StarHub Ltd (CC3) Earnings Call Transcript & Summary

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Pretty solid. So let me, with that, start with our financial highlights. So as you can see, starting with total revenue and service revenue, and of course, I'll focus on service revenue. We are flat year-to-date. We are down quarter-on-quarter. The reason we are down quarter-on-quarter is Ensign, our cybersecurity business, which has revenue recognition timing associated with it. So while it fell short in Q3, we expect those revenues to come in strongly in Q4 and stay on forecast for the full year. So at this point, as a note, when you look at our service revenue, irrespective of those timing issues around Ensign revenue coming in, which has created the downdraft in Q3 year-on-year, we expect that to come back, and we expect no change to our full year forecast, which has year-on-year growth. Now moving on to Service EBITDA. We see good growth in EBITDA, as you can see from these numbers here. That's driven by growth in our enterprise segments, high-margin growth in our -- growth in high-margin enterprise segments, which we'll talk about later as well as cost and OpEx efficiencies that we have been driving. Now zoning in on the bottom right side, as usual, as you have seen with us in many prior quarters, our net profit growth exceeds our EBITDA growth. And it's the same reason as we've talked about before, we are driving CapEx to OpEx substitution across the business as we use shared cost structures like Antina, and as we migrate our on-prem systems to cloud and SaaS-based systems, which are more OpEx oriented. This is, of course, something that generates superior ROI for us. It's reflected in lower depreciation. And we cross-correlate that against our strong free cash flow, which, as you know, historically over the past many quarters and continues to run at about 50% higher than our net profit, providing good buffer for our dividend obligations and to fund our growth. Now staying on the subject of free cash flow, we continue to reduce our leverage with our strong free cash flow, and our net debt-to-EBITDA is now 1.25x. This, as I always say, every quarter, gives us strong firepower. We use that firepower to aggressively drive our multi-market segmentation in the consumer business to aggressively scale our enterprise business and to make acquisitions. We are always asked the perpetual question around domestic consolidation, and we remain open. But we also want to increase the scale of our regional enterprise business, which is growing well and has strong customer traction around modern digital infrastructure. So we want to deploy some acquisition dollars to scale that business. Now moving to the next page on segment revenue, which is quite interesting, starting with Mobile. So our Mobile revenue declined 5% on a year-on-year basis and 6.5% on a year-on-year basis looking at Q3; however, when you look at our quarter-on-quarter revenue attrition, we were actually down to about 0.8%. I'd like to draw a little bit of a comparative, if you will permit me. So we were down 0.8% on mobile service revenue quarter-on-quarter. This compares to the third operator, where we saw consumer revenues decline by 6% quarter-on-quarter and the leading operator, which announced this morning where we know -- where we noticed the mobile service revenues declined 4% quarter-on-quarter. So we're quite happy with this 0.8% contraction because it shows that we are close to flatlining revenue attrition on the mobile side, certainly versus our competitors, and we did this by aggressively competing. And in fact, we added 55,000 subs in the third quarter over the second quarter. Most of the revenue impact for that has not yet come through. Some of it has resulting in this modest contraction quarter-on-quarter, but the revenue effects will start coming through next quarter onwards in full. Now the strategy that we're adopting in mobile is multi-brand, multi-market segmentation. We see the market, as Johan will talk about, divided into Premium, Digital and Value, and we're aggressively competing in all segments and growing our revenue market share. Talking about revenue market share, we are a strong #2 in terms of Service revenue market share and our lead over the #3 operator has widened to about 520 basis points, we believe. Now moving on to Broadband. We were actually able to grow year-on-year for the quarter. But again, looking on the -- at the quarter-on-quarter numbers, we grew 2.8%. Now again, drawing the comparative, we grew 2.8%. The #1 operator, we noticed was flat. And we believe the #3 operator declined actually about 3%. Now how did we do this? As we've talked about, we aggressively drove penetration of our ultra speed and high-speed plans. And in fact, we've doubled the number of subs that we have on high-speed and ultra-speed plans since from this time last year. So the percentage of our base that we have on ultra-speed plans and high-speed plans is actually quite significant and growing rapidly, leading to ARPU increase and superior economics for us. Entertainment, we declined quarter-on-quarter and year-on-year, and we'll talk about that some more. But I'd like to focus on Enterprise, which performed strongly. So overall, year-on-year, Enterprise grew. The impact of that was a little bit muted by Q3 for our cybersecurity Ensign business, Ensign, where revenues did not come in for Q3, but will be coming in, in Q4 very strongly. And as I said, we reiterate our full year forecast for that business and for our business as a whole. Now when you look at other segments of our Enterprise business, they grew strongly. Network Solutions grew 9.4% year-on-year. And within that, as Kit Yong will go through, we grew our Managed Services business by about 25% year-on-year. Our Regional ICT business grew 29% year-on-year. And as we have talked about, we are going to be integrating that business into our Enterprise business in Singapore, so we can drive modern digital infrastructure, which is a driver of our growth in a way that's unique and platform-based around hybrid multi-cloud and ubiquitous connectivity. And we are doing this in Singapore, and we're going to be doing it in the region. So with that, I will pass on. I always say our esteemed CFO, and welcome Jacky to his first earnings call with us, but certainly not his first earnings call as a seasoned practitioner. So over to you, Jacky.

