Announcement of Unaudited Results for the Third Quarter and Nine Months ended 30 September 2006

Transcription

1 StarHub Ltd Reg. No.: C 51 Cuppage Road #07-00 StarHub Centre Singapore Tel: (65) Fax: (65) STARHUB LTD Announcement of Unaudited Results for the Third Quarter and Nine Months ended 30 September 2006 StarHub is pleased to announce our unaudited results for the third quarter and nine months ended 30 September 2006.

2 Results for the Third Quarter and Nine Months ended 30 September GROUP PROFIT AND LOSS STATEMENT Quarter ended 30 Sep Nine months ended 30 Sep % Change % Change S$m S$m +/- S$m S$m +/- Operating revenue , , Operating expenses (357.5) (318.4) (1,059.3) (967.0) -9.6 Profit from operations Interest income Interest on borrowings (4.3) (3.0) (8.4) (8.6) 3.1 Profit before taxation Taxation (19.2) (13.0) (50.2) (34.5) Profit after taxation Attributable to: Shareholders of the company Minority interests EBITDA EBITDA as a % of service revenue 35.7% 33.9% 1.8 pts 34.0% 31.4% 2.6 pts Free Cash Flow (1) Profit from operations is arrived after charging the following: Allowance for doubtful and bad debts written off Depreciation and amortisation (net of asset grant) nm - Not - More than -/+300% Notes: (1) Free Cash Flow refers to net cash flow from operating activities less purchase of fixed assets in the cash flow statement (2) Numbers in all tables may not exactly add due to rounding (3) Certain comparative figures have been changed to conform to current year presentation Page 2 of 27

3 2. BALANCE SHEETS Group Company 30 Sep Dec Sep Dec 05 S$m S$m S$m S$ m Non-current assets Property, plant and equipment Intangible assets Investments in subsidiaries - - 1, ,063.2 Deferred tax assets Amounts due from subsidiaries , , , ,578.6 Current assets Inventories Trade receivables Other receivables, deposits and prepayments Balances with related parties Cash and bank balances Current liabilities Trade payables and accruals Other payables and provision Balances with related parties Bank loans Net current assets/(liabilities) (337.9) (267.4) Non-current liabilities Bank loans Deferred income Deferred tax liabilities Net assets , ,002.0 Share capital Reserves , ,147.2 Total equity , ,002.0 Page 3 of 27

4 3. GROUP CASH FLOW STATEMENT Operating Activities Quarter ended Nine months ended 30 Sep 30 Sep S$m S$m S$m S$m Profit before taxation Adjustments for :- Provision for charity fund/loyalty programme Depreciation and amortisation (net of asset grant) Impairment on property, plant & equipment and intangible assets (Gain)/Loss on disposal/write-off of property, plant & equipment and intangible assets (3.5) 0.3 (3.0) 0.5 Net interest expense Share-based expenses Operating cashflow before working capital changes Changes in working capital Net cash inflow from operating activities Investing Activities Proceeds from disposal of property, plant and equipment and intangible assets Purchase of property, plant and equipment and intangible assets (44.3) (58.2) (173.1) (212.5) Interest received Net cash outflow from investing activities (36.1) (56.8) (161.3) (209.8) Financing Activities Proceeds from issue of shares Interest paid (1.8) (2.0) (7.0) (9.2) Grants received Net proceeds from/(repayment of) loans (3.0) Dividend paid on ordinary shares (53.9) (85.3) (161.0) (85.3) Payment for cancellation of shares on capital reduction (655.7) - (655.7) - Net cash outflow from financing activities (297.1) (81.0) (416.8) (84.1) Net change in cash and cash equivalents (152.9) 0.8 (125.5) 94.1 Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period GROUP UNSECURED BORROWINGS Unsecured borrowings 30 Sep Dec 05 S$m S$m Amount repayable in one year or less Amount repayable after one year Total Page 4 of 27

5 5. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY Group Company S$m S$m S$m S$m Share capital Balance as at 1 Jan Issue of shares under StarHub Share Option Plans Transfer from Share Premium to Share Capital (1) Balance as at 30 Jun Issue of shares under StarHub Share Option Plans Cancellation of shares from capital reduction (655.7) - (655.7) - Balance as at 30 Sep Share premium Balance as at 1 Jan Issue of shares under StarHub Share Option Plans Transfer from Share Premium to Share Capital (1) (19.1) - (19.1) - Balance as at 30 Jun Issue of shares under StarHub Share Option Plans Balance as at 30 Sep Goodwill written off Balance as at 1 Jan, 30 Jun & 30 Sep (276.3) (276.3) - - Merger reserve Balance as at 1 Jan, 30 Jun & 30 Sep Capital reserve Balance as at 1 Jan, 30 Jun & 30 Sep Share-based payment reserve Balance as at 1 Jan Share-based expenses Balance as at 30 Jun Share-based expenses Balance as at 30 Sep Note: (1) Following the amendments to the Companies Act ( The Companies (Amendment) Act 2005 ) on 30 January 2006, the concepts of par value and authorized share capital were abolished and any amounts outstanding to the credit of the Company s share premium account shall become part of the Company s share capital. Accordingly, the share premium has been combined into the share capital account. Page 5 of 27

