Once again, thank you for joining us this morning. We have Nikhil, our CEO, and Jacky Lo, our CFO, Chief of Consumer, Johan, and Chief of Enterprise, Kit Yong. We will start off with a presentation, just a quick run-through of our performance for FY 2024 by Nikhil and the management team, and we will head on to Q&As thereafter. Nikhil?
Yeah. Let me start again, and sorry for all the interruptions and back and forth. Welcome, everyone, to our 2024 results. I would like to talk about 2024 as a year, but also the second half, and specifically on a number of matters, I would like to point out some key trends for the fourth quarter as some leading indicators. I would like to talk about ourselves and our business lines, but I would also like to talk about the market, both in terms of challenges as well as where we see some real opportunity. Moving on to the high-level financial results. Next page, please. Yeah. As usual, I will start from the top right-hand side of the page and focus on service revenue. For the full- year, we grew by 4%. For the second half year-on-year, we grew by 5%.
For Q4, we actually grew by 15% year-on-year. That is not representative due to really a pop in the phasing of our cybersecurity revenues in the fourth quarter. On service EBITDA, for the full- year, we grew 3%, roughly in line with revenue. As you know, we continue to spend materially on our transformation in 2024 as well as really the second half of 2024. Net profit, we were able to exceed our EBITDA growth, growing our net profit at 7.7% for the year. This is very much in line with our strategy as we have talked about in the past, of moving from CapEx to OpEx and asset-heavy to asset-light, which really comes from two things. It comes from our transformation, where we are shifting from legacy to cloud and SaaS platforms.
Also shared cost structures like we do have with our 5G joint venture, Antina. Last but not least, what is not on this page, which Jacky will elaborate on, is our strong free cash flow and our low leverage of 1.29x . Which is very low relative to regional telecom peers, which gives us the firepower and the ability to continue to fund our transformation, which is at its very tail end. As well as to continue our commitment to shareholder return, both in terms of dividends and otherwise, as well as position for M&A when it comes due and becomes available. With that, I would like to spend some time on the next page, which is really our segment performance. But I would also like to talk about the market and open up the aperture to a little bit about our strategy.
Mobile, as all of you know, is an incredibly challenging segment with hyper- competition. Johan calls it very exciting, and he'll talk about that in a bit. You have seen the results come in from a couple of others. You saw the results come in in mobile from the incumbent, which shrank a little bit quarter-on-quarter. You saw the results come in from the number three operator, which shrank, we believe, quarter-on-quarter by well over 3%, but with a loss for the quarter of 71,000 subs. In comparison, quarter-on-quarter, we were stable to up slightly 0.4% for the fourth quarter. For the fourth quarter, we added 94,000 subs. As a result, our revenue market share has grown. It is now somewhere between 500- 600 basis points over the number three player, so it continues to escalate in terms of that lead.
We're also materially higher in subs, which we're less focused on because we're focused on revenue market share. Nevertheless, something to point out. Our strategy, as we've been talking about, is multi-brand, multi-market segmentation to maximize our revenue market share in every segment and to be a leader in every segment. In premium, which is an important segment for us where the incumbent and ourselves pretty much operate alone, it's terribly important, with device plans, with high quality, with service bundling, and we will always be there focused on quality and incredible customer experience. On digital, it's a relatively crowded space, and we have a market leader, giga!, which has a differentiated proposition and ultra-high NPS. In value, which is somewhere we didn't play in the past, we're quite aggressive now as the market shifts to the value segment.
Again, we have a very differentiated but simple proposition in the segment, which is growing extremely rapidly. I would like to close out my comments in mobile by stating that yes, this is a market leadership strategy and a revenue market share maximization strategy, but it is also a profitability accretive and a value accretive strategy because all of our brands and all of our platforms are run off the same core platform, which every day that passes will be more automated, more data-driven, and more lean and mean. That's mobile. On broadband, despite the market shrinking for others, we were able to grow. We grew for the second half at actually about 2.6%, and we grew quarter-on-quarter at the same pace by 1.3%. As you know, in the broadband segment, we are the number one player.
Similarly, we have grown our revenue market share over the quarter. We drove exponential growth in our UltraSpeed base, migrating our platform to 10 Gb XGS-PON, which has allowed us to do that. Similar to mobile, we operate with multi-market segmentation, but with a bit of a difference. With StarHub, we're focused on high quality, UltraSpeed, rich bundling propositions. With MyRepublic, we're focused on an extremely tech-savvy gamer base that is really a litmus test for quality and speed. We don't really play in the value segment, which is really only focused on by the number three, number four operator and a few others.