All right. Thank you, Nikhil. Good day, everyone. I see some familiar faces as well as some new friends on the line, and I'm excited to get to know each of you better in the coming quarters, and I look forward to sharing our latest updates and discussing our company's progress with you. So before I go into detail, just a reminder that the numbers on this slide, they all exclude D'Crypt as the divestment was completed on February 29 this year. So overall, we are reiterating our full year 2024 guidance. So against the guidance of Service revenue of 1% to 3%, we ended 9 months 2024 flat year-on-year, mainly due to the timing of revenue recognition of our cybersecurity segment, which Nikhil mentioned, but we expect full year revenue to be in line with expectations. And for Service EBITDA margin, it's slightly above expectation at 22.6%, up 0.9 percentage points year-on-year for the 9 months 2024 period. And for the full year, we reiterate our earlier guidance of 22%. On CapEx commitments, which tend to be relatively higher in the second half of the year, is within expectations at 7.1%, including investment. And we have earlier declared $0.03 as interim dividends in August. And at this juncture, this remains unchanged. We reiterate our earlier guidance of $0.06 for the full year, and we remain committed to our dividend policy, which is at least 80% of our net profit after tax, excluding one-off nonrecurring items. Next page, please. So some quick call-outs on Slide 7. So Nikhil has given you an overview on headline numbers, so I won't repeat those numbers. So if you look at EBITDA for the quarter, it was $114.6 million. For 9 months 2024, it was $341.2 million. So overall, EBITDA is up both year-on-year and on a year-to-date basis. And net profit after tax remains strong. We closed the quarter 11% higher year-on-year at $40.4 million. For 9 months 2024, we are up 9.5% at $123.7 million. So this represents roughly $0.07 on an EPS basis. On free cash flow for 9 months 2024 is at $167.2 million or about $0.097 per share. So our leverage remains low at 1.25x, putting us on solid ground for financial flexibility. So with that, Johan will take you through the consumer business highlights. Johan, over to you.