6 5. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY (CONT D) Hedging reserve Group Company S$m S$m S$m S$m Balance as at 1 Jan Effective portion of changes in fair value of cash flow hedge Balance as at 30 Jun Effective portion of changes in fair value of cash flow hedge (1.3) Balance as at 30 Sep Retained profits/(losses) Balance as at 1 Jan (35.9) (130.9) Net profit/(loss) for the period (5.4) Dividend on ordinary shares (107.1) - (107.1) - Balance as at 30 Jun (6.0) (47.8) Net profit for the period Dividend on ordinary shares (53.9) (85.3) (53.9) (85.3) Balance as at 30 Sep 21.6 (68.1) Total Equity , ,921.6 Page 6 of 27

7 6. CHANGES IN COMPANY S SHARE CAPITAL Share Capital and Employees Share Plans Issue of new shares For the period between 1 July 2006 and 30 September 2006, the Company issued 3,953,139 ordinary shares upon the exercise of options by participants pursuant to the Company s share option plans at exercise prices ranging from S$0.48 to S$1.52 per ordinary share. Outstanding Shares Employees Share Option Plans As at 30 September 2006, outstanding unexercised options granted pursuant to the Company s share option plans totaled 28,399,821 (30 September 2005 : 52,818,662). This represents 1.5% of total issued shares in the capital of the Company. Performance Share Plan As at 30 September 2006, there were conditional awards in respect of 3,435,000 (30 September 2005 : Nil) ordinary shares under the StarHub Performance Share Plan. R estricted Stock Plan In 3Q06, the Company granted awards to participants under the StarHub Restricted Stock Plan. These awards are subject to the fulfillment of certain performance conditions and targets over a 2-year financial period. Thereafter, the awards will vest with the individual participants over a 3-year period. As at 30 September 2006, there are conditional awards in respect of 1,957,000 (30 September 2005 : Nil) ordinary shares under the StarHub Restricted Stock Plan. Capital Reduction On 5 September 2006, our capital reduction exercise became effective after the relevant Court Order and other documents as prescribed under the Companies Act, Chapter 50, were lodged with the Registrar of Companies and Businesses. As a result, the share capital of the Company was reduced by S$655.7 million, with a total of 308 million shares cancelled from the outstanding number of issued shares in the Company as at the Books Closure Date on 5 September AUDIT The figures have not been audited or reviewed. Page 7 of 27

8 8. AUDITORS REPORT Not applicable. 9. ACCOUNTING POLICIES The Group has applied the same accounting policies and method of computation as in the most recent audited financial statements for the year ended 31 December CHANGES IN ACCOUNTING POLICIES AND ESTIMATES Not applicable. 11. GROUP EARNINGS / (LOSS) PER ORDINARY SHARE Quarter ended 30 Sep Nine months ended 30 Sep Basic 3.97 cents 3.05 cents cents 6.97 cents Diluted 3.94 cents 3.03 cents cents 6.92 cents 12. NET ASSET VALUE PER ORDINARY SHARE Group Company 30 Sep Dec Sep Dec 2005 Net asset value per share 21.6 cents 45.7 cents 79.3 cents 93.7 cents Page 8 of 27

9 13. REVIEW OF GROUP PERFORMANCE Quarter ended 30 Sep Nine months ended 30 Sep Change (+/-) Change (+/-) S$m S$m S$m % S$m S$m S$m % Operating revenue , , Profit from operations Interest income Interest on borrowings (4.3) (3.0) (1.3) (8.4) (8.6) Profit before taxation Taxation (19.2) (13.0) (6.3) (50.2) (34.5) (15.7) Profit after taxation EBITDA EBITDA as a % of service revenue 35.7% 33.9% 1.8 pts % 31.4% 2.6 pts - Free cash flow Results for the period ended 30 September 2006 For the quarter and year-to-date, the Group s operating revenue increased 16% yearon-year (YoY) to S$460.6 million and 15% YoY to S$1,331.6 million respectively. The increase in operating revenue was on the back of an enlarged subscriber base and increase in average revenue per user (ARPU). EBITDA for the quarter grew 22% YoY to S$156.6 million and for the nine months increased 25% YoY to S$429.3 million. EBITDA margin, as a percentage of service revenue, expanded to 35.7% for the quarter. For the nine months ended 30 September 2006, service EBITDA margin increased 260 basis points (bps) to 34.0% from 31.4% a year ago. As a result, profit from operations in 3Q06 was 29% higher YoY at S$103.1 million on the back of the higher operating revenue and improved EBITDA margins. Year-to-date, profit from operations amounted to S$272.3 million, which was 44% higher YoY. In September 2006, the Company completed its review and rationalisation of the banking facilities available to the companies within the Group. This resulted in some banking facilities been prepaid or replaced with new facilities. In addition, a total of S$470.0 million was drawn from these bank facilities to provide financing for the operations of its subsidiaries. These impacted the interest expense this quarter, which increased 44% YoY to S$4.3 million. Year-to-date, interest on borrowings amounted to S$8.4 million, a 3% decrease YoY, due to lower interest rates on the average balance of the existing outstanding loans. Page 9 of 27