We believe that segment is still small, but we keep an eye on it. Then, again, I'd like to close off my comments on the broadband segment by stating that we have driven ARPU increase in line with the migration of our base to UltraSpeed plans. Again, we have and will continue to drive a profitability-focused and value-accretive strategy. Last but not least, shifting to our enterprise segment, which is very important. As you can see, we drove growth in all three segments of enterprise. In cyber, year-on-year, we drove growth of 26%. In regional ICT, we drove growth of 15%. In network solutions, we had growth of 5.6%. What I'd like to talk about is really double-clicking on network solutions and, in particular, managed services within network solutions, where we grew over 20% year-on-year.
This is a big business that's approaching a SGD 200 million book of business where we have grown order book extremely rapidly. This segment is all about large scale, smart city, infrastructure-centric use cases with tech and tools embedded, but focused on digital and data-driven solutions. We offer that in a way that is underserved by the current market offerings, which is really one or two telcos and a small handful of SIs, which really do it in a way that's monolithic and clunky. What we have been doing it in a way is in a way that's full stack, bringing together hybrid multi-cloud with ubiquitous connectivity, with tech and tools and data-driven solutions. But all as a full stack that's highly scalable with fast time to value and lower total cost of ownership.
That's been reflected in the growth of our managed services business, as well as in the growth of our order book. I would like to point out two things as part of my closing comments on this segment and on managed services in particular. One is that this is a profitable and value-accretive segment. Our margins, as I pointed out in the past, are not at the systems integrator level because this is a platform-centric model with infrastructure embedded. So they're roughly in between systems integrators, which are in the mid-teens, and telcos, which are sort of 80+. So the margins are attractive, reflecting the platform-centric model that we're deploying. Number two, and importantly, we are actually in the process of integrating our regional ICT business into our managed services business.
The objective for that is to be able to do the same high margin, platform-centric, all hybrid multi-cloud connectivity use cases focused on smart city developments, not just in Singapore with large government and corporate contracts, but also in Malaysia and beyond with large government and corporate contracts. With that, I would like to hand over to our esteemed CFO for a few comments.
Right. Thank you, Nikhil. Morning, everyone. We conclude 2024 with a strong balance sheet and solid free cash flow generation. These financial strengths allow us to stay committed to delivering dividends. Our operating cash flow remained robust, growing year-on-year to SGD 361 million. If we look at our free cash flow, which is something we monitor closely, we generated SGD 162 million on SGD 0.094 per share on the back of higher year-on-year CapEx investments. In terms of dividends, we have proposed a full-year dividend of SGD 0.062 per share for 2024. That is a total payout of SGD 107 million. By year-end, we had SGD 540 million in cash and bank balances. Our net debt to EBITDA ratio remains low at 1.29x , improving from 1.36x last year.
We also have strong liquidity with available lines of credit and access to public debt markets, giving us plenty of flexibility for future investments to drive growth. Our interest cover remains solid at 10.7x , well above industry norms. A quick note on borrowings. About 90% of our debt is on fixed rates, mostly locked in during COVID-19 when rates were significantly lower. As you see in our disclosures, we have some refinancing due in 2025, and we do expect some increase in finance costs post-refinancing. But with our strong banking relationships, we are confident we can manage any potential increase in finance costs effectively. Now, let me take you through what we have achieved for 2024 on the next page. We met our guidance across all metrics for the full- year. On service revenue, we achieved 3.9% year-on-year growth, exceeding our guidance of 1%- 3%.
Next, on service EBITDA margin, this is in line with expectations of approximately 22%. On CapEx commitment, including investments, that came in at 9.5%, below our guided range of 11%- 13%. Lastly, as I mentioned earlier, we are proposing a full-year dividend of SGD 0.062 per share, higher than our SGD 0.06 guidance. For the second half of 2024, we propose SGD 0.032 on top of the SGD 0.03 declared in the first half of the year. This aligns with our dividend policy of paying out 80% of net profit attributable to shareholders, excluding one-off items.
Next page. Some quick call-outs on this slide. Nikhil has given you an overview on some headline numbers, so I will not repeat those. But excluding D'Crypt, which we divested in February 2024, our service EBITDA for 2024 was up year-on-year at SGD 437.4 million with a 21.7% margin. Net profit after tax remained strong, closing the year 7.7% higher year-on-year at SGD 161.7 million. While free cash flow dipped slightly due to our CapEx investment, it still remained healthy at SGD 162.2 million. As mentioned earlier, our leverage remains low at 1.29x, putting us in great position for financial flexibility moving forward. With that, I will hand it over to Johan, who will take you through the consumer business highlights.