Thank you, Jacky. Now I'm no longer mute. So let's do that again. So good afternoon and evening, everyone. Let me take you through sort of the consumer highlights. Quite a few things have been covered by Nikhil, so I'll browse through and give you a bit of more context and flavor to some more important strategic elements to that. So let's move. Next slide. So mobile ARPU flat, which I think in this market is a great achievement. ARPU is holding well. Sub-base is up 63,000, also alluded to, by Nikhil, that on the back of strong growth in MVNOs. So that's really a great performance. Monthly churn rate, we kept that low at 1.1%. So in the light of the current market context, that's a great achievement, too. Prepaid ARPU flat, prepaid ARPU base marginally down as we move more and more to SIM-only and segment revenue, Nikhil related to you. More interesting is actually the next page. So the next page shows you that we have been quite aggressively and diligently, I would say, deploying a multi-brand strategy, and we are emphasizing in each of those categories of competitiveness. So Premium segment is all about bundling on the StarHub brand. Digital is driven by our giga! brand, which has been doing well. And then on the Low Cost, we have stepped up, and that's where a lot of our growth is coming from. It's not only connection, we actually also do additional elements to make sure that we differentiate. So we're taking a very active eSIM adoption strategy. We are embracing the migration to SIM-only across all segments where relevant, but we do not lose focus on things like device. We saw a really great iPhone launch in the last quarter, which continues to help us to differentiate also in tariff plans with device. And we're actively addressing cybersecurity concerns consumers have by offering where we can applicable cybersecurity solutions as a VAS, which we see significant uptake. In fact, that's part of a vertical, which we call internally T2, and you see it highlighted here on the slide in green. Actually, we crossed a 5% contribution of Mobile revenue from that vertical. That's giving you a strong indication of how that is moving. And of course, we continue to focus on the shift to digital. Moving to Broadband. We really had a very good quarter in Broadband. We basically grew ARPU. We grew subs. And on the back of that, we basically saw a good uptick in revenue. Now a lot of that is driven by a very proactive approach driving higher speed tariff plans. We call them internally and in the market, they're known as ultra speed. So anything, which is higher than 3Gbps. And we see a very significant uptake of customers on those plans, which is good for customers and also for our ARPU. Churn remains low, 0.8%, slightly up compared to the previous quarter, but we believe in the market, that's a great achievement, and we continue to focus on that. And of course, Broadband, as you will see later on, we never look at Broadband individually. We combine broadband in most of the cases with bundling of Entertainment and other services. So let's move there because the revenue numbers Nikhil referred to. Entertainment, on its own ARPU down slightly and a steady decrease, I have to say, from consumers on the back of continuous process of cord cutting. But we manage profitability of this particular line of business very carefully, and I'm very pleased to say that we manage the cost in tandem. So our profitability remains steady and good. The churn is slightly higher. No reason for alarm. There is a bit of an effect of OTT churn flowing through on that. But all in all, we're very pleased with the performance in that particular category as well. Now as I mentioned, as we move to the next page, we look at Broadband and Entertainment often in tandem. And I would like to use the opportunity just to highlight the reason for that. Often Broadband people in the business refer to as a connectivity utility commodity service. Therefore, it's very important to differentiate. So we do that on 2 angles. Number one is broadband itself. We were the first mover to XGS-GPON network, which we're very proud of. And I think it's paying off in the performance. We see a very strong adoption. And that also positions us very well for the upcoming government grants, which have been communicated to the market. Now in Broadband, we differentiate on service. I mean, we have a very skilled force of what we call Hubtroopers, ensuring that we do a great installation and also follow-up service when needed. And we bundle hardware as well as IoT on the back of that. So as a customer, you don't only buy a broadband product, you actually are ensured of great service and support all along. And then we differentiate on the back of entertainment. And in entertainment itself, we have taken 3 years ago a diligent approach to focus on entertainment, which matters for customers. We all know about piracy of mainstream entertainment, but there is definitely a segment in the market, which is willing to pay for premium content, which we see today. And we're pleased actually that we have progressively been expanding our Entertainment product portfolio in sports. We added FA Cup for this season, and we do see a constant and strong uptake on subscriber base, both for Premier League as well as for sports in general, and that helps us to differentiate as well. And obviously, not only is the churn lower of bundled Triple-Play customers, as we call them here, churn is 8x lower than stand-alone, which pays off as well. But on top of that, customers have a significantly higher ARPU. So that's important to make sure that we stand aside from the rest of the market. And on that note, I'll hand you over to Kit Young for Enterprise update. Thank you.

All right. Thank you. Right. For Enterprise itself -- right. For Enterprise itself, if you can see that overall, year-on-year, we are having a growth of 5.4%, but quarter-to-quarter, you can see a decline of 3.1%. Now let's break down into where the growth areas and where are causing the revenue to come down, right? First, for Network Solution itself, we are holding our Data and Network business, reducing churn, and we are growing our Managed Services itself. So we are able to expand our client base through strategic partnership with our partners, technology partners. We are going into competitive mode, taking over the installed base of our incumbents. There is a different technology provider, so we are gaining market share by offsetting the existing incumbents in our Managed Services. And we are also going into our value-added Managed Services as an inclusion to differentiate ourselves from a traditional SI or pure telco play. So we're increasingly seeing the differentiation and clients are getting to see the value, and we need to continue to get more clients as a reference. And only when using our services, then they can differentiate and share with others so-called colleagues or friends, right, in the same industry to share the advantage of using StarHub Enterprise Services itself. Now I come to Cybersecurity services, right? So you can see it's quarter-to-quarter, there's a decline because of project timing, right? But from on a year-on-year itself, it's still on the growth trend, right? Now if I move into the Regional ICT services, right, it is on a growth trend from quarter-to-quarter, right? And year-on-year is on the growth, right? But having said that, we are also looking at the fact that there's a lower higher hardware sales. But then the team is working on towards the Managed Services where there's higher value and higher margins, right, and start to pivot our position from a hardware resale to a more value-added service provider in the markets that we operate. Now next, -- so scale our enterprise business in the region, right? So how we're going to do this differently here is not a traditional SI mode nor a pure cloud-native managed service provider. But combining both together with our unique connectivity solutions that we now we call Ubiquitous Network that is backed by our hybrid multi-cloud architecture. So that's created a very unique value proposition where we can partner with all hyperscalers. And we can help them to build on-prem private clouds, and the last mile connectivity to the edge and collect -- and once we extend to the edge, we collect data that they never had and introduce digital services, right, through the application modernization and with the data that we have and we collect at the edge, create new possibilities in data and AI use cases. And then with our new integration of our omnichannel platform, they're coming together, right, to create a better client experience. So that's what we have been busy building this modern digital infrastructure powered by our 3Cs and also part of the Cloud Infinity roll out as a base infrastructure for us to do this. Now as we look at the use case that we have, not on a concept of a technology, but actual use case like JTC, you know that's coming to a completion. It's going to -- building is going to T.O.P at end of this year. We are all busy fitting things up. We're going to build new use cases after we deploy the network that is data-driven. And during our Analyst and Tech Day, we have the Moove Media CEO to share with most of you or some of you how they use our data and [indiscernible] collaboration, use our data AI capabilities to help them to grow their business through the data, right? And then we have SBS Transit, right, that did a design thinking workshop with us to co-create a use case as to improve passenger experience during train disruption, using our modern digital infrastructure capabilities to deliver the services and the infrastructure capabilities to solve a business problem. And one of them, we didn't state the client name because it's still work in progress with the client before we can declare anything in a smart retail platform, again, leverage on the data that we have and leverage on our services capabilities, improving analytics, even introducing Gen AI as one of the use case. And you will see soon in the next few months where the industry will start to spread the news of our capabilities in embracing and delivering a use case on emerging technologies like Gen AI. All right, with that, move on to the next slide. Let me hand over the key priorities that we are facing to Nikhil. Thank you.

