Financial Analysis Starhub - 2330 Words

Business Profile SWOT Analysis Strengths †¢ Effective management team †¢ Distinguished brand †¢ Strong bargaining position with suppliers †¢ Large customer base †¢ Offers integrated services Weaknesses †¢ Scaling operating costs †¢ Market position relative to SingTel Opportunities †¢ New technologies †¢ Changing customer preferences †¢ Government initiatives (e.g. island-wide wi-fi access) †¢ Changing network infrastructure (e.g. next-gen broadband network) Threats †¢ Government regulations †¢ Technological obsolescence †¢ Changing customer preferences †¢ Increasing competition (e.g. SingTel in cable TV market) †¢ Growing market saturation †¢ Economic recession that puts downward pressure on ARPU Starhub Ltd is one of the stalwarts in the local†¦show more content†¦Starhub’s high debt to equity position indicates an aggressive strategy in financing assets and growth with debt, especially in comparison to its competitors. In contrast, both SingTel and M1 have a lower reliance; Singtel in particular has a very low reliance on debt, which is unsurprising given its large market capitalization. For a relatively young company like Starhub, with smaller market capitalization, it would be necessary to take on more debt in the stages of growth. Starhub’s investments could potentially reap high returns in the long run to cover the debt burden. However, there is more financial risk involved; a heavy reliance on debt in a capital-intensive industry raises doubts on long-term liquidity. In periods of recession and recovery, Starhub would find it more difficult to maintain its solvency. In terms of coverage, Starhub is able to cover its debt expenses at around 15 to 16 times in FY2007 and FY2008. It fared better than Singtel despite greater debt obligations. This bodes well as it reduces the risk of bankruptcy or liquidity problem, by providing a considerable safety margin. To further verify Starhub’s debt-servicing ability we look at its free cash flow figures. Starhub has maintained positive free cash flows over the three-year period, indicating sufficient operating cash flow, after cash is used to maintain and increase its assets, to cover debt. Profitability Ratio AnalysisShow MoreRelatedPotential Merger Of Starhub And Mobile Essay1556 Words   |  7 Pagesmerger of StarHub and mobile one will be biggest threats to SingTel’s number one position in Singapore for mobile markets. With the competitive market, SingTel will have to fight against star hub and mobile one through price, promotions and advertisings since all three companies’ main business are in provision of mobile plans and sales of mobiles. SingTel may need to improve customer service further to create superior customer service that tag to their brand. 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