Starhub analysis Essay Example for Free

Starhub analysis seeGeneric Characteristics of telephone company IndustryMarket structure is either aMonopolyNatural monopolyOligopolyDominated by a handful of big playersHigh capital expenditure (capex)Absolute unyielding exist is superiorBut fixed cost per substance abuser is real low telephone service whitethorn be in truth cash flow rich if capex is controlledLow operating expenditure (opex)Average cost per user is very, very, very(prenominal) low.Generic Characteristics of Telco IndustryLines of line of productsVoiceTraditional fixed lines overtaken by mobile near households do not even have fixed linesi.e. M1 gives free fixed line with fibre political programLucrative international dialing business is largelygoneReplaced by selective information i.e. Skype, VOIP etc.Generic Characteristics of Telco IndustryLines of businessDataEscalating bandwidth demand (geometric growth)Some business models have failed as a resolveUnlimited mobile information plan replaced by tier edpricing plansReasonably footingd unlimited fixed broadband/fibrestill available in some countries (not so in the US).Price specialization between home and business dataplansSub segment differentiation exists gamers (lowlatency)Telcos need data to make up for loss revenue in voicebusinessGeneric Characteristics of Telco IndustryLines of businessPay TVTelcos offering pay TV not common for allcountries. Exists in Singapore.of all time a balancing act between controlling costof content and charging viewers more follow is increasing for developed countries Not so for developing countries..Video on-demand late business model gaint pay for a whole channel, just pay for theTV program you wantMio TV vs Cable TVGeneric Characteristics of Telco IndustryStrategy for non-saturated marketsBuild out infrastructure and coverage whilecontrolling capexGain market share by grabbing customersEspecially in on a lower floorserved marketsAttempt to bar in existing customersIncrease revenue by of fering tell priceplansTiered data plans (both mobile and fixed)Sell supplementary serviceCaller ID, low latency etc.Generic Characteristics of Telco IndustryStrategy for mature and saturated marketsInfrastructure and coverage largely built so on that point is little capexControl opex tightlyGain market share by poaching customers fromcompetitorsAvoid price warSame as beforeAttempt to lock in existing customersIncrease revenue by offering differentiated price plansExpand into overseas marketsAny economies of scale?Industry feel Cycle Analysis ushers five Forces affright ofNewEntrantsBargainingPower ofSuppliersmilitantRivalryWithin theIndustryThreat ofSubstitutesBargainingPower ofBuyersPorters Five ForcesThreat of New EntrantsHow faint is it for new players to enter the industry?What are the barriers to entry? inscription to existing brandsStickiness and incentives (e.g. inscription points)High understudying costsHigh capex and fixed opex costsScarcity of resourcesGovernment re strictions and licensingTechnology and rational property rightsPorters Five ForcesPower of SuppliersHow much pressure can suppliers exert on thebusiness?Single or few suppliers (monopoly or oligopoly)Few or no substitutesSwitching to new supplier is costly or timeconsumingSuppliers product is extremely distinguishedSuppliers industry has high gearer profitability thanbuyers industryPorters Five ForcesPower of BuyersHow much pressure can buyers exert on thebusiness?Single or few big buyersPurchases are in large volumesSwitching to a different competitor is trippingNo stickiness or consignmentBuyers are price sensitiveCompanys product is not importantPorters Five ForcesAvailability of SubstitutesHow correspondingly are customers to switch?Few or many similar products on the market?Switching cost is low and easy to doDisruptive technologySecular changes in consumption patterns andlifestylesPorters Five Forces belligerent RivalryHow intense is the opposition in the industry?High competition means low margins proceeds of competitors and sizeAny dominant company? small-scale differentiation between competitorsproducts and servicesIndustry life cycleYoung market means all firms grow as general pieexpandsMature market means competitors grow by takingmarket share from other companiesApplying Porters Five Forces to StarhubThreat of New EntrantsGovernment license is required and need to bid forairwaves in government auctionIs Singapore government issuing new telco licenses?What is the availability of airwaves?Auction prices brassy or costly?High capex and fixed cost..but very low opex cost per userLoyalty and sticknessSome stickiness due to contract obligations (earlytermination penalty) and incentives (handset upgradesubsidies)Low switching costs if not under contractNo cost and retain old mobile numberApplying Porters Five Forces to StarhubPower of SuppliersPressure from handset manufacturersHandset subsidy recouped by locking incustomers into contractsBig un likeness in price of handset without contractApple able to negotiate for higher pricesTelcos subsidize more. be passed down toconsumers.Pressure from content providersCable TV pays HBO, Fox etc for contentSpecial events like EPL cost much moreCosts have been escalating lately..Applying Porters Five Forces to StarhubPower of Buyers umteen retail customers (Starhub is no. 2 in SG)Extremely price sensitiveLittle brand loyalty and stickinessIndividual customer have zero powerEasy to switch out to competitors offeringsProduct is important but not even to StarhubE.g. can get same(p) handset and data plan fromcompetitorsSome tradeoff between monthly price plan and dataAll telcos touching away from all-you-can-eat data planApplying Porters Five Forces to StarhubAvailability of SubstitutesHandsets are not tied to StarhubVoice and data plans are also not unique to StarhubCable TV content is differentiatedCompetes only with Singtel but not directlyDifferent content and pricing contentSpecia l events like EPL are hotly contentedApplying Porters Five Forces to StarhubCompetitive RivalryExtremely high competitionMature and saturated Singapore marketStarhub grows by taking market share fromSingtel and M1Little differentiation between competitorsproducts and servicesBut no direct price competitionDespite rivalry, industry margins relatively highLow opex cost per userAverage revenue per user (ARPU) is growingDriven mainly from new tiered data plansKey Ratios for Telco Industry earnings Before Interest, Taxes, Depreciation andAmortization (EBITDA)Indicator of a companys financial performance fag RateActual rate at which customers leave for acompetitorAverage Revenue Per substance abuser (ARPU)Takes into account revenue, capex and opex.As market matures, ARPU drops.THE EQUITY RESEARCH PROCESSPurpose of the Equity Research key outTo communicate to clients a single messageHow to allocate financial resourcesAll other issues are junior-gradeWhat are lectors looking for?Ideas, i deas and ideasUnique ideas are great but most of the time, ideasgenerated could just be the same as everyone elseHerd instinct is safe optionBut no one will think about you..How to Make the Report important?Use the KISS principleInvestors have little time (and patience) hap clearly, concisely and get to the point.Have something to sayDoes it lead to an actionable idea?Report is an opportunity to standout and may lead toother revenue generating activities or more face timewith the client.How to Make the Report Valuable?Issue the report in a timely fashionGiving investment opinion and apprise too late ispointlessBetter late than never fails in this caseTreat your reader with respectReader may be an investment professional herselfDont patronize or condescendTailor tone and language to target audienceHow to Make the Report Valuable?Be impartial and objectiveA research report is not an advertisement.Even if you like the company very much, not overhype the company leave that to the IR firmsKnow your stuffBe beaten(prenominal) with both the industry and companyBe brave (but be prepared to face the firing squad)The better(p) analysts are willing to take risks with theiropinions