Thank you, Jacky, and good morning. Good morning to the most vibrant and exciting marketplace. We will start with mobile today. As you can see, mobile, we grew market share a lot in Q4. We added close to 100K post-paid subs. As Nikhil mentioned, we are very determined and very excited about our multi-brand strategy, where we play in different segments in the market successfully. ARPU declined marginally. That is mainly out of bundle revenue, which is coming down, which is to be expected. Prepaid is fairly flattish, I would say, in terms of base and ARPU. Also a note on that going forward, we will combine post and prepaid into one because the market lines are blurring in that respect. Noteworthy is churn. We keep churn at a low level, at 1% in this very competitive market.
With all that, we actually managed to solidify our number two position, both in revenue market share as well as the subscriber market share. Last note I want to call out on this page is what we call our T2 revenue, which is basically new verticals, which comprises, for example, of gaming and cybersecurity, which we add to our connectivity services. We generate well over 5% of our revenue in this particular segment of total. That is growing, which is good. That is diversification right there. Moving to broadbands. Noteworthy in broadband is based on our computations is that the entire revenue growth in the market, we basically collected on StarHub brand. That is reflected in an increase in ARPU, as you can see here, and also year-on-year growth in terms of revenue. What is driving that? Driving that is the very successful deployment of higher speed plans.
We call it UltraSpeed, which I am sure you are familiar with, and 19% end of Q4 is on higher speed plans called UltraSpeed, and that is helping us significantly when it comes to ARPU and revenue. Also it helps us maintaining churn at a low level. You can see that, 0.9%. That is a successful product category. Entertainment. Everyone is familiar with entertainment. On the next slide, entertainment is characterized by a slow but steady decline in terms of subscribers due to cord cutting, but ARPU remains very healthy at SGD 45, and we continue to believe, and that is what we see as well, that entertainment is a very important differentiator added to our connectivity services. Interestingly enough, churn decreased to 1.2% in Q4, which is again, an attribute to the team's great efforts doing cross and upsell and retention policies in a very competitive market.
To summarize consumer market, yes, it is competitive. Yes, I think we're doing very well in all product categories, growing market share, both on revenue, but in most categories, also on subscriber. And we're confident that on the back of a multi-brand strategy, we're well-positioned in 2025 to continue that momentum. Thank you for your attention, and I'll hand over to Kit Yong for enterprise. Thank you.
All right. Thank you, Johan. Now let me run through the enterprise overview. Earlier, the CEO has talked about the growth in all three segments. If you look closer, starting with regional ICT, it's a 13% growth of revenue. It is backed by, I would say, we have continued to increase the share of wallet of our existing clients. And that really help us to continue grow our business. And as they evolve, we have the ability to provide with more complex solutions when we do the regional integration. When it comes to the cybersecurity services, strong momentum, 26% growth. There's a strong need for the cybersecurity solutions and the cybersecurity services is doing very good job and become one of the most recognized brand for cybersecurity in the region. Now moving to network solutions, Nikhil mentioned about the managed services growth.
This is very important to us. It's an organic growth for us, and it's differentiated, with competition that we are beating them, from the global SIs to the local players. And we are winning on large deals with iconic brands. And we are seeing momentum now with a platform-based play, not a pure SI or pure connectivity, but a platform base with integrated services and using sophisticated tools that we invested when we built Cloud Infinity and extend this to our enterprise environment.
We receive very good feedback from the enterprise clients that we engage, that these are tools that they wish they had, and they are very glad that StarHub invested in it, and they are very willing to partner with us so that we have better, to enable them to build a more resilient structure that is, come with interoperability and more resiliency for them. So we are on a good state for managed services. We have a registered material growth. And we'll continue to do that. With that, let me hand over to Nikhil.
Thank you, everyone. In concluding, just two pages, with respect to our 2025 outlook. Number one, what do we want to get achieved for the year? In consumer, we want to continue to grow our revenue market share, with maximizing leadership in each and every segment with our multi-brand, multi-segment strategy. We want to continue to drive Infinity Play, with real focus to add additional revenues on top. We wanna c ontinue in broadband to the migration of our base to UltraSpeed plans, thereby uplifting our pool steadily, and driving profitability and value accretion like we do in mobile.
