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Good evening, ladies and gentlemen. Hope you've all been well. My name is Amelia. Thank you for joining us on this update call.
We've just released our first voluntary business performance update this evening since moving to the semi-annual reporting regime. This evening, we have with us our Chief Executive, Peter K.; CFO, Dennis Chia, Head of Enterprise, Charlie Chan; and Head of Consumer, Johan Buse. We are all speaking to you from various locations today so we apologize if the call conditions are less than ideal. Peter and Dennis will bring us through a quick presentation before we open the floor to questions. [Operator Instructions]
Peter, over to you, please.
Okay. Thank you, Amelia, and a very good afternoon, ladies and gentlemen, and thank you for your interest in the results of our company. There is a deck in front of you that we will go through and of course, any forward-looking statements need to be read in the context of Slide 2. Allow me this evening to spend a few minutes on 3 key messages and then we'll elaborate on the results a little bit more. First message is about people; the second is about the impact of COVID on our business; and the third is the transformation initiatives and our strategy relating to that.
First of all, over the last 3 months, our absolute number one priority has been caring for the health and safety of our employees, our customers and the community at large. We've been extremely fortunate based on a number of initiatives that only 3 of our people received quarantine orders, and 17 were served with stay-at-home notice. So within a group of just over 2,000 people, our initiatives to protect the health and safety of our employees seems to be paying some dividends.
Also, we activated business continuity plans from early February to make sure that our employees are split into teams A and B to provide business support to customers, consumer and business. 90% of our employees today are working from home, except few essential employees in the North and other areas. We have closed retail shops, except a few locations. We've accelerated the migration to online capability for the protection of our customers and our employees. And of course, we're making sure that our network has got enough redundancy and capacity to cope with the growth in terms of transactions.
At the same time, we've also supported the community. Over $1 million, we've put aside to donate for various causes, including low-income beneficiaries. We've offered unlimited time to health care professionals. We extended remote working solutions to enterprise customers. We're offering free preview channels to our consumer customers at home, e-learning support to students. As I mentioned earlier, also, lower income support for a number of people in less fortunate conditions than us. So our first priority has been health and safety of our people and supporting our customers and our community.
Second message from us is that certainly, COVID-19 has impacted us, but we have put in place measures to mitigate these challenges, including adequate financial liquidity and no further financing is required until 2022. We have actually adequate facilities to manage our working capital and all other funding requirements, and we do expect to sustain positive operating cash flow generation for the rest of the year and beyond. And later on, our CFO will outline some more details about that.
Definitely, we have been impacted. We've seen the initial impact of COVID. We expect more in the second quarter of this year. And we are trying to understand. And over time, there'll be more clarity in terms of the trading results as well as the impact of various government support measures on our business.
As a result of this uncertainty, StarHub is withdrawing its guidance for 2020 and we will update our shareholders once there is greater visibility to the overall nature of COVID-19 on our business.
The third message is that our transformation strategy is more relevant now than ever before. And in the last 3 months, we've made various announcements, and we've put in place important foundations for the execution of the strategy. First, the 5G provision license has been awarded to our joint venture, and we look forward in the next few months for that license to become a full license, and then to start the rollout of the network and provide 5G services to customers in the future.
The second building block is the acceleration of our IT transformation. We selected a company in terms of PCCW solutions and together, we will accelerate a business transformation, our IT transformation and the overall digitization capability of StarHub.
And thirdly, another foundation is the acquisition of a company in Malaysia, a B2B digital services enterprise solutions company, which provides diversification and growth, together with Ensign, another investment we've made almost 18 months ago.
So they are the 3 key messages. If you allow me then to go to the next slide, which is Slide 4, a little bit more detail about the impact of COVID. As I mentioned, we operate with about 5 retail stores and less working hours. And the good news is that a lot of customers are responding to online sales and service. We are seeing higher network traffic in both the fixed and mobile network. But again, the peak loads were nowhere near the capacity of the network, well below that. We are seeing the supply chain for handsets, for routers, being disrupted.
Less stock is available and that, of course, is also impacting on the sales of CPE, and you will see that in quarter 1 results, quite substantially lower CPE sales. We are also seeing longer sales cycles for enterprise business customers, where now a lot of corporates are rethinking expenditure and also, delaying maybe some of the expenditure. And we're also seeing requests from customers for deferred payments, which again, in the current environment, is to be expected.