Thank you. Yes, so we always get the question on DARE+ expenses, and it's a very good question and very important. So I'm pleased to announce that we are on schedule to complete our DARE+ build. And by virtue of that, we are also on schedule to finish off our DARE+ spend. So by the end of the year, we will have, as we have told you in the past, $27 million of spend left out of the $270 million flowing into 2025, which should be spent in the first half of 2025. And that remains unchanged, and that's something that we'd like to reiterate. So that's something that you can factor in as you look at our outlook. Next page, please. And then to reiterate our priorities, we talked about our consumer business and through multi-brand multi-market segmentation, which we're driving very aggressively. And as you saw, our quarter-on-quarter trend lines are significantly superior to the market. Our focus is on retaining our revenue and potentially even growing in time. We believe in terms of retention, we're quite close to that point as we drive the offsets with multi-brand, multi-market segmentation. We are also focused on cross-sell and upsell because very soon, we will have our data lake and our IT transformation completed. And that will allow us to do interesting things across the range of our Infinity Play product, which are not really available to the industry. The second thing that we want to do with our consumer business or rather the third is to -- through our IT transformation and our cloud transformation is to increasingly automate. That journey has, of course, already started with platforms already on our cloud stack. And as we complete the cloud transformation, we will be increasingly automating to reduce cost as we drive this multi-brand, multi-market segmentation model of a common platform. You heard from Kit Yong around modern digital enterprise, which brings together hyperscale capabilities, ubiquitous connectivity with core tech and tools with ourselves as a primary consumer. And then we make that available to our government and enterprise customers on a multi-tenant basis, and we are going to be driving this. We have been driving this hard. We're going to be amping this up even more, both in Singapore as well as regionally as a regionally integrated enterprise business. We've been talking a lot about our IT and network transformation that will drive automation, that will drive scalability, that will drive new levels of observability down to the very end point in a way that is a little bit of a different paradigm from what is in the industry to date. And that journey will again be complete quite soon. Now with all of that, we're incredibly focused on driving total shareholder return for our shareholders. One piece of it is, of course, completing our DARE+ transformation spend on budget and on time, which as I've communicated and reiterated, we will. That allows us to harvest cost efficiencies in our consumer business by digital engagement, but also digital efficiencies at the middle and the back end and automation at the core. On Enterprise, we've talked about this many times. We are not driving an SI model. We are driving a more high-margin, scalable model in our enterprise business that brings together, as we talked about, hyperscale capabilities, ubiquitous connectivity with things like applications modernization, et cetera. So by virtue of that, it's a more scalable, high-margin model and certainly not SI or ICT. And that we will be driving harder to generate returns for our shareholders. And then, of course, M&A. M&A, we will look to do, and we will look to do it in an accretive manner that is protective of our dividend and our dividend trajectory. On the one hand, we are open to consolidation. On the other hand, we are very, very keenly focused on growing our regional enterprise business, not just organically, but inorganically by acquiring capabilities, but also expanding our footprint to other Southeast Asian markets. And then last but not least, prudent capital management. We will maintain a healthy cash position and our commitment to our dividends irrespective. One of the things that we've all been calling out is the impending 700 megahertz spectrum, which will be awarded and our payments in that regard. And to reiterate, we will be maintaining a strong cash position, very strong leverage position, funding firepower and our commitment to dividends despite. We are -- the second point is sort of similar to my first, which is we're very focused on paying the dividends and driving total shareholder return. And then as we look to allocate our capital, organic is important. We will aggressively compete, but in an accretive manner as we've done so far. We continue our commitment to dividends and other capital return strategies, and we will continue to do accretive M&A. So with that, I would like to culminate and pass this back on to Amelia.