Then very important, we will be completing our transformation in the first half of this year. With that, we will achieve a number of things. Number one, we will have the most highly automated, most hyper-personalized, most data and AI-embedded customer journeys in the market. Number two, we will have the ability and enhanced ability to drive product and bundling. Continuing with the heritage that we have in the past, but really in a way that is much more value-creating and data-driven with more precision.
Then number three, we will be moving over time our consumer business, but really the whole business, but the consumer business, to a lean and mean cost structure that is attuned with the needs of the business. On enterprise side, as we've talked about, we would like to aggressively continue the scaling of modern digital infrastructure with Cloud Infinity embedded, with managed services, with AI and data embedded that we say here. Second, we are in the process of integrating our regional ICT business into managed services to more aggressively drive the large-scale government and enterprise smart city-based contracts that we do in Singapore, in Malaysia and beyond. Then number three, we continue to work on synergistic acquisitions to expand our enterprise footprint and add capabilities in the Southeast Asia region. We will continue to drive costs down.
In particular, what I would like to highlight is that we have completed the transition of our network to a hybrid multi-cloud with tech and tools, what we've been calling Cloud Infinity, with data and AI embedded. What that really moves us from is this really monolithic, call it base station approach, of the telco paradigm of the past to establishing a new paradigm around network performance and observability down to the very edge, which will translate into better experience for customers and a greater ability for us to drive automation and cost. Then last but not least, we look forward to driving total shareholder return. This comes from our own organic evolution where we continue our commitment to dividends. We will also, of course, continue to keep our eye focused on value accretive M&A. Moving on to the last page.
So in terms of our outlook, on service revenue, we are moving away from providing percentage service revenue guidance. That's in general, but there are three reasons for that. Number one, we want to retain flexibility to compete aggressively in the declining consumer business, to take revenue market share and maintain leadership and increase our leadership, to drive retention and in time growth. Number two, we intend to aggressively drive our enterprise managed services and regional ICT, which is an offset, obviously, a positive offset. Then the third thing I'd like to point out, which is not on the page, is clearly there's a propensity for acquisitions, but also potentially for some deconsolidations, which are neutral to positive in terms of value impacts, but do affect potential revenue in terms of what's consolidated and what's not .
Now, moving on to EBITDA. Absent percentage revenue guidance, we are actually shifting our EBITDA guidance to commit to stable EBITDA for the year. This will be enhanced and supported by an aggressive and focused cost optimization effort as we complete our transformation. So really moving to build, to harvest, both in terms of customer journeys, but also in terms of automation, enabling aggressive cost reduction. Number three, on CapEx, we continue our outlook and guidance of 9%-11% of total revenue. Our transformation investments are at their tail end. Now, what we are not including here is the one-time spend for 700 MHz spectrum, which continues to evolve. We will provide an update. We are, of course, very well-funded, both through our cash generation as well as our leverage capacity, to take on the financial commitments associated with 700 MHz spectrum without material financial impact.
Then last but not least, we continue our commitment to total shareholder return, which is organic growth as well as returning capital to shareholders via dividends as well as other means. Our leverage, as you know, remains low, and our funding firepower is strong. Our cash generation is strong and our cash balance is strong. We continue our dividend policy of no less than SGD 0.06 per share or 80% of net profit, whichever is higher. So with that, I'd like to conclude the presentation and hand it back to Amelia to open this up for questions.
Thank you, Nikhil. As usual, for Q&As, if you have a question, please raise your virtual hand and we'll get to your question. First in line, Arthur, would you please unmute yourself?
Yeah. Hi. Good morning. Yes, can I ask my questions, please? Hi. Good morning, everyone. Firstly, on the dividend, can I just clarify how we get to SGD 0.0 62 ? If I look at your FS, you are getting an SGD 0.088 EPS, which means you should have paid around SGD 0.07 cents based on the 80% payout ratio or SGD 0.06 or whatever is higher, right? What adjustments were made so that the EPS actually came in lower than SGD 0.088 for you to get to 80%? Second question is, again, on the dividend. What is the commitment to this on keeping a 6% floor, 80% payout? Should M&A occur in the market, is this number safe?
Last question I had is with regard to the EBITDA outlook. It seems to be stable year-on-year. However, you have had a big transformation project being booked over the last few years, with it winding down this year. Why are we not seeing margins uplifting or EBITDA uplifting, given that those costs should be fading into 2025 and 2026?
