Singaporean telcos StarHub and Singtel have reported a robust set of earnings for the Dec. 2014 quarter, capping a year of solid performance for their pay-TV business lines.

The market added 4,000 new pay-TV subs during Q4 2014, and 11,000 during the whole year. At end-2014, StarHub had 56% share of Singapore’s 962,000 pay-TV subs, while Singtel TV had 44%.

Reported pay-TV industry revenues grew by 13% during CY 2014 to reach S$620 million (US$488 million), largely driven by top-line gains at Singtel TV (+43% from a relatively low base). StarHub was up ~1%.

Competition in the broadband segment meanwhile remains challenging, but formerly volatile pricing showed signs of settling down towards the end of last year.

“The market here is all about bundles,” remarks Vivek Couto, executive director of industry consultants Media Partners Asia (MPA).

“There are no pure-play video service providers, so both telcos use video as a defensive weapon to shore up growth across their bundles, including broadband – which remains under attack – and mobile,” Couto adds.

StarHub signed up 9,000 more pay-TV subs last year, but Arpu, at about US$40 a month, remained relatively flat.

Singtel, on the other hand, saw little pay-TV subs growth but more Arpu momentum, with annualized yields starting to track at around US$30 a month.

“StarHub’s pay-TV subscriber growth last year is encouraging, driven by its quad-play HomeHub service pack,” Couto says.

“However, it’s unclear what proportion of these customers is subscribing to StarHub’s slimmer, low-Arpu packs – bundled with fiber and cable broadband – and subsequently what is the level of up-selling to higher-Arpu packs.”

While both players are investing in content and multiscreen apps, Singtel TV’s content breadth has notably expanded, Couto notes.

“Singtel TV’s subscriber growth has been modest, but Arpu growth is kicking in,” Couto adds. “It’s clearly benefited from last year’s Fifa World Cup broadcast and wider content availability, with channels from Rewind, Turner and Universal coming on board.”

The earnings, while solid, raise more questions than answers over the medium-to-long term however, with two key battles determining future pay-TV prospects for both companies.

1) Content

2015 is the expiry date for StarHub’s valuable exclusive carriage agreements with Discovery Networks Asia and HBO Asia.

Will Singtel get access to channels from these pay-TV blue-bloods, and if so, at what price?

Will HBO deepen its partnership with StarHub, embracing mobile and broadband with SVOD rights? If so, will censorship rules and regulatory issues (including licensing) delay a proper deployment of SVOD services by broadcasters and telcos?

In a BPL (Barclays Premier League) football year, managing content costs is going to be key for Singtel TV. BPL remains the high-cost ticket item, although there will be an element of rationality creeping in after Singtel TV’s US$250 million bid for the 2013-16 BPL rights cycle.

The business is now housed under Singtel’s profitable Singapore Consumer Business segment, and the focus appears to be on getting Singtel to reach breakeven and grow longer-term.

2) SVOD & OTT

Singtel’s new regional SVOD-based OTT service, Hooq, made a promising debut in the Philippines last month.

Next up is India, Thailand and then Indonesia, with Singapore likely to appear on the radar in the second half of next year.

How Hooq might co-exist with Singtel TV is unclear, although there will probably be significant cross-promotion, with Hooq theoretically acting as an on-demand top-up to Singtel TV.

In this context, StarHub is also likely to develop and execute on its own SVOD play, as part of its broader strategy to strengthen its bundles and grow pay-TV and broadband.

Here, MPA believes that sports will play a vital role. While Hollywood programming is important, it’s difficult to scale or make money long-term on an Asian OTT proposition with US content alone, Couto notes.

At the same time, Asian entertainment rights are fragmented and are being bid up irrationally, especially for popular Korean and Chinese fare.

“So, you have to start to home in on sports,” Couto suggests. “It’s far more consolidated and digital rights are clearly demarcated. Operators have more skin in the game, either through their own acquisitions or through well-framed partnerships with third-party providers.”

Sports’ traditional and successful role for linear pay-TV channels, as a battering ram into people’s homes, can be extended to multiple screens and non-linear consumption, Couto adds.

“It’s a much overlooked area for media and telecom operators,” he says.

There are still layers of regulation to work through, which will delay market deployment, although sports are less affected by content censorship, providing the genre with a notable advantage.