10 With the higher operating profits, tax expense for the quarter increased by S$6.3 million to S$19.2 million. As a percentage of profit before tax, the Group s effective tax rate for the quarter was approximately 19%. The Group has a total of S$123 million of deferred tax assets not recognised in the Group s accounts. As in previous years, we will reassess annually the recovery of such unrecognised deferred tax assets in the Group and we expect to account for additional deferred tax credits of approximately S$70 million in 4Q06. These deferred tax assets arose from temporary timing differences and unutilised tax losses relating to certain subsidiaries. Compared to 3Q05, profit after taxation for the quarter was 25% higher YoY at S$81.4 million. For the nine months ended 30 September 2006, profit after taxation at S$218.5 million was 48% higher YoY than S$148.1 million a year ago. Free cash flow generated increased S$55.5 million or 69% YoY to S$136.0 million in 3Q06. Year-to-date, free cash flow recorded a 59% YoY growth to S$279.5 million. Page 10 of 27

11 Operating Revenue The breakdown of the Group s operating revenue is as follows: Quarter ended 30 Sep Nine months ended 30 Sep Change (+/-) Change (+/-) Operating revenue S$m S$m S$m % S$m S$m S$m % Mobile revenue Cable TV revenue Broadband revenue Fixed network services revenue Total service revenue , , Sale of equipment Total , , Quarter ended 30 Sep Nine months ended 30 Sep Operating revenue mix Mix % Mix % Mix % Mix % Mobile revenue Cable TV revenue Broadband revenue Fixed network services revenue Sale of equipment Total The Group s total service revenue increased by 16% YoY to S$439.0 million for the quarter and to S$1,263.2 million for the year-to-date period. All major lines of business recorded double-digit growth in revenue for both the quarter and year-to-date. Revenue from sales of equipment increased by 8% or S$1.5 million to S$21.6 million for the quarter. Year-to-date, revenue from sales of equipment was 7% higher YoY at S$68.4 million. Increases in equipment revenue were due to higher volume of handsets and Digital Video Recorder set-top boxes sold starting 2Q06. In terms of revenue mix, the faster rates of growth in revenue of each of the Cable TV, Broadband and Fixed Network services resulted in an increase in their respective revenue contribution in the quarter and year-to-date periods. Mobile services revenue while continuing to account for the major share of the operating revenue mix saw its share of mix declined from 52.7% to 50.7% for the quarter and to 50.9% for the year-todate period. Page 11 of 27

12 Mobile Service Revenue Quarter ended 30 Sep Nine months ended 30 Sep Change (+/-) Change (+/-) Mobile revenue S$m S$m S$m % S$m S$m S$m % Post-paid Pre-paid Total Note: (1) Source : IDA Quarter ended Nine months ended YoY 30 Sep 30 Jun 30 Sep 30 Sep % Change Mobile Key Drivers /- Number of mobile customers (in thousands) Post-paid Pre-paid Total 1,467 1,371 1,328 1,467 1, Monthly minutes of use per active customer Post-paid Pre-paid Average monthly SMS per user (originating) Total MMS traffic (in millions) Total GPRS traffic (in GBytes) 1, , , ARPU with IDD included (S$ per month) Post-paid Pre-paid Blended Non-voice service as a contribution to ARPU Post-paid 20.3% 19.7% 18.0% 20.1% 17.6% - Pre-paid 11.2% 11.1% 9.6% 11.4% 11.8% - Average acquisition cost per gross connection (S$) Average monthly churn rate (postpaid) 1.0% 1.1% 0.9% 1.1% 0.9% - Singapore mobile penetration (1) 101.5% 96.9% 96.2% 101.5% 96.2% - Market Share 33.2% 32.5% 31.7% 33.2% 31.7% - Page 12 of 27

13 Mobile service revenue increased 11% YoY to S$233.7 million for the quarter and S$678.2 million for the nine months period. The increase in revenue continues to be primarily driven by Pre-paid mobile services, which increased over 30% YoY. Consequently, Pre-paid mobile revenue share of the overall mobile revenue mix increased to 23% as at 30 September 2006, compared to 19% one year ago. The overall Mobile customer base as at 30 September 2006, stood at 1.47 million customers, an increase of 11% YoY. For the quarter, we had 96K net-adds of which 92K were from the Pre-paid mobile customer segment. Based on the IDA statistics, at end September 2006, our mobile market share was estimated to be 33.2%. Post-paid mobile services For the quarter, our Post-paid mobile services revenue increased by S$10.7 million YoY to S$177.2 million. Year-to-date, Post-paid mobile services revenue was 6% higher YoY at S$522.8 million. As at 30 September 2006, we had a Post-paid customer base of 779.3K subscribers, a 7% increase YoY. During the quarter, we added a net of 4.0K Post-paid subscribers. Based on the IDA statistics as at end September 2006, for the quarter, we took 21.9% of the Post-paid market net adds, resulting in our Post-paid market share growing to 27.8% as at end September Compared to 3Q05, our 3Q06 Post-paid average monthly voice minutes of use (MOU) per active customer was lower at 546 minutes. This was mainly due to lower free incoming call minutes, which does not impact ARPU. In the quarter, we continued to bundle handsets with higher tier mobile price plans to encourage customers to sign up to higher tier subscription plans. This has positively impacted our 3Q06 ARPU. Our ARPU had held strong at S$71 for the quarter and has averaged S$70 for the year-to-date period. More attractive 3G handsets were available during the quarter, which boosted the takeup of 3G services by our Post-paid subscribers. As at 30 September 2006, our 3G subscribers totaled 127.8K, an increase of over 30% from 2Q06. For the quarter, non-voice services as a percentage of Post-paid ARPU increased to 20.3%. The increase was due mainly to more customers signing on to our unlimited data subscription packages, which led to 80% YoY increase in data traffic. Year-to-date, non- as a percentage of Post-paid ARPU was voice services 20.1%. For the quarter, our Post-paid churn was higher at 1.0% compared to 0.9% in 3Q05. Year-to-date, churn was higher at 1.1% compared to 0.9% a year ago. The higher churn is reflective of a more competitive market as market penetration increases. Page 13 of 27

