rolls out new plans, my team has the pleasure of figuring out how to allocate these. These adjustments happen from time to time because of that. Your third question on the refinancing of the SGD 220 million. If you might recall, we did the final transaction in the DCM market in 2020 literally on 31st December 2020, where we did lock in a fairly competitive coupon of 2.48% with a debt issuance of SGD 200 million at that point in time. We did raise that money in recognition of the tranche that would be maturing in September of this year. As a result of that, we would expect to retire this tranche with the cash that we have on our balance sheet. Neil, does that answer your question before we go to Johan? Yeah. There's just that little bit about the 5G subs. Yes. yes. Thanks, Dennis. In terms of dynamics, there's obviously quite a few dynamics underneath Neil, with movements in the base. Where we see an uptick in terms of 5G customers, and as we mentioned, we've crossed the 300,000 mark. We also see more and more customers opting for on the other side on a more affordable 4G SIM-only plans. In this mix is also interwoven giga!. That composite drives these numbers. Neil, I would also like to clarify that. On a quarter-on-quarter, have you seen Johan? Say again, sorry. Sorry. On a quarter-on-quarter, have you seen an increase in the 5G subs, Johan? Absolutely. If you remember well, I think by heart, the previous quarter Q3, we closed around SGD 250. Yes. We added 50,000 thereabout. To clarify, I think, Neil, what you mentioned was the actual number we disclosed in the DARE+ presentation, which was in November. Oh, yeah. Yeah, sorry. Yeah. It was in September the thirtieth. Oh, okay. We did say 300,000, and now we're saying over 300,000. Yeah, correct. As Johan said, we have grown. Yeah. We're not disclosing the specific number yet. Yeah. Actually, during Investor Day in November, we disclosed over 250,000. Okay. Yeah. Okay. Quite a considerable growth. Okay in that one month. Correct. Yeah. over SGD 250,000 to over SGD 300,000. To clarify, Neil, that's a quite, I would say, logical thing to happen in Q4 on the back of the new handset launches, which are mainly 5G. Yeah. Understand. Thank you, gentlemen. Thanks very much. Thank you. Thank you. Thank you. All right. We will have Huzaini next, please. Hi, good evening, everyone, thanks for the call. Few questions from me. First, Nikhil, I missed your earlier comments. Is it possible to give a bit of a split on organic growth for FY 2022? Of the 10%, minimum 10% growth you are seeing, what is organic bit and what is the inorganic bit? That's question number one. Second question is on mobile competition. How do you see mobile competition evolving? Are we seeing a similar level of aggression from MVNOs or should we see better growth going into 2022, just from the competition point of view? Some housekeeping questions. First is on spectrum rights. When we should expect the 700 MHz payment. Finally, on Dennis comments that around 3 percentage points decline in margins because of higher utility costs. That totals to around SGD 50 million. Are we expecting that kind of increase in just utility costs in 2022? Thank you. Okay. Let's take it from the top. On the 10% increase in revenue for 2022, that comes from, number one, the consolidation of MyRepublic and JOS. It also comes from growth, as anticipated and continuing in Ensign and Strateq. What we have not assumed, as we've talked about, is further organic growth from some of the things that we're doing. What we also haven't assumed is more than a modest roaming re-recovery. What we haven't assumed is synergies from the acquisitions that we have made. Hopefully that clarifies your question. On mobile competition, what we would say is this. Look, I mean, you know, I mean, the last couple of years have been extremely competitive. We can't really plan for whether... We don't want to necessarily plan for whether mobile competition recedes or increases. In fact, we plan for it increasing. We don't necessarily plan for it to recede. What we are focused on doing is driving the best connectivity, driving Infinity Play with the best connectivity to our base. Driving 5G adoption and strong upgrade in broadband through the Infinity Play strategy and, therefore, you know, kind of taking up consumption and our ARPUs upwards. That's our strategy. You know, Johan can add to it. Yeah. I think, in terms of competition to be expected, I mean, the market is very competitive at this point of time. We expect it to remain probably rather competitive. It's hard to put any outlook on that. We are sticking to our strategy. Our strategy is very much around differentiation and adding value. We're very keen on driving the 5G agenda, which we believe is beneficial for customers, both on the enterprise as well as on the consumer side. When all things are equal, that will stand aside. That's what we do, and that's our strategy which we pursue. We, by the way, did see some MVNOs exit in the market over the last 12 months as well. On 700 megahertz spectrum, I guess, you know, it's hard to crystal ball around this. You