Also, if you look at -- as I mentioned, business continuity plans have been put in place. We continue to manage our cash flow and balance sheet with great discipline, and Dennis will outline more detail about that. I would say that deferring nonessential expenditure, preserving cash and managing cash correctly is very, very important.
We are providing assistance to customers who require that, and we're taking a very selective approach. Of course, we know that some industries have been hit more than others, like hotels and tourism and so on. And again, we're working one-on-one with those customers to provide some support. Also, we're working closely with various regulatory bodies to extend support to other segments in the community and the network as required. Liquidity. Definitely as I mentioned, that we've been fairly fortunate, and we acted very quickly to ensure that we have refinanced anything that was due this year and secured financing until 2022. And we do believe there are adequate credit facilities for working capital in place to support us, including the rollout of the 5G network over the next, about 18 to 24 months.
In terms of specific financial impacts. Definitely, our consumer business has felt the brunt of it so far. IDD revenues, inbound and outbound roaming revenues have almost vaporized, and we've seen much lower sales of handsets, simply because customers are not mobile, and they're not really shopping around for a new handset right now because of the restrictions in movement. We've also seen lower prepaid customers and prepaid revenues. Again, a lot of -- part of our prepaid customer base depends on foreign workers. It also depends on local citizens, but also depends on international tourism. And of course, we've seen almost that dry up completely. In the Enterprise business, we have seen some projects being delayed, as I mentioned earlier, including tenders. We have seen some customers asking for extension of the delivery of some of the contracts which are work in progress, and everyone is reviewing their budgets for the rest of this year and beyond. And we hope that again, some of the critical projects will be delivered. If you go to the next slide, Slide 5, you'll see the movements in revenue. If I -- I'll start from the left-hand side and move to the right-hand side of the slide. You see our total revenue year-on-year dropping by 15%. Now when you see the service revenue further down, it drops almost 9% year-on-year. One of the reasons there -- there are a number of reasons. First of all, this time last year, we had a very strong acquisition campaign with handsets to drive the growth of our business. So CPE sales last year were a very significant amount. This quarter, they're not, and this quarter, we're also taking a hit from here in terms of subsidies.
So part of that drop in year-on-year revenues, in total revenues, has to do with CPE sales. The other has to do with service revenues. Mobility, TV and broadband revenues year-on-year are below what we expected. The real growth came from the cybersecurity part of the business. Our service EBITDA, again year-on-year, has dropped, but quarter-on-quarter has improved, quarter 4, that is, to quarter 1 this year. We are managing OpEx very, very tightly, and that's being reflected in the service margins that we are delivering this quarter. Year-on-year, our service EBITDA margins have dropped to a couple of percentage points to 31.1%, but from last quarter, we've seen an improvement in margins.
Overall, the net profit we're delivering is $40.2 million, 25% year-on-year, and profit attributed to our shareholders, quarter-on-quarter, has gone up. Quarter 4, we reported $35 million for net profit. This quarter, we're reporting $40.2 million. Our free cash flow has improved year-on-year and quarter-on-quarter.
So that's the overall financial performance. Dennis, in the next few minutes, will go through the P&L. If you look on the right-hand side of this slide, we're showing revenues for mobility dropping 15% year-on-year and 14.3% quarter-on-quarter. In the quarterly revenues, there were one-off amounts in quarter 4 last year. So if you compare quarter 4 to quarter 1 this year, it's about 10.3% drop in revenues. In the MD&A, we're making that statement clear. And if you allow for the COVID impact, there is around about 4.3% drop in revenues in terms of quarter-on-quarter.
ARPUs are dropping for 2 reasons. There's migrations to SIM-only as well as customers are spending less on roaming, less on IDD. So it has suppressed ARPUs quarter-on-quarter and year-on-year. Subs are growing, slightly growing from year-on-year as well as last quarter to this quarter, but the -- every new postpaid customer is bringing us less revenue than the current ARPU, predominantly there are SIM-only or other promotion initiatives.