14 Pre-paid mobile services For the quarter, Pre-paid mobile services revenue at S$56.5 million was 31% higher YoY and for year-to-date, was 32% higher YoY at S$155.4 million. The increased customer base and a higher revenue traffic throughput drove the revenue increase YoY. As at 30 September 2006, our Pre-paid base stood at 688.2K customers, an increase of 92.3K Pre-paid customers in the quarter. This was a 182% increase in net-adds compared to the net-adds of 32.7K in 3Q05. The Pre-paid market has resumed growing since the completion of the Pre-paid registration exercise in 2Q06. Based on IDA statistics as at end September 2006, we took 51.5% of the Pre-paid market net additions for the quarter, bringing our Pre-paid market share to 42.7%. Year-on-year, Pre-paid monthly MOU per active customer increased by 183% from 102 minutes in 3Q05 to 288 minutes in 3Q06. Year-to-date, the Pre-paid MOU per customer increased by 140% YoY to 244 minutes. The higher Pre-paid traffic in 2006 was driven mainly by the on-demand free incoming call (FIC) for Pre-paid service that was introduced in September last year. For a fee of S$0.59 per day, Pre-paid customers enjoy unlimited incoming calls. Various promotions were introduced to encourage higher use, resulting in higher ARPU in For 3Q06, Pre-paid ARPU recorded a S$5 increase to S$29 when compared to S$24 in 3Q05. Year-to-date, Pre-paid ARPU at S$26 was S$2 higher than the S$24 ARPU a year ago. Pre-paid GPRS traffic continues to increase in the quarter, driven mainly by the half price rate promotion for GPRS usage, which commenced since March Pre-paid GPRS traffic grew by 98% when compared to the same period last year. As a percentage of Pre-paid ARPU, Pre-paid non-voice service increased from 9.6% in 3Q05 to 11.2% in 3Q06. Year-to-date, Pre-paid non-voice service as a percentage of Pre-paid ARPU was 11.4%. Acquisition Cost In 3Q06, average (blended) acquisition costs per gross connection were S$9 lower at S$89 compared to S$98 in 3Q05. The lower costs in the current quarter were due to a higher mix of new Pre-paid service connections. Acquisition costs of Pre-paid service connections are much lower than that for Post-paid service connections. Page 14 of 27

15 Cable TV Revenue Quarter ended 30 Sep Nine months ended 30 Sep Change (+/-) Change (+/-) S$m S$m S$m % S$m S$m S$m % Cable TV revenue Quarter ended Nine months ended YoY 30 Sep 30 Jun 30 Sep 30 Sep % Change Cable TV Key Drivers /- Number of residential cable TV customers (in thousands) ARPU (S$ per month) Average monthly churn rate 1.1% 0.9% 0.9% 1.0% 0.9% - Percentage of home-passed 99.9% 99.9% 99.9% 99.9% 99.9% - StarHub's penetration 42.7% 42.8% 39.0% 42.7% 39.0% - Cable TV revenue for the quarter amounted to S$79.1 million, S$13.6 million or 21% higher YoY. The increase YoY was attributed to higher advertising and subscription revenue on the back of the increased subscribers base and higher ARPU. For the nine months period, Cable TV revenue was 22% higher YoY at S$234.0 million, as a result of the increased subscription and advertising revenue, which were driven in part by the 2006 World Cup event in 2Q06. For the quarter, our Cable TV average monthly churn increased to 1.1% following the World Cup event that ended in early July Compared to a year ago, year-to-date churn was marginally higher by 10 bps at 1.0% as at 30 September Despite the higher churn rate, there was a net-add of 101 customers for the quarter. As at 30 September 2006, our Cable TV customer base stood at 478.5K customers, an increase of 10% or 45K customers when compared to a year ago. Adjusting for the impact of the World Cup event, ARPU would have been S$47 in 2Q06. Therefore, our Cable TV ARPU quarter-on-quarter (QoQ) at S$48 was S$1 higher and S$2.70 higher than 3Q05 YoY. The higher ARPU this year was attributable to a higher mix of customers who subscribed to our digital tier and higher take-up of value packages. Year-to-date, the monthly average ARPU at S$48 was 8% higher than the S$45 last year. As at 30 September 2006, our digital cable subscribers at 291K comprised 60.8% of our total Cable TV subscriber base, up from 36.8% a year ago. During the quarter, we continued to expand our service and channel offerings to reach out to the various customer segments. We launched Flexiwatch, a prepaid Cable TV service that allows customers to enjoy a selection of our Cable TV programming on a flexible pay-per-use basis. We also promoted Smart TV service, added new programming such as HBO Signature, HBO Family and HBO Hits, Playin TV and Page 15 of 27