know, I think we hope that by the end of 2022, that we will have visibility on getting the 700 spectrum. Again, it's hard to crystal ball. Sort of that's the sort of timeframe that we're thinking about, a year plus. Dennis, would you like to address the question on utilities? On the final question, regarding the utilities, unfortunately, that's the reality that we're facing. Based on the crude oil prices, which is north of SGD 90 today a barrel, we're looking at approximately a 2.5 times increase in unit pricing per kilowatt in terms of the utilities and the electricity tariffs that we're facing based on current rates. They're not looking as if they're tapering at any point in time to assume the current rates versus the average rates that we had recorded in 2021 for purposes of this guidance. Thanks, Dennis. Huzaini, I hope we've answered all your questions. Yeah. Thanks for that. Maybe just if I can ask, just one follow-up. Housekeeping question, which is on the working capital side. There was a big gain on working capital side. Means what percentage or what proportion of it going forward could be, you know, will be reversed and what can be, you know, is a permanent kind of a gain? Huzaini, the working capital improvements that we recorded in 2021, I believe are largely sustainable. Improvements and DSOs and DPOs, you know, are things that we put mechanisms in place to ensure that that's sustained. It will be a steady state, so you won't see a significant year-on-year improvement, nor a reversal of that trend in 2022. Yeah. Okay. This is very clear. Thank you very much. Thanks, Huzaini. Next up, we have Foong. Hi, good evening, everyone, and congratulations on the good set of numbers. A couple of questions from me. Firstly, on the Q-on-Q increase in postpaid ARPU, how much of that was due to the recovery in roaming? I think Johan also mentioned that the increase in ARPU was also due to takeup of entertainment VAS. Can you provide a bit more color as to what that includes? That's question number 1. Second question, it was also mentioned that the ARPU, postpaid ARPU was somewhat offset by lower plan subscriptions, due to SIM-only, and that's despite the higher 5G take-up. Can you tell me what percentage of the subs base is now SIM-only, or what percentage of your gross adds is SIM-only? Related to this question, right, as you see the continued shift of subscribers from postpaid contracts to giga! and SIM-only plans, I'm wondering what is the net impact on StarHub's revenue and earnings, all else equal. What I see is that, you know, what you are showing me in the third quarter is that the service revenue impact is actually negative. I would imagine you would have also lesser device sales, right, moving from postpaid contracts to SIM-only. Does that mean the earnings are also negatively impacted? My third question, as you guided previously, the DARE+ benefits only come in the second half of 2023. I'm wondering where do you see the service EBITDA margin once the full net benefit from DARE+ is realized? Those are my three questions. Thank you. Okay. Johan, would you like to start? Okay. I'll take the 2 first questions, Foong. Thank you very much for the 2 first questions. First on the postpaid ARPU. Postpaid ARPU is a composite of quite a few things. It's a blend of SIM-only 5G plans, and then of course, in this mix is also giga!. Below that, you have basically subscription revenue, out-of-bundle revenue, and roaming and VAS. To your question directly answering, the plus is definitely somewhat on the roaming side. The VAS on the entertainment side, obviously you can guess, is mainly coming from what we bundle with our 5G plans, which is Disney+. That's offset to a certain degree with what we call out-of-bundle variable charges, which are decreasing as data bundles have become bigger over time. That's the level of information I can give you around ARPU. In terms of the split between SIM-only and device, that's typically not a level of information which we disclose. We compete in both areas. What I don't mind disclosing is that interestingly enough, the churn rates are almost identical in both. That's I think a good indicator. And although maybe the top-line revenue on SIM-only may be a bit different compared to handset bundles, as we call them, with the 5G uptake and the pricing strategy we have pursued on 5G in the mix, that's fairly simple, fairly stable. Sorry. That's probably I would say the flavor I can give you when it comes to these parameters. Hopefully, that gives you a bit of an direction before I hand over to the last question. Foong, does that answer your question? Yeah. If, if I can just throw in a follow-up, to what. Yeah Johan said. So essentially, you know, what we're aiming for here is we're aiming for 5G take-up to help us increase the ARPU to offset any sort of erosion in ARPUs from the SIM-only side? Yeah, that's a very good, I would say summary, Foong. In a way, if I may just build on that. The market, in a way, is sort of diverging. In the good old days, it would be mainstream. There was one flavor. It was a device tariff plan. In the new world, there are obviously