We retain our Overweight rating on StarHub after the company announced today (after market close) that its founding President and CEO, Terry Clontz, will retire as the company’s CEO in January 2010. After he steps down as CEO, Mr. Clontz will remain a Director on the Board. StarHub will appointM1’s ex-CEO, Neil Montefiore, as the succeeding CEO, subject to regulatory approval.

We believe this could raise concerns among investors as Mr. Clontz has been instrumental in StarHub’s success in the past 10 years. Having said that, we do not expect any material change in the company’s strategies or daily operations. StarHub could also benefit from Mr. Montefiore’s experience in the Singapore telecom industry, as he has been M1’s CEO since 1996. We also expect smooth management transition in January, especially given that Mr. Clontz will remain on the Board of Directors after he steps down as CEO.

Our Overweight rating on StarHub is based on our view that despite the weak macro environment, the company should be able to maintain its minimum dividend commitment of S$0.18 per share, which translates to an attractive dividend yield of 8-9%.