16 Playin TV Mini, and marketed various value packages of bundled channels in the quarter. These initiatives helped to further increase the cable TV customer base and increase ARPU. As at 30 September 2006, our Cable TV market penetration increased 3.7 percentage points to 42.7% of homes in Singapore when compared to the 39.0% penetration rate recorded a year ago. Broadband Revenue Quarter ended 30 Sep Nine months ended 30 Sep Change (+/-) Change (+/-) S$m S$m S$m % S$m S$m S$m % Broadband revenue Quarter ended Nine months ended YoY 30 Sep 30 Jun 30 Sep 30 Sep % Change Broadband Key Drivers /- Number of residential broadband customers - subscription-based (in thousands) ARPU (S$ per month) Average monthly churn rate 1.1% 1.0% 1.1% 1.0% 1.0% - Percentage of home-passed 99.9% 99.9% 99.9% 99.9% 99.9% - For the quarter, Broadband revenue increased 22% YoY to S$55.5 million. Year-todate, Broadband revenue was 26% higher YoY at S$161.7 million. We continue to enhance our value proposition via increasing access speeds, making available applications such as digital voice and broadcast quality i-view channels, and up-selling customers to higher speed plans, which led to the growth in customer base and ARPU. During the quarter, our competitors continued with high acquisition premiums and reduced price plans. We continue to price our superior Broadband speeds at a premium. Although this has resulted in lower customer net-adds and higher churns in the quarter, in 3Q06, we net-added 9.1K subscribers. Our average monthly churn rate has increased to 1.1%. Year-to-date, our monthly average churn rate is at the 2005 level of around 1.0%. We had a total of 308K subscribers in our residential broadband customer base at the close of the quarter. ARPU for both the current quarter and year-to-date was strong at S$59, S$2 higher YoY as a result of a higher mix of customers subscribing to the higher tier plans. Based on the IDA statistics (which includes prepaid and wholesale customers), our residential broadband base was 49.1% of total market share as at 30 September Page 16 of 27

17 Fixed Network Services Revenue Quarter ended 30 Sep Nine months ended 30 Sep Change (+/-) Change (+/-) Fixed Network Services Revenue S$m S$m S$m % S$m S$m S$m % Data & internet Voice services Total Quarter ended Nine months ended YoY 30 Sep 30 Jun 30 Sep 30 Sep % Change IDD /- IDD minutes (in millions) Our share of IDD market (1) 17.9% 17.4% 15.8% 17.3% 14.9% - Note: (1) Total market as per published statistics from IDA website as at September 2006 The overall Fixed network services revenue grew 23% YoY to S$70.6 million for the quarter, and 17% YoY to S$189.4 million for the nine months ended 30 September Higher Data & Internet revenue growth contributed to the bulk of the revenue increase. Against 3Q05, Data and Internet revenue was higher by S$9.1 million or 25% YoY at S$46.2 million in 3Q06. This is on the back of a higher volume of both local and international lease circuits and Fixed Data services sold. Year-to-date, Data and Internet revenue of S$128.0 million was 20% higher when compared to the same period last year. Revenue from voice services continues to be driven by higher international voice traffic volume, but somewhat offset by lower unit pricing. Our retail IDD traffic volume increased 18% YoY to 224 million minutes in 3Q06 compared to the 190 million minutes in 3Q05. Year-to-date, our retail IDD traffic was higher by 20% YoY at 637 million minutes. In-payments arising from our international voice bilateral arrangements also increased upon settlement of some of these contracts when due. Consequently, our Voice service revenue in 3Q06 increased by 21% YoY to S$24.4 million and for year-todate, voice service revenue increased S$5.7 million or 10% YoY to S$61.4 million. Based on the IDA statistics as at end September 2006, StarHub s IDD traffic accounted for 17.3% of the Singapore IDD market, compared to 14.9% a year ago. Page 17 of 27

18 Hubbing (Multi-Service Households) As at YoY 30 Sep 30 Jun 30 Sep % Change Hubbing Metrics /- Total Singapore occupied homes (in thousands, estimated) (1) 1,079 1,079 1, Total hubbing households with at least one service of post-paid mobile, cable TV and/or broadband services (in thousands) Percentage of total hubbing households which subscribe to any two services 32.4% 32.6% 31.8% 0.6 pts Percentage of total hubbing households which subscribe to any three services 17.0% 16.5% 14.0% 3.0 pts Total hubbing households which subscribe to two or more services 49.4% 49.1% 45.8% 3.6 pts Note: (1) Source: AGB Nielsen Media Research for 2005 and 2004 information As at 30 September 2006, a total of 736K households subscribed to at least one StarHub hubbing service. Compared to a year ago, this was a 5.4% increase YoY. During the quarter, we launched a new branding campaign with the tagline For the life that I love, i am a Hub to empower our customers to connect faster and enhance their experiences in communications and information accesses and promote hubbing services. We also highlighted the exclusive privileges and savings customers can enjoy when they sign up to our hubbing services of post-paid Mobile, Cable TV or Broadband services. As at 30 September 2006, our Hub Club membership (that is, customers having all 3 of our hubbing services) has grown to 125K households, a 28% increase from a year ago. The total number of households that subscribed to two or more of our hubbing services now comprised 49.4% of our hubbing homes as at 30 September 2006, compared to 45.8% a year ago. Page 18 of 27