Thank you, Nikhil. We'll now move on to Q&As. The only request that I'll make today is that because of the technical issues, I will have to mute and unmute my audio, so then it will be like a walkie-talkie system. [Operator Instructions] First up, we have Sachin.

Congratulations on a good set of numbers. Two questions. I mean, first of all, I think I really acknowledge that you have disclosed the transformation CapEx and OpEx. Just a little bit more color on how much of that $52 million has been done in the 9 months or anything you can disclose by 3Q? That's question number one. Now secondly, I noticed that your Mobile metrics are much better than your peers. I can clearly see that you have gained subscribers in the postpaid without ARPU dilution, which is quite surprising to me because when I look at your peers, I think both of them are struggling. So could you tell us, is it sustainable? And I saw that -- maybe the related question is I saw that 5% of your Mobile revenue is from new services. So could you throw some light here? Is there any target -- what are these new services and is there any target for you to take the 5% to, I don't know, 10%, 15% in what time frame? And what are the margins on these services?

Thanks, Sachin. Let's have Jacky answer the first question for transformation.

Actually, before you do that, I'd just like to be a little bit cheeky and welcome Sachin back to this call. I think you missed the last one, Sachin. So it's good to see you on top of the roster. And also, we'd also, on behalf of staff, like to wish you a happy birthday. So happy birthday, Sachin. But with that, I'll pass on to Jacky.

I just want to make sure that the question is on DARE+ or...?

Yes, DARE+ transformation. He was asking how much of the $52 million was already spent in the 9 months?

Yes, so I think, as mentioned, we are actually not changing the guidance. We are targeting for the whole project of $270 million, and we expect to spend about $90 million by like through the end of this year. And roughly, I think we have spent, I think, on track. If you look at the $52 million, it's basically phased out throughout the year. So Q4, there will be a portion coming in roughly about $10 million to $15 million.

And then let's have Johan on the second question around Mobile and the new verticals, please.

Thanks very much for the question. Two parts to the question. Number one is the performance of Mobile, and thank you very much for appreciating and noticing the performance compared to competition in the market. So no ARPU decline, I agree. We're particularly proud of that as well. The main reason for that is, I think, that the team has done a very, very solid job in terms of segmenting the market and having a very segmented approach. And unfortunately, I wish I could give you more details behind some of the logic, but I will be giving away secret sauce, which I can't do, obviously. But we even saw on some of the underlying segments marginal ARPU growth on some of the things the team has done related to pricing and inclusion. Whether that's sustainable, time will tell. We are definitely having, I would say, a very well-calibrated set of initiatives lined up for the next 12 months, not only to continue to grow market share in the various segments, but also to monetize in the right way. And obviously, that will be subject to competitive pressure in the market as we go forward, but we have our plans. So that's number one. Number two, and that's an even more interesting topic, the 5% ratio in terms of new revenue, we believe that -- we always have believed that for the last sort of 24 months as we have been preparing for that, that there is quite a significant opportunity. And to untap that opportunity, we need to have basically 2 things in place. and one is linked to the DARE+ transformation, which is what we call the ITX program, is the user journey, which in the past used to be pretty clunky and a little bit slower than I would like it to be, but we're definitely speeding up on that. That journey has been improving. That's number one. And number two is the product range, which we're offering. So there's one in particular interesting driver, which is related to cybersecurity, which we started to offer as an add-on and bundling, and we see significant uptake. And we do have a calibrated road map going forward to expand also that and bring, I would say, differentiated services to consumers, which really, really matter. So we are hopeful and very determined to make that grow further as part of our total portfolio. And then in the back of that, we also have things like gaming, which is ramping up. So yes, I would say, stay tuned in this particular segment. Thank you very much.

So can I say that cybersecurity forms the bulk of that new services in the Mobile? Is it cybersecurity as a bulk of that?

Yes, Sachin. That's totally correct.

I think this was a very commendable performance Johan and Nikhil.

Thank you so much.

Next up, we have Arthur. Arthur, please unmute yourself.

Yes, 3 questions, please. Firstly, on Mobile, how do you see competition here evolving? Are you seeing increased inroads by the fourth player? Is there escalation on Mobile and Broadband? I'm just wondering, is the softness in revenues driven by competition? Or is this mainly owing to migration to SIM-only plans? Second question I had is with regard to the 700 band spectrum. What are the plans for this? When do you take delivery and payment? And last question is with regard to Nikhil's earlier comments on consolidation. Just wanted to be a bit clear on this. Does this pertain mainly to Enterprise? Or are you still open to possible Mobile consolidation?

