OUR TAKE  
 
Scoring for another season. Singtel, which is largely expected to retain the broadcast rights, is determined to court more pay-TV subscribers from StarHub to expand its pay-TV (mio-TV) reach. In fact, we would be most surprised if it did not, with the benefit of its deep  pockets.  The  non-exclusive  deal  exempts  the  group  from  the  content  sharing ruling, which coincidentally was introduced after Singtel paid through its nose to wrestle the  iconic  content  from  Starhub  back  in  4Q09  for  the  current  season,  which  ends  in 2Q2013. Although there were no indications how much Singtel paid for the rights to air 380 matches for the new season, it would not be unreasonable to surmise that the group paid  handsomely,  judging  by  the  record  70%  premium  against  the  2010-2013  season that British Telecom (BT) and British Sky Broadcasting (BSkyB) paid for the rights (see Table 1), which priced each match at a staggering GBP6.5m. 

Starhub being realistic in not vying for a loss leader. We believe that Starhub would have played out the scenario of Singtel pursuing a non-exclusive deal to prevent its own (Starhub)  subscribers  from  watching  the  games  via  the  cross  carriage  regime,  which would have mandated that Singtel shares the content. The position is as per its current setting,  whereby  Singtel's sports  subscribers  sign  up  for  a  second  set-top  box.  After losing the rights for the current season, Starhub saw minimal churn on its pay-TV base
(Figure  1),  an  indication  that  its  non-sports  content  is  still  compelling.  It  has  also broadened  the  genre  of  content  offered  on  its  platform,  as  well  as  added  other  sports content  deemed  strategic  and  which  do  not  contribute  to  value  destruction  (the  recent Euro 2012 broadcast rights being a good example). Starhub's inherent rational position is viewed positively.

VALUATION & RECOMMENDATION  
 
Prefer StarHub. We make no changes to our forecasts for Singtel and Starhub for now pending the release of their  September  quarter  results  next  month.  While  we  are  NEUTRAL  on  both  stocks,  we  prefer  Starhub  (FV: SGD3.30)  for  its  capital  management  prospects.  With  the  BPL  outcome  known  and  following  the  recent SGD220m bond issuance, there may be potential upside to StarHub's dividends going forward (FY13 dividend yield of 5.4%). The BPL would further crimp Singtel's EBITDA margin ' a de-rating catalyst for the stock on top of  the  recent  news  of  a  potential  downside  in  India  arising  from  the  introduction  by  its  government  of  punitive one-time charges for the 2G spectrum.

Source: OSK