device plans, 5G mainly, and on the other side there are SIM-onlys on the other spectrum side. It's diverging. Okay. Okay. Granted the market is competitive and you have to do SIM-only, like what, like your peers are all doing. The net benefit from 5G take-up is pretty much neutral, you would say? Hard to predict and hard to say at this point in time because there is also the factor of roaming. Roaming is not insignificant, as we discussed in earlier analyst calls. That's something we haven't baked in going forward, so that's something we need to see. Okay, got it. Understood. The plan, Foong, is definitely to play aggressively in SIM-only. Yeah. To embrace it, to drive it, to drive giga. With the strategies that we've talked about, 5G adoption, driving OTT into the mobile base and more Infinity Play product, to grow revenue. Yes. That's kind of what I think what we've been doing over the last three quarters. Correct. On the back of stable to rising ARPU blended. Okay, understood on that part, yeah. Foong, to your final question on, what the SGD 80 million after-tax margins do to our margins. If you actually model out the guidance that we've given for 2022, which is at least 10% uplift from our 2021 service revenue of SGD 1.611 billion, if I remember that correctly. That leads you to at least SGD 1.76 billion or SGD 1.77 billion number on service revenues. You then model out another 5%-10% that we've given as an outlook for 2023 and impute that same percentage growth over the, over the coming years on a compounded basis. The SGD 80 million of after-tax margins or SGD 100 million on a pre-tax basis should uplift Service EBITDA margin by about 3.5%-4%. 3.5%-4% from 2021's level, is it? That's right. If you use 2021 levels, then if you use 2021 service revenues, then it would uplift by 6%. A SGD 100 million on pre-tax basis on SGD 1.6 billion translates to 6%. I'm now looking forward on a compounded basis and what if our revenue should look like in a few years if we had a crystal ball. Okay, understood. A lot of numbers to digest, but I'll come back if I need to run through those numbers again with you. Does that answer your question, Foong? Yeah, it does. Thank you so much, everyone. Yeah. Very insightful. Yeah. Thank you. Okay. Thank you. Thank you, Foong. Paul, we'll take your questions next. Yeah, thanks so much for the presentation. Just 3 questions from me. It's, the 2 questions is regarding this slide. The easy one would be, can you just touch a little bit, what is that pink portion, the DARE+? Could you maybe elaborate what kind of services that you could be introducing in FY 2023? That's my first question. The second question is, the upfront investments that you mentioned, IT transformation, manpower, and so forth. I can assume these are not one-time, one-off in costs. These are going to stick to your fixed costs, I mean, lack of better word. Is it a good way to understand these upfront investments? My last question. Could you just share a bit on the uplift in ARPU from these 300,000 5G customers? A range is fine. Anything, any number that you can share that would be helpful. Yeah. Like throw a dog a bone or something. Thanks. Okay. Okay. Paul, maybe Dennis Chia, would you like to take the first two questions and then Johan the third on, ARPU uplift from 5G? Sure. As part of the, what Nikhil, you know, and Johan and also Charlie have articulated in terms of the growth initiatives we're undertaking as part of DARE+. Consumer space, we are talking about Infinity, the Infinity Play, and some of the security, peace of mind, you know, initiatives and product lines that have been launched and will be launched going forward. The cloud gaming that we've already launched and the further updates from that. The enterprise space, we're looking at certain 5G use cases that we will be implementing and expecting to generate in 2023. Those are the growth initiatives that we have assumed that will start in 2023. We believe that is a reasonable assumption coming through, because it will take some time to see the outcomes of what we're working on. Those have been assumed as part of the DARE+ outcomes that we expect to generate in terms of the growth initiatives. Does that answer your question, Foong? Yeah. Sorry, just to clarify. The incremental revenue that you're referring to is, sorry, just to confirm, is cloud gaming, enterprise, 5G use cases. Just two examples of it. other than. Yeah. There are other services that we're in the process of launching or working on as part of the Infinity Play and super app. These are things that we will be launching. Obviously, we have visibility of that internally, but we've not shared with the public market. Oh, sure. We hope that will excite everybody over. Okay. Okay, thanks. Thanks. All right. In terms of the upfront investments, there will be a bunch of investments. Mm not be recurring, and this will surround implementation costs of the new IT stacks. Now as we know, these implementation costs or what we call the SI costs are significant and very hefty. These will not be recurring. Some of these costs in terms of the upskilling the organization