19 Operating expenses Quarter ended 30 Sep Nine months ended 30 Sep Change (+/-) Change (+/-) Operating expenses S$m S$m S$m % S$m S$m S$m % Cost of sales (19.5) (52.3) Other operating expenses (19.6) (40.1) -6.7 Total (39.1) , (92.4) -9.6 Compared to 3Q05, while operating revenue increased by S$62.3 million YoY, total operating expenses for the quarter increased S$39.1 million or 12% YoY to S$357.5 million and were 10% higher YoY at S$1,059.3 million for the nine months ended 30 September Cost of sales Quarter ended 30 Sep Nine months ended 30 Sep Change (+/-) Change (+/-) C ost of sales S$m S$m S$m % S$m S$m S$m % C ost of equipment sold (5.5) (11.4) -9.0 Cost of s ervices (3.4) (20.0) T raffic expenses (10.5) (20.8) T otal (19.5) (52.3) Increases in business volume and customers drove the increases in the va rious components of cost of sales for both the quarter and the nine-month period in As a percentage of operating revenue, total cost of sales had remained at around the same level as 2005 at 29.8% for the quarter and 31.5% for the nine- month period. Cost of equipment sold for the quarter increased by 15% YoY to S$43.1 million as a result of a higher volume of handsets sold to new and re-contracted customers. Year-todate, cost of equipment sold increased 9% YoY to S$138.6 million. The increase was mainly attributable to the higher volume and unit costs of handsets sold during the ninemonth period. In 3Q06, cost of services increased by S$3.4 million or 9% to S$40.8 million and yearto-date, was 19% higher YoY at S$128.1 million. The main factors contributing to the increase for both p eriods were higher Cable TV programming costs driven mainly by higher Cable TV subscriber base, and higher content and service costs incurred for the mobile data and fixed network services platforms. Traffic expenses for the quarter increased by S$10.5 million YoY to S$53.3 million due partly to higher volumes of voice and data traffic delivered over our multiple platforms as well as higher blended international terminating rates. Year-to-date, traffic expenses for the nine months were 16% higher YoY at S$153.2 million. Page 19 of 27

20 Other operating expenses Quarter ended 30 Sep Nine months ended 30 Sep Change (+/-) Change (+/-) Other operating expenses S$m S$m S$m % S$m S$m S$m % Staff costs (0.5) (1.4) -0.8 Operating lease (8.9) (11.9) Marketing and promotion (8.6) (17.8) Allowance for doubtful receivables (0.9) Repair and maintenance (0.8) (3.9) -8.7 Other expenses (4.9) Sub total (14.3) (37.1) -8.3 Depreciation and amortisation (5.3) (3.0) -1.9 Total (19.6) (40.1) -6.7 Total other operating expenses for the quarter amounted to S$220.2 million, an increase of S$19.6 million or 10% higher YoY as against an increase in revenue of S$62.3 million or 16% higher YoY. As a percentage of operating revenue, however, total other operating expenses ratio for the quarter was lower at 47.8% compared to 50.4% in 3Q05. Year-to-date, total other operating expenses were S$40.1 million or 7% higher YoY at S$639.4 million. As a percentage of total operating revenue, total other operating expenses ratio trended down to 48.0% compared to 51.9% a year ago. Staff Costs There were no significant increases in staff costs for both the quarter and the nine months ended 30 September 2006 despite a higher volume of business transactions and expanded customer base. For the quarter and year-to-date, staff costs increased marginally to S$56.6 million and S$163.8 million respectively. As a percentage of operating revenue, staff costs ratio for both periods were lower at 12.3%, compared to 14.1% in the corresponding periods last year. Operating Lease Expenses Operating lease expenses in 3Q06 amounted to S$36.9 million, an increase of S$8.9 million or 32% YoY. The increase in the quarter was attributable to a higher cost provision for lease circuits capacity and rentals. For the quarter, operating lease expenses as a ratio of operating revenue was higher at 8.0% when compared to 7.0% in 3Q05. Although year-to-date operating lease expenses were 14% higher YoY at S$99.0 million, as a percentage of operating revenue, operating lease expenses ratio was marginally lower at 7.4%, compared to 7.5% last year. Page 20 of 27

21 Marketing and Promotion Expenses Increased customer acquisition and retention activities and a new customer branding campaign in 3Q06 drove marketing and promotion expenses higher. For the quarter, marketing and promotion expenses increased by 27% YoY to S$41.2 million and was S$17.8 million or 18% higher YoY at S$117.5 million for the nine month period. As a percentage of operating revenue, marketing and promotion expenses ratio was 8.9% for the quarter compared to the 8.2% ratio in 3Q05. Year-to-date, the ratio of marketing and promotion expenses to operating revenue was 20 bps higher at 8.8% as compared to 8.6% last year. Provision for Doubtful Debts S$1.4 million was charged to the profit and loss account for allowance for doubtful debts in 3Q06 compared to S$0.5 million in 3Q05. The lower charge in 3Q05 was due to a write back in provision in that quarter last year. Year-to-date, allowance made for doubtful debt receivables amounted to S$7.1 million or 0.6% of service revenue as compared to S$9.9 million or 0.9% of service revenue last year. The improvement in ratio was attributable to better collections. Repair and maintenance In 3Q06, repair and maintenance expenses were 5% higher YoY at S$16.1 million. Year-to-date, repair and maintenance expenses were 9% higher YoY at S$49.1 million. The higher level of expenses was required to support the increased assets base of IT systems, operational equipment and network infrastructure. As a percentage of operating revenue, repair and maintenance expenses were lower at 3.5% in 3Q06, compared to 3.8% in 3Q05 and for year-to-date, the ratio was maintained at last year s level of around 3.7%. Other expenses Other expenses for the quarter were S$5.3 million lower at S$14.7 million when compared to S$20.0 million in 3Q05. This was due to favorable foreign exchange differences and net gains from disposal of certain network assets in 3Q06. These were however offset by provisions required for impairment in value for certain network assets whose book values exceeded their fair values. For the nine months ended 30 September 2006, other expenses at S$45.9 million were S$4.9 million higher than last year. The lower 2005 other expenses was due to the write-backs of cost over-accruals. As a percentage of operating revenue, other expenses ratio in 3Q06 and year-to-date were at around the same level as last year at 3.4%. Depreciation and amortisation Against 3Q05, depreciation and amortisation at S$53.5 million was S$5.3 million or 11% higher YoY. Year-to-date, depreciation and amortisation increased S$3.0 million to S$157.0 million. The increase in depreciation and amortisation charge was due to a higher depreciable asset base as more fixed assets were added. Page 21 of 27