Okay. Thanks, Arthur. Do you want to start off with some opening comments since these are all about the outlook?
Yeah.
Jacky can add on.
Yeah. On the first, I'll pass it on to Jacky. On the second, yes, the commitment is safe. We don't see any issues with that, which is why I'd made the statements around our funding position, our cash generation, and our free cash flow out there, as well as our existing cash position. On EBITDA, again, I'll hand it off to Jacky, but I guess the overarching comment is yes, we're completing our transformation. We are aggressively moving into harvest, but harvest takes some time. So there's some timing and phasing issues over the year, where you really start to see the full scale of the impact in 2026 and beyond. Not to say that there isn't anything happening this year. We're working hard this year with realized savings, but they will be through the year.
So you don't really see the full impact of it within the one year, 2025. But with that, maybe Jacky, you can elaborate on-
Sure.
All three points.
Yeah. Arthur, maybe I'll just clarify the calculation first, right? If you look at the policy definition, it says 80% of our net profit, but excluding one-off items. As we disclose in the MD&A, there are certain one-off items during the year. Particularly, there's some DARE+ related cost provision that we utilized during 2024, which we consider as one-off. So that's actually removed from that calculation. So that explained the SGD 0.062 . On EBITDA, yeah, Nikhil already point out, we invest and we are close to the tail end of the transformation investment. Yeah, but that's going to take some time to realize all the benefits. But as you know, the benefits will be coming from reducing legacy costs, enhancing our service capabilities, and driving long-term operational efficiency. So all this will gradually realize this year and mostly maybe coming from next year as well.
Yeah.
Arthur, does that answer all your questions?
Yeah, sorry, I'm still a little confused in terms of the DARE+ and transformation-related bookings. Where are we related to this? What percent has been executed versus what's remaining for 2025?
Nikhil?
Yeah, go ahead, Jacky.
Right. Yeah, so I think if you look at it, for our transformation is related to network and also IT transformation. So I think mostly for the network part is done, and mostly what remaining is the IT transformation. So I think we shared before, we are looking at over CapEx and OpEx investment roughly SGD 270 million. And through the end of 2024, we have roughly spent the investment about 90%. So the remaining 10%, we plan to use up in the first half of this year, and mostly on the IT transformation.
No change, Arthur.
Understood. But that's actually what confuses me with the EBITDA margin guidance or the flat EBITDA outlook. Because we're just down to 10% booking. Why are we not seeing a stronger outlook on EBITDA?
Yeah, I think it goes to two blocks of things. One is the three items that I pointed to in terms of the revenue outlook, which is our flexibility and ability to compete in a declining consumer business, similar to what we had been doing. Growing our managed services business acquisitions and deconsolidations. Secondly, it's also what I talked about, which is the timing and the phasing of the harvest associated with our transformation, which is decommissioning legacy systems, which is digitizing and automating at the core, digitizing our customer engagement, moving everything to new platforms, which is an exercise that takes some time. We will not see the full effects of that certainly within 2025. We will see some effects, but more in 2026. So it's a system of offsets.
Got it. Thank you.
Thanks, Arthur.
We'll provide more details over the coming quarters, Arthur, as well as updates and timeline.
Okay. Next in line, Hussaini. I think you're up next.
Sure. Thanks, and good morning, everyone. Thanks for the opportunity. A few questions. First is around guidance once again. On the mobile side, it is mentioned that StarHub will be aggressively compete to defend or grow market share. If you can throw some light, like in which segments you are going to compete. If you're going to compete in the value segment, what is the risk of your premium segment downtrading to the value side? Just question number one. Second question is on the cybersecurity, which has done extremely well. If you can help us, like where the profitability is and what are the future plans in terms of potentially hitting the IPO side. Then finally, maybe going to Arthur's questions once again.
On the flat-ish EBITDA guidance, just trying to understand that is the decommissioning of those legacy systems bit delayed, which is leading to some delays in harvesting the cost benefits on the back of that? Maybe the final one is on the spectrum side, wherein it is mentioned that you are in the discussions with the regulator. There is an ongoing discussion with the regulator. Maybe if you can give some color on what kind of discussions they are. Thank you.
Thanks, Hussaini. Maybe let's start off with Johan on the competition.