Thanks, Arthur. Let's have Johan answer the first question on Mobile first.

So to the question, Arthur, around Mobile softness, if I may use your words. Obviously, there isn't a very lively competition in the market going on. We deliberately timed some of the initiatives in the MVNO space the way we've done. A lot of that initiatives resulted not in a full quarter impact. So what you will see going forward is that that's going to ramp up fast and furious. And that's, in a way, the explanation for a slight softness in that sort of respect for this particular quarter because we didn't harvest the full quarter on the back of that and the flywheel has only started to turn in the second part of the quarter. The other thing, which I think we're doing well in relation to that is to defend the device customer base. No doubt there is pressure on that. But we had one of our best iPhone launches actually ever. And that's, again, kudos to the team in terms of execution, positioning and branding and also in relation to pricing. So yes, there is a temporary softness from what we see and an opportunity on the other side. And back again to also Sachin's point, the rest is subject to how the markets will evolve. It will remain competitive, no doubt. But we'll compete in each segment with the right tools, and we'll ensure that we deliver a good experience, a very solid experience in each segment. And by the way, which I didn't mention, also last quarter, we actually started really on giga! 5G. And again, that's -- I'm giving a bit away a bit more information that's helpful in terms of ARPU and also customer perception and NPS. So there's a lot of things going on, but we're on it. Thank you.

Thanks, Johan. We will now have Nikhil answer the next 2 questions on the 700 megahertz plans and consolidation.

Yes. Thank you, Arthur. Great to chat with you. Thanks for joining us. So on 700 megahertz, as far as timing, I guess you've seen the 2 barbells, right? You've seen, I believe, Singtel announced that they will be looking to take receipt of the new bands and look to launch services quite early in the year. And on the other end of the barbell, you have probably heard from the Keppel announcement that they will be doing the same, but really on a much more back-ended time frame, but no later than July 1, right, which is kind of the regulatory requirement. So I would say we -- our intent -- I don't want to really disclose when we're launching services on the back of 700 megahertz. But needless to say, we're sort of in between those 2 barbells, to what extreme I won't say. The other thing to keep in mind is obviously that we operate 5G through Antina, and there's an element of close cooperation with M1 in that regard. Now on consolidation, again, I'll say, we are, of course, quite laser-focused on expanding our regional enterprise footprint and our capability set to drive modern digital infrastructure. But we are also highly interested and continue to be interested in consolidation. As I always said, it's healthy for the market. It's resulted in strong synergistic outcomes in multiple other markets around us. We believe we're well positioned as an acquirer. From a market share standpoint, we're big enough for it to be matter, but we're regulatorily, I guess, able to do material acquisitions. We have strong firepower. We have strong funding capability. We have low leverage. We've done acquisitions. I think we are quite pleased with our operating performance and the traction of our transformation. So we're kind of here and ready and able, but we can't really speculate or we can't really comment on market speculation, and we can't really talk about the details or timing of any potential consolidation at this point. So stay tuned.

Next up, we have Paul.

Just a few for me. On the 700 megahertz, could you just remind us again the amount payable? And you mentioned there were services on top of the 700 megahertz. I thought 700 megahertz would just give you some extra bandwidth, which I'm not sure you actually need it, but anyway, just some elaboration on that. The second question is on the subscriber growth for Mobile. I just wanted to confirm where is it -- is it from Premium, giga!? Or do you actually include MVNO in it, which I don't think you do, but I just wanted to clarify on that. And the last one would be regarding DARE+. So you mentioned harvesting cost efficiencies, so did we see that this year because the first 2 years, you already spent almost $200 million. And related to that, just some housekeeping. Third quarter '23 EBITDA margins was unusually low. It was below -- it's, I think, like 19% plus. Was there any particular reason why? Just some housekeeping there.

Thanks, Paul. Maybe let's have Nikhil continue the 700 megahertz topic.

Yes. So Paul, the price of the 700 megahertz spectrum was roughly about $90 million per band. And in the 2018, 2019 auctions, we won 3 bands. Now in terms of capabilities and value creation out of the 700, business cases are obviously being built. Needless to say, it will improve the coverage experience and particularly in-building coverage experience and consumer experience. There may be also some things that we can do in our enterprise business, which are meaningful, of course, because we talked about the fact that we're pushing into ubiquitous connectivity, running our network of hybrid multi-cloud. And that really brings 5G together with fiber broadband together with optical networking in a way that customers are frankly indifferent. So 700 megahertz can be an interesting part of that, particularly as we drive into smart city environments. But that work process is underway, clearly with some lag as usual, some time required. We're looking to optimize our position on the 700 in terms of the number of bands, et cetera. And we're looking to optimize aspects such as the way in which we roll out, the timing of such rollout and trying to get some value creation out of the 700 in time.