So we're adding more customers, but lower revenue per customer. We also had a number of mobile customers on old pricing plans. In the last 12 months, we launched new pricing plans. So as customers are rolling over to the new pricing plans, basically, we're seeing less revenue coming from excess data charges. We used to charge before, revenue not coming from CLI, which we used to charge before. We simplified our plans. And basically, that's also driving our ARPUs there.
If you look at TV revenues. Pay TV continues to be challenged. Of course, the drop in revenue year-on-year of 33%, 34% is directly attributable to number of customers year-on-year dropping as well. And we had close to about 67,000 customers year-on-year dropping because of the migration. The good news is quarter-on-quarter, there are only 2,000 customers dropped between quarter 4 to quarter 2.
The revenues are also revised downwards because we do have new packages. And basically, we have simplified again a lot of the TV -- from having 42 options, we now have 7 or 8 bundles to choose from. So again, that is as customers are now rolling over to the new pricing plans, the ARPUs are lower.
If you look at Broadband, year-on-year, the revenue has declined. Part of that decline is because we had a lot of promotional offers together with TV. And those promotional offers over the last 12 months are eroding the revenue base. The positive news is that compared to quarter 4 2019, the revenues have slightly grown, 1.8%, and the customer base has slightly grown. We're now at 502,000 customers overall.
In the Network Solutions business, we are seeing a decline in revenues year-on-year of 16%, and part of the decline is coming from many services that we are delivering. It's coming also from voice traffic and IDD traffic, which we're not seeing anymore on the network and it's coming from erosion of data contracts as they've been renewed from the corporate sector. And again, also quarter-on-quarter, the revenue was down. Typically, there's a seasonality. Quarter 1 for Enterprise is seasonally softer than quarter 4 because in quarter 4, a lot of projects, especially for key clients and corporate clients, government clients that come to fruition. So seasonally, there is a delta between quarter 4 to quarter 1.
On the right-hand side bottom corner of that slide, you see the cybersecurity results. The cybersecurity results continue to be very positive. It's both group of companies as Ensign has D'Crypt. They're showing a healthy growth in revenue and quarter-on-quarter as well as year-on-year. And Dennis will also share with you that for the first time, after 5 operating quarters, we're seeing the first positive NPAT contribution from the Ensign business.
So with these comments, I will hand over to Dennis to talk a little bit about the overall P&L of the company and other matters, and then I'll come back. Dennis?
Thanks, Peter, and good evening to everyone, and I trust everyone is well. I'm on Slide #6. Peter has elaborated on the first 2 lines of the table, which are the total revenue and the movements in service revenue. I will move on to the third line, which is effectively the operating expenses. If you can see the operating expenses, we've actually recorded a substantial decline in the operating expenses year-on-year, and this is really in tandem with the revenues.
So we've seen declines in almost all the cost of services line, content cost, traffic costs, marketing promotion, repair and maintenance, staff costs. The only thing that we've actually baked into our Q1 results were the higher provisions for doubtful debt, in recognition of some of the aging profiles of some of our customers. Other than that, we've actually seen positive improvements in all lines of our operating expenses.
If we move on to EBITDA. We reported EBITDA of $136.2 million for the quarter, and it's translating to a service EBITDA margin of 31.1% for the quarter. Just as a reference, we guided the market to 27% to 29% when we announced our full year results.
Our net profit after tax attributable to shareholders is $40.2 million or $0.024 on an EPS basis. We generated $118.9 million free cash flow for the quarter or $0.068 on an FPS basis. At the end of Q1, we had approximately $220 million of cash and cash equivalents on our balance sheet, which led to our net debt-to-EBITDA ratio of 1.4x, which is lower than our net debt-to-EBITDA for Q4 as 1.51.
Those are the key highlights of our financial results for the quarter. I'll hand the call back to Peter.
Thank you, Dennis. We have a number of slides that provide detailed breakdowns by product category between year-on-year and quarter-on-quarter. We will happy -- we'll take questions that you may have on those specific slides. But to make sure we give you sufficient time for Q&A, I go to the second last slide of the presentation, talking about the strategy and transforming the organization going ahead.
We have shared the strategy with you for at least 18 months, our 4 pillars of strategy and great to see that, as I mentioned earlier, the 5G provisional license is all about trying to deliver better customer experience, trying to deliver new services to the customer base in the future. And we're very, very pleased that we had a winning combination, together with M1 in securing the 100 megs of 3.5 gigahertz spectrum as well as 800 megs or millimeter wave, predominantly for the Enterprise segment.