Yeah, thanks, Hussaini, for that question. Maybe, if I can structure the answer to the question in a few components. Let's start with mobile. Because mobile is the, I would say, more pronounced market and also the more sizable. The market is probably diverging at this point in time, where you clearly can distinguish three, I would say, I wouldn't even call it segments, but sort of three buckets. One is a premium segment. Second is the sort of, I think you used the word value segment, or no-frills as we call it internally. Then there is the digital segment. They have different dynamics due to change in consumer behavior, competitive dynamics, and also technology changes. I refer in this respect, for example, to eSIM. So what is our strategy?
Our strategy is to compete in each and every segment, and they come with their specific operating cost model. It won't surprise you that, for example, if you talk about giga!, our digital brand, the cost operating model is a fraction of what it is compared to the main brand. So by competing in different segments, we basically manage to grow not only market share, both in subs and revenue, but also preserve the margin. So that's how we look at it. In broadband, that is not so pronounced at this point in time.
We are obviously very focused on differentiation in terms of quality of service, and that has served us well for the last one year, and we will plan to continue that direction. Obviously broadband consumer expectations are slightly different, I would say, as well. Quality is, and brand, are the two key parameters for customers to buy. We tap into that and deliver what customers would like to have, which is quality and a better network. Hopefully that gives you a bit of color and context around how we see the market and how we plan to compete in the different segments. Thank you.
Thanks, Johan. Jacky, would you like to take the question on the EBITDA outlook? Better on the delay of decommissioning system.
Yeah, I think we mentioned, yeah, I mean, the decommissioning that we'll be facing, and we started this year, but that's going to carry forward into 2026. For us to realize the full benefit of these decline in the legacy system cost is going to mostly realize in 2026. It's a gradual process.
Okay. Nikhil, with the last two questions, cyber and spectrum.
Yeah, I'll talk about those. Just to add just one note of caution on top of Jacky statement. Not caution per se, but the cost efficiencies, to be very clear, don't just come from decommissioning. There are a number of areas where we're going to be automating and getting cost efficiencies, not just decommissioning. All of those have different time frames to implementation and harvest, and we will continue to provide more detail as the quarters pass. Moving on to cyber. The business has grown well, right? As you have seen, they are ending up the year close to about approaching or really close to about SGD 400 million in revenue. As we have said, as they approach and get to SGD 400 million in revenue, that is kind of the point at which they look to really focus and drive profitability.
That is very much of a focus to now position the business towards greater profitability. There are many ways to doing that, which are being gone down, I would say. Roughly speaking, the business is divided into three segments, right? Or three business lines, shall we say, which are interconnected. They don't just operate solo. There's the project business, there's managed services, and we're talking about Ensign InfoSecurity here. Then there are core technology platforms with IP, right? Which go to things like automated algorithmic threat detection, et cetera, et cetera, command and control. Some of the things I think you saw in our Investor Day of 2023. The intent is to obviously drive the managed services business harder and core tech harder, which realizes margin uplift and improved profitability.
So that, in general terms is kind of the goal for Ensign InfoSecurity, which should realize an improving profitability over time. It's a multi-year journey. On IPO, that's not something that I can really talk about. It's a highly nuanced matter, also to do with the nature of the contracts and the business that we do, which is of a sensitive nature. But all avenues are possible, but I would caution against any kind of discussion of those kinds of financial strategies. We're really more focused on the business. In terms of 700 MHz spectrum, we do have a commitment to the 700 MHz spectrum.
We do believe it will realize returns over time in the form of improved coverage, improved capacity, and improved customer experience, as well as to fill out our enterprise offering for managed services, not in terms of 5G use cases, but in terms of hybrid multi-cloud use cases with embedded ubiquitous connectivity. But having said that will take some time. I'm not really at liberty to talk about the nature of the discussions that we have with regulators, but we'll keep you updated over the coming quarter and quarters.
Thanks, Nikhil.
This is super helpful. Maybe if I can have one follow-up. Is that okay?
Sure.
Of course.
Yeah, sure. To Johan's point on the cost to deliver giga! is almost a fraction of that of premium postpaid connections. From the absolute EBITDA point of view, are the absolute EBITDA for giga! and the premium offerings similar? That is what I am trying to understand. If it is similar, then all this competition does not hit the EBITDA because if someone tastes down, still the EBITDA is preserved. Just trying to understand the cost economics over there.
Johan.