22 Liquidity and Capital Resources Quarter ended 30 Sep Nine months ended 30 Sep Change (+/-) Change (+/-) S$m S$m S$m % S$m S$m S$m % Profit before tax Non-cash items & net interest expense adjustments Net change in working capital (21.6) Net cash provided by operating activities Net cash used in investing activities (36.1) (56.8) (161.3) (209.8) Net cash used in financing activities (297.1) (81.0) (216.1) (416.8) (84.1) Net change in cash and cash equivalents (152.9) 0.8 (153.8) nm (125.5) 94.1 (219.6) nm Cash and cash equivalents at beginning of the period (18.0) Cash and cash equivalents at end of the period (171.8) (171.8) Free Cash Flow (1) Fixed Assets Additions (9.4) (50.2) Note: (1) Free Cash Flow refers to net cash flow from operating activities less purchase of fixed assets in the cash flow statement During the quarter, the Group generated S$180.3 million net cash flow from operations, 30% higher YoY, after adjusting for non-cash items and a positive S$21.6 million change in working capital. Year-to-date, net cash flow from operations increased by 17% YoY to S$452.6 million. These increases in 2006 were on the back of strong EBITDA performance and positive working capital changes. Net cash used in investing activities amounted to S$36.1 million for the quarter and S$161.3 million for the year-to-date period. These were lower than the corresponding periods last year as there were lower capital expenditure on capacity or infrastructure expansion this year. As at 30 September 2006, the Group s outstanding capital expenditure commitments consisting mainly of network capacity expansion and IT systems upgrades, totaled S$83.4 million. The higher operating cash flow generated and a lower cash capital expenditure resulted in free cash flow increasing by 69% to S$136.0 million for the quarter. For the nine months ended 30 September, free cash flow was 59% higher YoY at S$279.5 million. Page 22 of 27

23 The higher free cash flow was used to fund the quarterly dividend payments, which amounted to S$53.9 million for 3Q06 and S$161.0 million year-to-date as well as the repayment of external bank loans amounting to S$60.0 million in the quarter and S$80.0 million for the year-to-date period. During the quarter, the Group also drew S$470.0 million of its long term bank loan facilities to re-finance its subsidiaries operations, which were previously funded through inter-company loans to the subsidiaries to better utilise the group s operational free cash flows. On 15 September 2006, the Group made a total payment of S$655.7 million to its shareholders as cash distribution pursuant to the company s capital reduction exercise. Consequently, at the end of September 2006, the Group s bank balance was reduced to S$49.0 million. Gearing As at 30 September 2006, the Group s long-term borrowings increased S$410.0 million to S$542.5 million compared to S$132.5 million as at 31 December Current portion of Loans amounted to S$90.5 million, S$20.0 million lower when compared to the outstanding balance as at last financial year-end as a result of loans repayment during the quarter. Gearing expressed as a ratio of total net debt to capital employed has increased from 6.6% as at 31 December 2005 to 59.4% as at 30 September ANY VARIANCE BETWEEN PROSPECT STATEMENT PREVIOUSLY DISCLOSED AND THE ACTUAL RESULTS The Group s operating revenue for the quarter and year-to-date increased 16% and 15% YoY respectively. In our 2Q06 announcement, we have revised our guidance on operating revenue from a high single digit growth to that of a low-teens growth YoY. EBITDA margin for the quarter was 35.7% and for the nine months ended 30 September 2006, EBITDA margin on service revenue was 34.0%. In our 2Q06 announcement, we had revised our EBITDA guidance to expect EBITDA margin, as a percentage of service revenue, to trend towards 33.0% for the full year of The Group s capex payment to-date amounted to 13.0% of operating revenue. We have earlier guided that for the full year of 2006, we expect the cash capital expenditure to operating revenue ratio to be in the mid-teens. 15. GROUP OUTLOOK The Singapore Mobile market is highly penetrated at 101.5% as at end September While competition in the Pre-paid segment has increased, we have chosen to focus our promotions on Pre-paid customers enjoying more value and rewards as they increase their usage and top-ups of their Green cards. In the Post-paid segment, revenue growth is expected to be moderate. Further growth in the mobile market is expected to come from increasing non-voice data usages and transactions. To increase data usage, apart from expanding our i-mode range of handsets to include popular brands such as Nokia and Ericsson, we are also promoting new value-added services and content such as MSN instant messaging service, Windows Live Messenger Page 23 of 27

