Interview: Neil Montefiore, Starhub

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Starhub faces iPhone-fuelled data explosion

Starhub to use Singapore’s NBN to solve mobile data explosion 

After a gap year, Neil Montefiore is back in Singapore running Starhub, which plans to cope with the iPhone-fuelled data explosion by using the country’s new national next-generation broadband network — and the NBN will also allow Starhub to offer IPTV services in place of its existing TV cable operation

Former M1 CEO Neil Montefiore took a year off travelling
the world before he was able to take over at the top of
rival operator Starhub

Come to Singapore if you want advance information on how the data explosion is going to affect mobile operators. Half of the phones Starhub sells every month in Singapore are Apple iPhones — and 75% of all Singapore’s new phones are smartphones.
“Phones have an average life of 13-14 months,” says new CEO, Neil Montefiore. So, at the current rate of sale, by the middle of 2011 a substantial proportion of terminals in use on his network will be iPhones. That means Starhub needs to ensure its network is ready for the data volumes: operators the world over have told of the pressure that iPhones in particular put on their backhaul — but at Starhub, the backhaul is going to be even more stressed.
Fortunately the island republic of Singapore is building its own national broadband network — which should help to cope with the demand. A Starhub sister company, Nucleus Connect, will be in charge of running services on the network for all Singapore operators — though rules about neutrality mean that Montefiore is unable to talk about Nucleus’s operations.
This all means that Montefiore is back at work with a vengeance after a gap year — a contractual requirement when he resigned from Singapore mobile operator M1 at the end of 2008 in order to take up a similar post with its competitor. Starhub began life as a cable TV operator but now offers fixed and mobile telephony as well as internet access.
“I spent the year travelling the world,” he recalls. “A lot round Asia, India by train and car. Southern California, France, Spain — by train — and the UK. Now I’m back after a year of change for telecoms: not just fixed telecoms but this is the year of the smartphone.”
The national broadband network — 60% of which should be in operation by the end of 2010 — should be able to deliver symmetrical 100 megabits access to Singapore homes. The network is being built by an associate of SingTel, another rival, but Nucleus “will light up the fibres and put the boxes in homes”, but it will be a carrier-neutral network that will deliver access on behalf of all competing companies.
“I’m excited” about the launch of the service, says Montefiore, because Starhub will be one of those using the NBN to connect fixed customers. “We’re getting everything ready.” Starhub has had limited fixed access until now to the residential and commercial market. “There are a lot of buildings we can’t access,” and SingTel, the incumbent has had “a virtual monopoly” before the arrival of the NBN.
Operators such as Starhub will be competing with one another to deliver attractive services. “To compete with us and SingTel you’d need to have content as well,” says Montefiore. “We have all our pay-TV services and we will move to IPTV delivery. We’ll have a common set-top box so the customer doesn’t have two or three boxes. We already do mobile TV.”
Montefiore is enthusiastic about the way Singapore, which has 4.6 million people in just 650 square kilometres, has tackled its broadband strategy. “I think Singapore will take the world lead,” he says. The combination of a network installation company, a network services company and a set of competing retail service operators “is unique”, he adds. “No one else is doing it quite the same way. We’ve got to make it a success.”
The national broadband network will not be a monopoly, and he thinks that SingTel may well opt to remain a vertically integrated company with its own network.
Provision of symmetrical broadband is unusual. “It changes the use of the internet,” says Montefiore. “You get a dramatic increase in sharing of content.” Starhub’s cable network already provides 100 megabits a second downstream, but the uplink speed is a more modest, and more conventional, five megs. SingTel, by comparison, provides ADSL at 25 megs. “It’s going to be interesting to see how it all works out.”
This will all go to make Singapore as competitive in the fixed market as it already is in mobile, with penetration at 137%. “We have a 29% share,” says Montefiore. “Our growth is coming from new services. In 2010 we are increasing our ARPU from S$70.” That’s equivalent to US $50. Smartphone ARPU is around $10 a month higher than that, he notes.
Advertising is one way to increase income, he believes, but any service needs to be location based and it needs to be across all operators in a market — which means there will be a role for a clearinghouse. “Advertising has a real future but you need to make it easy.”
Montefiore — a former Cable & Wireless executive who has been in Singapore since 1991 — has an international perspective but Starhub retains a Singapore focus. “It will remain that way,” he says. “I’ve seen a lot of companies destroy shareholder value on the acquisition trail.”
First quarter revenue was up 5% on the same period of 2009, though profit was down because of the cost of investing in the network for smartphones. The company pays a fairly regular 5 cents a share dividend per quarter: shares are around S$2.24, so that produces a shade under 20 cents a year. “We have a 9-10% dividend yield and that’s pretty safe,” says Montefiore.
Mobile broadband runs at 21 megabits a second, using Huawei equipment, with the rate heading up in 42 megabits in the middle of 2010. “We’re doing LTE trials, also with Huawei. And we want more customer experience management, measuring what the customer is doing.”
Almost all backhaul from the base stations is IP. “Singapore took that leap a year ago,” he says. Most of the traffic is generated by USB modems on laptops “and 80% of the data comes from that”, but that was before the explosion of the iPhone, which went on the Singapore market in December 2009, just before Montefiore’s return from his gap year.
And then? Content, he repeats. Operators in Singapore’s competitive market will need to offer content. “We want to do co-production. We’ve started a local sports channel and we’re looking at co-producing relevant content.”
Which leads to the inevitable question about over-the-top content and how that will affect the opportunities in Singapore, especially once the NBN is in operation. “Our customers like dealing with the carrier,” says Montefiore.
But there are a lot of carriers in Singapore. It’s a dynamic market and no one has yet seen what the reality of a national carrier-neutral next-generation broadband network can do. Singapore is one of the world’s testing grounds. We will see. GTB