All right. You are asking a very detailed question, Hussaini, which I appreciate. Now, as you will understand, I cannot disclose absolute accurate numbers because I would call them company confidential. Let me try to give you a bit of directional reassurance on this one, okay? If you look at percentage-wise margin, then you can compute it probably for yourself, the dollar value is very healthy, like for like. All right? You need to look at this in a wider context as well, because there are, as you probably can imagine, indirect costs, other developments in terms of market shares, market volumes, and so forth. So, in the mix, I would like to reassure you on that one, that it is a healthy exercise for us. So that is what I can disclose in direction to your question. I hope that helps you a little bit. Thank you.
Sure. Very helpful. Thanks a lot.
Thank you.
Yeah, Hussaini, it goes back to my opening comments, which is we want to maximize revenue market share in each of the three, for lack of a better word, segments, premium, digital, and value. This is a profitability accretive and a value accretive strategy because the incremental margins outside of the premium segment are healthy.
Yeah.
But the other comment I would like to double-click on, Johan, if you permit me, is let's not forget premium. Premium is really important as well. It's really significant. Really, there are only two players in premium, right? That's where we also see a lot of juice from our transformation in driving some pretty delightful, highly automated, data-centric customer journeys. It also lends itself to our broader strategy, which is a bundled strategy. Yes, for better or worse, the approach to consumer is highly nuanced, with a lot of different flavors. It's about multi-market segmentation, it's about bundling, but every segment is important, and every segment will drive value accretion and profitability accretion. In tandem with other products will also drive cross-sell and up-sell. We like the fact that we have a lot more firepower and tools at our disposal than others in the market.
Yes.
Particularly with the transformation almost completed.
Can I add one thing on the back of what Nikhil mentioned? Also, again, I think for you, Hussaini, and the others maybe too, get a bit of a better triangulation. We obviously measure and manage churn in the different categories. One of the things really in the premium segment we're really, I would say, obsessed on is managing churn. Our churn in that category is super low.
The team also is very active in what I would call value accretion in terms of cross and up-sell in that particular segment. As Nikhil mentioned, we have one competitor, and I wish I could give you a bit more information, but I would cross a boundary in terms of our relative performance to that, but you can probably conclude. Rest assured, we play in each segment or each value bucket in the market with the objective to win, and we do so. Thank you.
Thank you.
Super helpful. Thank you.
Thanks, Hussaini. Next up, we have Kenneth.
Hi. Good morning, management. Thank you for this opportunity. Just two questions from me. First is on the net profit target. I think if we take into account the current level of competition that we're seeing plus your flat EBITDA guidance, should we still be expecting that SGD 80 million incremental NPAT targets by FY 2027, and will there be a revision to this? Second question is on the split. Could you just give us a rough sense of how much of mobile revenue is between premium, digital, and value? And add on to that, do you have a longer-term revenue proportion target for the value segment? Thank you.
Thanks, Kenneth. Maybe let's start with Johan since he just answered the last question on the mobile instance.
Nikhil, you can take-
Can you rephrase the question for me?
He wants to know the proportion between the three segments.
Okay. Thank you very much, Kenneth, for that question. That's a little bit, I would say, propriety. I would love to answer your question, but actually I don't think I can. Sorry. Sorry for that. What I can maybe give you directional is that we believe going forward there will actually be four big buckets in the mobile market. One bucket which we didn't discuss as such is basically what I would call eSIM travel SIM market, which is a segment on its own. Then you have low cost or low price, then you got digital, and then you got premium. They have different dynamics, and I would give away competitive information if I would answer your question in more detail. I would hope you respect me for that. Thank you.
Nikhil.
Yeah, just to add to Johan's comment, Kenneth, in a nutshell, our intent by driving our strategy this way across segments with the tech and tools and firepower that we have at our disposal is to be neutral or Zen to the way the market shifts between segments. We're a leader in each, and we leverage all the firepower and tech and tools that we have at our disposal. We make money in each segment, and we drive value in each segment. That's not the position of the other players in this market. That's what we want to do. Yeah.
Now, to your question on our net profit after-tax target. It obviously is very much our intent and our target to get to that number by 2027. Having said that, I would say the market continues to evolve in a very rapid way, and I think particularly in consumer, it's evolving in a way that we haven't seen in the past, right? We are doing a lot of work around what is under the hood, what we hope to achieve in the consumer segment, what we hope to achieve with our transformation, what the opportunities are for scaling our enterprise business aggressively as we have been. We'll continue to provide updates as we go through the next few quarters.
Kenneth, does that answer your questions?
2027 is, in this world, it's a long time away, Kenneth. I think it's less about that and perhaps more about the planning that we're doing and the replanning that we're doing, both negative and positive. Defensive as well as offensive, which we'll continue to update you on.