and increasing the bench strength of organization in terms of preparing us for the future growth, those will be recurring investments that we'll be making. However, you have to believe that we will continue rationalizing and optimizing the way we operate as a company. We'll continue to look for efficiencies across the company in terms of the way we're organized, as well as when we digitally transform our business model, there will be significant improvements in transaction processing times, retail footprints and all of that. That will all translate into actual outcomes. Mm. Mm ... and savings in terms of operating model. This will go towards funding or generating the right returns on the investments we're making to transform our business model. Okay. If that is clear, I will take your last question, which is related to almost like anything you can give me about information around 5G ARPU uplift. We expected that question, I do not mind sharing a little bit more information. If you look at our retail pricing, 4G to 5G, device to device and SIM-only to SIM-only, the ARPU or the MRC, the Monthly Reoccurring Subscription, is ranging roughly between SGD 15-SGD 25 more for an equivalent 5G plan. That is also the number we see flowing through in the ARPU. Having said that, this is important because this is really the crux, the essence, the backbone of our platform Infinity strategy, most, if not all of 5G plans are bundled with additional goodies, meaning entertainment like Disney+ are part of that. Just keep that in mind if you talk about the ARPU uplift. There are elements of service which are differentiated between 4G and 5G. Circling back to the first question you had for 2023, obviously Infinity Play platform strategy, which we have in mind, is key to grow revenue. That's well beyond the verticals which we have been discussing today, and we've been discussing peace of mind. There's a lot of opportunities we believe around cyber, cybersecurity for end consumers, cyber protection, cyber insurance. Gaming is also a big vertical. Entertainment on its own is a big vertical, but there are other verticals which obviously you will understand we cannot elaborate on today we're pursuing. Hopefully that's given you the context and the flavor you were hoping for. Thanks so much, Johan. Can I just follow up? Assuming roaming returns, I mean, whichever date it may be, but, will a 5G subscription give you a better uplift compared to a 4G or there's really not much change because it's just roaming? You ask a commercial person, of course a commercial person will say, "I do hope so," and that's something we're planning for. That's something to be tested and validated in the market. 5G roaming is a topic which most telcos are working on. We hope to, again, in our close to our DNA, to bring a differentiated value proposition soon. Okay. Thanks. Sorry, just one last housekeeping. The electricity or utility costs, just wanted to double-check. Which line item in the P&L is this re-reported? Is it cost of sales, I guess? No. It's recorded under occupancy costs, under operating expenses. Under other operating expenses. Okay. Under the other operating expenses under this line item called occupancy costs. Oh, okay. All right. Good. Thanks. Thank you. Thanks, Paul. Going back to your question on the DARE+, right? Charlie, do you have anything else to add from the enterprise perspective? Yeah, sure. I think it's exciting with what we can do in the enterprise space for DARE+. You know, being digital, we're growing without frontiers. It is really about leveraging our core competency and bringing value to where the market is heading. The priorities we observe in the marketplace is about digitalization, it's about sustainability. We believe that we are in good position as through our DARE+ transformation efforts to position StarHub to make ourselves more and more relevant and aligned to this long-term interest. Watch this space. Thanks, Charlie. We only have time to cover 1 last question in the chat that was posted by a retail investor, Xing Jie. The first question is on net profit. Dennis, this is a question for you. He's asking, you know, net profit has stabilized at about SGD 40 million per quarter in second half of 2021. Do we expect this level to be sustainable moving forward? I think you've given some comments about this with regards to our guidance. Perhaps you can reiterate some of those messages later. The second question is on cybersecurity. He is wondering, when will it contribute more significantly to our net profit, and what is the nature of the one-time inventory write-off? The third question, he is asking if we are expecting a significant decline in revenue or net profits after transferring the 20% economic interest for Ensign back to Keel, and when do we expect it to happen? Nikhil, would you like to address- Sure The third question first? Okay. You know, our intent is to continue remaining as the consolidating shareholder of Ensign. It's a core part of our business. We manage it closely together with the other parts of our enterprise business. As we talked about, we're building common digital