Paul, before we move on, do you have more questions around the 700?

Yes. Just one -- sorry to keep talking about this topic anyway. But the -- what -- how was the amortization like -- because although it won't impact your EBITDA, but you have a dividend payout -- sorry, up to 80%. So I'm just wondering how would that kind of impact your net profit? And of course, ultimately, could also impact your dividends?

Sure. Nikhil, please?

Yes. It's a bit premature to comment on our 2025 guidance, but let me give you a few key principles. Number one, of course, we're committed to our dividend payout, so I will reiterate that in terms of '24 as well as '25 in terms of our policy. And we're committed to total shareholder return, and keeping our dividends in place. Beyond that, I can't really say any more other than to wait for February 2025, where we'll release our formal guidance. But rest assured, we're focused on maintaining our dividend.

Sorry, can I just -- just the last one, I will be silent. But just on the amortization period, how long is the amortization period for the.. .

Well, it's 15 years, but a little bit subject to the date of award. And the date of award is no later than July 1.

And then let's have Johan address the question on Mobile subs.

Yes. So Paul, thanks for that question. Maybe first to clarify, we've always reported MVNO numbers as part of the Mobile numbers. So they always have been there. So that's a definition clarification. Second part of your question was where exactly is the growth coming from. And obviously, the growth is across all segments, primarily on the MVNO and digital side. So hopefully, that's answering your question to satisfaction.

And Jacky, on the DARE+ cost efficiencies and comments on margins.

So I think DARE+, we're going to gradually realize the benefit from that. But as you know, like a lot of that will be like decommissioning some of the legacy systems, which is going to take time to phase out. And so the benefit will gradually come throughout '25 and '26, but it's going to be like a step process.

Okay. So obviously, legacy, you are running both systems. So that's why you have a duplicate cost. Is that one way to understand it?

Yes, that's right. There's going to be some time for overlapping because of migration, et cetera. And so it's going to take some time to decommission the legacy system. Exactly right. So we're going to run some of the systems in parallel, but we'll gradually decommission the legacy system.

Yes. So to add on Paul, I think you asked about the margin improvements to date and versus last quarter. So I think as you heard from Jacky, the DARE+ efficiencies haven't really come in yet. So the margin efficiencies that you're seeing are from other areas.

Okay. Just that the third quarter of last year was unusually low. I mean, I should remember this, but I just thought was there any particular reason?

No, nothing in particular. Just ongoing efficiencies.

[Operator Instructions] I don't think we have anyone in the queue right now. Okay. Michael, please.

Just 2 questions from me. So basically, it's more first off, can you just remind us of what's your current cost of financing? And secondly, because now we've come close to the end of DARE+, and with the expenses, like Nikhil mentioned, it's going to most likely be expensive to the first half. So can I also just get a bit more of an update on the benefit realizations that we've had to date and what we should expect for the upcoming year in terms of these realizations?

Thank you. Nikhil, would you like to address the second question first?

Yes, so as you point out, Michael, we're on course with our DARE+ spend to tail off within the first half, and there's only $27 million left for next year. The second point that I'd like to reiterate is the efficiencies that we've achieved so far are not really associated with the DARE+ efficiencies or if they are the early DARE+ efficiencies, not really the bulk of it coming through. As Jacky pointed out, those will start to come in, in the second half of 2025, progressively into 2026. I can't really, at this point, point to numerical impacts unless my CFO would like to, but we'll save that for our 2025 guidance, and we'll give you a directional sense at that point.

And Jacky, for the question around cost of financing...

Michael, on the cost of financing, we never really disclosed the exact number. But if you look at our debt profile, I think about 90% is actually fixed interest rate. And we actually entered into the debt arrangement, I think, when the interest rate was relatively lower compared to the current days interest rate. So that will give you an idea of what's our cost of financing at this point.

Michael, I hope those answers your questions.

Yes.

Do we have more questions from the floor?

Nikhil, I'm just going to repeat a question that Arthur asked. Between the 2, I mean, you've got the balance sheet. But between the 2 operators, what would be more attractive for StarHub in a consolidation scenario? I mean, do you want subscribers? Or do you just want to get the spectrum, I suppose.

By 2 operators, you mean SIMBA and M1.

Yes, I'm leaving Singtel out of this, right? It's Panda or SIMBA, they call themselves, and M1.