Thank you very much.
Thank you.
Thank you, Kenneth.
Thank you.
Could you please unmute yourself?
Yeah. Hi. Thank you for the presentation, and just one question from me. Any color on depreciation next year, could it drop further due to lower CapEx? Thank you.
Sorry, could what drop further?
Depreciation.
Oh.
Yeah. I think we mentioned this actually on the last call. I think with the spectrum rollout, we expect actually higher depreciation expense.
Yeah. In 2025. Yeah.
Yeah.
Amanda, does that answer your question?
I think so, right? Yeah.
Okay, thanks.
Yeah, so I think you're certainly going to see a lag between depreciation versus any kind of return on the 700 MHz spectrum, whether from consumer or enterprise.
Okay. Next up we have Hong Wei.
Okay. I have a couple questions. The first one I noticed is that you mentioned that the new verticals in mobile contribute more than 5% of mobile revenue.
Yes
How fast is this segment really growing, and is it profitable? That's my first question. My second question is that to be more specific, how much firepower are you setting aside for acquisitions? I know that there's quite a number of opportunities out there, but just roughly how much will you be thinking about?
Okay, Johan.
Hey, Hong Wei . Thank you very-
Great question, Hong Wei .
Yeah, exactly. I was about to say thank you very much for that question. The accurate number is actually 6%, which is the contribution of what we call T2, and I will come back to classification of what T2 means, out of the consumer service revenue. That grows, and I cannot disclose really the growth percentage because, again, I think I would be helping my dear competitors who are probably listening in somewhere as well. What does that comprise of? There are three categories in that particular bucket. Number one is cyber, and I will come to that in more detail. Number two is gaming, and number three is health. Under cyber, there is also some other insurance products. The fastest-growing, and that will not surprise you, is anything related to cybersecurity, which we offer as an add-on service in most plans to our customers.
And the other one, which has a good performance at the moment, is gaming and what we call LifeHub+, which is health-related, as a marketplace, it's a bit smaller. Are they profitable? That was your part two of the question. Absolutely, they are. And they deliver a very healthy margin as well. They typically come on a variable basis, so we don't have any fixed cost structure in the back. And we actually are very much in line with our All-in-One App strategy offering this across the board, both to subscribers of StarHub connectivity service as well as non-StarHub customers.
The last point I want to call out is that, and it's an interesting footnote, that gaming actually we offer, okay, I'm going to give some information here, but that's fine. Beyond Singapore, and actually seven out of our 10 gaming customers come from outside of Singapore. That gives you a bit of context in terms of how we look at that. And yes, this is a very important part of our business because it's a growth business. So stay tuned. Thank you very much for the question.
And Nikhil, on the M&A firepower.
Ooh. I'm hesitating, Wei Hong, because I don't want to put a dollar number out there, which might be misread. Depending on how people might read it, and the constituency that they're coming from. Look, all I can say is we're at 1.3x net debt to EBITDA, right? And the telco median is about 2.5x. With small to mid-size M&A, people can comfortably, and I think we could stay comfortably under the telco median. For instance, in enterprise, right? But for large scale M&A, what you typically see is people will go above the telco median.
Yeah.
They will delever over time as the synergies come through. So that is how I would dimension it. I just want to stay away from dollar numbers. We also obviously have a very strong and strongly committed bank group. We have free cash flow generation year- on- year. So I guess I would answer the question perhaps by saying funding and firepower is not so much of our issue. It is more about the opportunity, the value creation case, and just if and when these things happen, right?
Thanks, Nikhil. Hong Wei, do you have any follow-up questions?
Oh, that is all from me. Thanks for answering that. I think that is quite comprehensive, actually.
Okay.
Thank you, Hong Wei.
Thank you.
Thanks, Hong Wei.
Okay, I think we have a couple more minutes. Since we started a few minutes late, we will be happy to stay on a little longer.
Yeah. Sorry about that.
Questions that you might have. If you have a question, please raise your hand.
Arthur, anything else? Hussaini? You can take up the time and space left by Sachin.
Okay, I think-
I think we are good then, right? Okay, let's wait. Yeah.
Going once, going twice. Okay, there are no more questions. Happy Friday, and let us know if you like this morning format. At any time, if you want to catch up with management, let us know. You know how to get me. Have a good Friday and weekend ahead. Thank you everyone for joining us. Bye.
Thank you, everyone.
Thank you.
Bye.
Thank you.