platforms across cyber cloud and connectivity that we intend to scale. Certainly the thought process is very much to keep going rather than to sell at stake. Now, does that answer the third question? No. I think you had also asked whether a potential deconsolidation of Ensign leads to a significant reduction in profits. Yeah. The answer is no. Because the way accounting works, is that, you know, we account for the economic proportion. Right of whatever we have as net profit, whether it is, 40% or 50% or 60%. It doesn't really impact the final net profit. Today, Ensign does not generate significant net profits. As alluded earlier to a response to one of the questions, we have undertaken, the diversification of our portfolio and revenue streams because we believe these will generate, meaningful returns for us as these scale in terms of operations, whether they are consolidated or not consolidated. Yeah. I think Ensign, when you look at a business, we're a business that's growing 20-plus % with the tailwinds from cybersecurity, you know, very much in the zone of technology and technological solutions around security. You know, we make an active decision-making process around whether we wanna keep growing the business fast or whether we wanna harvest it for profit. As long as the business continues growing fast, we're gonna delay that delayed gratification on profit. We're gonna keep moving that point forward to harvest the increased revenues, then at some point, tip into producing significant amounts of nonlinear, as Dennis called it, EBITDA and net income. Okay. Dennis, would you like to address the first two questions? Yeah. If you look at the average net profit for 2021, the average was SGD 40 million a quarter. Based on the guidance that we've given for 2022, and the relatively lower margins recognition of the high utilities cost and the inflationary cost that we're looking at for this, for this year, as well as the upfront investments that we're making, mathematically it would lead to a lower quarterly NPAT than what we've registered in 2021. However, if you take into account what we've guided in terms of the after-tax, SGD 80 million of margins that we expect to generate on a steady state basis to our existing margins, and whatever we generate from our base business, we do expect the quarterly net profits to be higher than the SGD 40 million in the coming years. That's why we're taking, these upfront investments to generate the growth and to change our operating model because we are managing the business, for the long term, and for the viability of the business, and to stay very competitive, in this marketplace. This is the reality of business. We wish we would be able to generate the high outcomes without investments and report nice increases in profits all the time. In reality, as a management team, we do have to take decisions around investing for the future and for the growth and long-term views of the business, and this is what we intend to do for 2022. Okay. There is one more question on cybersecurity. When do we expect cybersecurity to contribute more significantly to our net profit, and what is the nature of the one-time inventory write-off? Yeah. Okay. If you look at the current scale of the business, a lot of it is centered around investing in capabilities to deliver the revenues. At some point when you reach a certain scale, and I do believe we're actually quite close to it, you will not have to add as many people on a linear basis to generate the higher revenues and capabilities that you would need. Case in point, honestly, is that when you've reached a certain scale and credibility in the marketplace, you do have a significant amount of competitive advantage, and you become certainly a more attractive employer as well for people. We are reaching inflection point. We're not at, in a position to be able to guide to the specific year that will happen, but we will say that it's around the corner. I would also add that we have been at Ensign, we have been investing. We have been investing in people, we have been investing in R&D and IP, and we have been investing in automation. Those are all things that at the right point, when we're ready, with the right scale, that we can harvest for improving profitability. For now, the focus is growth. Yeah. Just to add, in the meantime, we're working closely as an organization, Ensign's chart that draws to bring about end-to-end capabilities like cybersecurity. Yeah. With specific regards to the inventory write-off, at year-end, this was in relation to a specific initiative that the Ensign group was delivering in terms of a project. This is non-recurring, so this was just a one-time write-off in recognition of that event. Okay. Thank you, Dennis. I think that is all the time we have today. Thank you everybody for spending your Friday evening with us. As always, please feel free to reach us at ir@starhub.com if you have further questions that we were not able to address today. Till next quarter, please stay safe and have a restful weekend ahead. Thank you. Bye-bye. Thank you. Thank you. Thanks all. Thanks, Jen. Thanks all.