24 Some of the statements in this release constitute "forward-looking statements" that do not directly or exclusively relate to historical facts. These forward-looking statements reflect our current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Because actual results could differ materially from our intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward- looking statements contained in this release with caution. available on our i-mode mobile phones in Singapore and other push mail services together with push-mail supported handsets that are now available in the market. We have also announced our intention to upgrade our 3G mobile networks with HSDPA capability in the near future, which will provide even faster broadband connectivity wirelessly. On the cable TV front, we will continue to add more content, more flexibility and choice in our digital TV offerings to suit our viewers lifestyles. In October, new channels such as STAR Chinese, a Tamil VIJAY entertainment channel and other new channels will be made available. By year-end, we intend to launch HD TV commercially. In the past two quarters, we saw new IPTV players offering niche programming to certain segments of the market. We believe these IPTV players will further expand the market with specialised programming and thereby increase the Pay TV market penetration further. However, programming costs are expected to increase. In the Broadband market, there are many initiatives by the Government in executing its Intelligent Nation 2015 Masterplan. The winners of the wireless broadband tender were announced at an event where IDA introduced the Wireless@SG program. Wireless@SG offers Internet users in Singapore two years free access of basic tier wireless broadband connectivity with speeds up to 512 Kbps in most public places by This service will be offered via WiFi technology. We did not win the tender to offer this free wireless WiFi broadband access service. Such initiatives by the Government are expected to accelerate the rate of broadband penetration in the market. In StarHub, to further encourage narrowband dial-up customers to migrate to broadband service, we launched in October a promotion on our prepaid MaxOnline 4000 Flexisurf service, offering free broadband access to selected popular websites and web-based services. Users only need to purchase a StarHub cable modem and they can immediately enjoy high-speed broadband access. Beyond these free access sites, customers can pay for Flexisurf access at S$2.50 a day. Based on the current outlook, barring any unforeseen circumstances and changes in economic and market conditions, our full year 2006 operating revenue is expected to grow at about 14% YoY, EBITDA margin on service revenue at about 33% and cash capital expenditure, as a ratio of operating revenue, will not exceed 15%. Page 24 of 27

25 16. DIVIDENDS During the quarter, we completed our capital reduction exercise and distributed S$655.7 million cash to shareholders. This is in addition to a cumulative total of S$0.05 dividends per share paid for FY2006 at 2.5 cents per share for 1 st and 2 nd quarter. Barring any unforeseen circumstances, and in view of the Group s current cash position and distributable reserves, coupled with profitability and free cash flow trend, the Group intends to pay a minimum annual cash dividend of 11.0 cents per share in FY2006. (a) Current financial period reported on Any dividend recommended for the current financial period reported on? Yes Name of Dividend Dividend Type Dividend Amount Tax Rate Interim Cash; Tax exempt (1-tier) dividend S$0.03 per ordinary share Exempt (1-tier) (b) Corresponding period of the immediately preceding financial year Any dividend declared for the corresponding period of the immediately preceding financial year? Yes Name of Dividend Dividend Type Dividend Amount Tax Rate Interim Cash; Tax exempt (1-tier) dividend S$0.025 per ordinary share Exempt (1-tier) (c) Date payable The interim dividend will be paid on 5 December (d) Book closure date Notice is hereby given that the Register of Members and the Transfer Books of the Company will be closed on 23 November 2006 ( Book Closure Date ) for the purpose of determining members entitlement to the interim dividend. Duly completed registrable transfers received by the Company s Share Registrar, M&C Services Private Limited, 138 Robinson Road, #17-00 The Corporate Office, Singapore up to the close of business at 5.00pm on 22 November 2006 ( Entitlement Date ) will be registered to determine members entitlement to the interim dividend. S ubject as aforesaid, persons whose securities accounts with The Central Depository (P te) Limited are credited with ordinary shares in the capital of the Company at 5.00pm on the Entitlement Date will be entitled to the interim dividend. Page 25 of 27

26 17. IF NO DIVIDEND HAVE BEEN DECLARED/RECOMMENDED, A STATEMENT TO THAT EFFECT Not applicable. 18. STATEMENT PURSUANT TO RULE 705(4) OF THE LISTING MANUAL The Directors confirm that, to the best of their knowledge, nothing has come to the attention of the Board of Directors which may render the above unaudited financial results for the third quarter and nine months ended 30 September 2006 to be false or misleading in any material respects. On behalf of the Board of Directors Tan Guong Ching Director Steven Terrell Clontz Director Singapore 8 November 2006 Page 26 of 27

27 19. SUPPLEMENTARY INFORMATION PROVIDED SOLELY FOR MARKET COMPARISON The Group operates as a fully integrated organisation. The analysis below shows EBITDA by each network platform namely Fixed, Mobile and Cable (TV and Broadband). The analysis assumes allocations based on the principle of emulating, as closely as possible, the fundamentals of each business segment as if each platform had operated as a standalone entity, after allocation of certain shared costs and eliminations of intra-group transactions. Sourcing of internal supply from Fixed Network Services by Mobile and Cable is on a pass through cost basis. Third quarter ended 30 September 2006 Fixed Mobile Cable Elimination Total Network Platforms S$m S$m S$m S$m S$m Total revenue (32.9) Service revenue Sale of equipment EBITDA EBITDA as % of service revenue 21.4% 45.5% 26.1% 35.7% Nine months ended 30 September 2006 Fixed Mobile Cable Elimination Total S$m S$m S$m S$m S$m Total revenue (88.9) 1,331.6 Service revenue ,263.2 Sale of equipment EBITDA EBITDA as % of service revenue 20.5% 42.5% 25.8% 34.0% Page 27 of 27