Yes. I may have to take the Fifth on this, if you don't mind. The various pros and cons and scale is a function. I don't think spectrum is a function, by the way, as much as scale, cost efficiencies. But the other lens I would look at other than scale and cost efficiencies is also multi-market segmentation. And as I said, we look at the market as divided between premium, which is Singtel and ourselves. Digital, which is Circles, GOMO and giga. And Value, which is where SIMBA is a leader, but we have made great strides. So those are the 3 lens I would look at it at scale, cost and CapEx efficiencies and multi-market segmentation. But beyond that, Neel, if you don't mind, I'll take the Fifth on this one.

Yes. I understand. I understand it's conjecture. And it's probably stuff that all 3 of you all are working on. If I can have a quick follow-up. Will -- I mean, what I've heard in the market is that Circles has its own sort of pathway, right, and doesn't want to be -- is that true? Or that's just something I've heard in the market. And I'm trying to figure out Circles is -- yes, it's an attractive asset in M1's portfolio. So -- or you're going to take the Fifth on this as well?

I can't really comment on Circles. I think you make a correct point that at least based -- I mean, at least based on the data that we have, yes, Circles is, I believe, a significant portion of M1's portfolio as measured in sort of almost any respect. But beyond that acknowledgment of your statement, yes, I'm going to have to take the Fifth on this as well.

All right. Thank you, Nikhil. Sorry, I'm sort of suspected that you couldn't probably give very clear answers on these questions. The results stuff is very strange.

Full marks are trying, Neel. No bias. You know what, I guess what, I would say is, I'm -- against a shifting M&A landscape, I personally, I'm quite pleased with our situation. I believe we're the only acquirer...

No, I am too. Trust me, I used to cover markets like Hong Kong and Taiwan ages ago, and there used to be 6, 7 operators back then.

Competitive marketplace. So whichever way the market landscape shifts, I'm feeling pretty confident that we can play this to the right outcome. And as you surmise, we have choices, right? So...

As I said, I used to cover Taiwan and Hong Kong years ago, and there were 6, 7 players and consolidation was the best thing that ever happened in those markets.

Yes, it always happens, right? It's not a question.

I see Sachin has his hand up.

Yes. Actually, since we have time, I think we should utilize Nikhil's time also. And just to -- if we have this $80 million in savings. I remember when we started the transmission program, we talked about that $80 million savings from that program. So could you just remind us a little bit on that $80 million savings? Anything has been saved so far? How much is the room from here on? And will it be just cost savings or it is a combination of higher revenue and the cost savings? If you could just go back to that when we started the transformation program, the original thesis of 80 million benefit to the earnings, right? I think that's where we started. So if you can a little bit -- are we on track for that? And is there any deviation and in what form, revenue and cost savings?

Yes. So Sachin, just to be clear, we -- yes, we did guide as the outcome of DARE+ program to have an incremental net profit after tax of $80 million. on top of our 2025 net income, which I believe was $145 million, right? So $225 million or so. So I would say at this point, there is no change to that. In terms of how that breaks up into revenue and cost and all of this, those are things that continue to evolve. And with the full year behind us and as we remap our plans against the landscape, both competition as well as opportunities, we'll obviously be taking another look at those numbers to see how we can meet that $80 million incremental net profit after tax.

No, that's $5 million plus $80 million, right? You're talking about that right, $300 million...

$80 million in incremental net profit after tax on top of our 2021 net profit after tax, which is when we initiated DARE+, right, at the end of 2021. And that number was $145 million.

Yes. So that looks very ambitious target. I mean, from here on, right, because we're talking of almost 80%, 90% jump in our earnings to achieve that, right?

Yes, albeit I think you heard Jacky talk about -- this is not linear. A lot of it is back-ended, particularly as efficiencies start to come through. from platforms having been built and then decommissioning happen and efficiencies being realized. And then, of course, revenue outcomes being realized as well. So by function of that, it's obviously back-ended. The market has obviously moved significantly since we started this. The macro has moved significantly. We've been pretty consistent in reiterating that target. But the house and the wise of how to get there will continue to evolve. And where we sit today, as we end the year, we'll take a look at how we can achieve those targets.

So it's largely cost savings and not really new revenue opportunities, right? Can we say that.

No, I think both. I think both. I think the ratio that we looked at last time around was -- of the $500 million, which achieves the $80 million, $280 million were cost and $220 million were revenues. And I wouldn't say that ratio has changed dramatically. So for now you can probably use the same ratio. But don't hold us to the ratio because this is an evolving analysis that we have to do as more data comes in and as we put more time behind us in a changing landscape.

We can probably take one last question before we end the call. We'll just give it a few more seconds. Okay. No more questions. Otherwise, we will end the call for today. Thank you very much for joining us. And you know how to get us if you have additional questions. Thank you very much, and have a lovely evening. Bye.

Thanks, guys. Thanks for making the time.

Thank you.

And happy birthday again, Sachin.