Our approach will be to encourage as many application developers as possible to work with us to basically leverage the capability of 5G because 5G, we keep saying it is not about a faster transmission technology. It is about a new way of doing business because it will involve data analytics, collection of a lot of information from many, many sensors and -- including artificial intelligence to turn that information to decision-making for customers.
Also, the reason, of course, for the strategic cooperation with M1 is to make sure we optimize the infrastructure to get the right coverage and capacity across Singapore, and do so at a much lower cost than either one of us would have done. We do expect some feedback from IMDA by the end of the second quarter this year. Until that happens, we will not be making any detailed comments about what we're investing and so on, because we need to finalize all the details with the regulator as well as select the vendors who will deliver. And typically, vendors have varying different prices for different parts of what we're looking for. So all of that will happen when IMDA announces the full provision of license -- the full license, hopefully by the end of June. The second part of the pillar, of course, is the IT transformation, which basically accelerates the capability to deliver new platforms, new interactions with customers and more than ever, for example, right near the period we're in social interacting through digital means has become even more relevant. We have seen a tremendous growth of online sales and service capability. Of course, that's been growing over the last 2 years, but of course, it has accelerated in the last few months.
So we're making an investment in terms of a relationship with PCCW. We will be gaining some benefits and some savings, but they will be redirected to invest in accelerating our capability, because again, irrespective of COVID, digitizing the organization is a big part of our strategy. And I think I mentioned at the very beginning, the other initiative relates to the acquisition of a company, the second acquisition over an 18-month period. Both acquisitions have regional capability, B2B, that is to complement what we're currently doing in Singapore, complement the product set and complement the geographical focus to allow us to diversify and grow domestically, through new products and internationally, through new opportunities and customers.
At this point in time, I will stop presenting information, and we're quite happy to take your questions. So Amelia, back to you.
Thank you, Peter. We'll now open the floor to questions. [Operator Instructions] Let's take the first question from Arthur.
I have 3 questions please. First, just to clarify on the Pay TV revenues. There seems to be a big drop quarter-on-quarter. What's driving this cut in ARPU? Second question I had is with regards to revenue trends on a monthly basis. Are you able to elaborate how January, February and March trended, and how this is extending in April? I'm just wondering if you're starting to see some semblance of stabilization or if it's still softening. And last question I had is with regard to guidance. I know that you've withdrawn the guidance for the year. But does this include the dividend commitment as well?
Arthur, thank you. If we take your questions, first of all, on Pay TV. Pay TV are 2 factors driving the revenues down. Of course, one is less customers and the second is we had a number of promotional offers to entice customers from the old cable TV to migrate to fiber IPTV. So the lower prices and the bundling with broadband, that is resulting in lower revenues and of course, the lower number of customers because we still see customers exploring nonlinear options. OTT is still relevant, free content is still relevant. But lower number of customers and the promotional impact, as the customer base moves more and more on the new pricing, is driving those costs -- those revenues down. Johan, you're online. I'm not sure if you wish to add anything else.
No. I think that's comprehensive.
The other thing, again, on TV. Recently, we announced the offering of Netflix as part of our portfolio of products and bundles. And what you don't see on TV, you're seeing the revenue, but Johan and the team is doing a great job in terms of reviewing the cost side of Pay TV, the cost of content, the cost of routers and equipment that may or may not be required, the cost of truck rolls to support customers. So there's quite a bit of work behind the scenes.
Whilst we're recognizing the revenues are dropping, we are working very diligently to take a lot of cost from the equation to make sure the margins try to improve. That's on your first question.
Your second question in terms of monthly trends. We're not providing that information, and part of withdrawing guidance relates to that. Really, we've seen January was a sort of seasonally adjusted almost normal month. We've seen the impact predominantly starting from late February and certainly from the circuit breaker, first week in March -- sorry, I beg your pardon, first week in April, we're seeing more impact. So we have the details, but we're not disclosing those details. All I can say right now is that if you look at some product lines relating to tourism, I mean, we virtually have 0 transactions at the airport. We used to sell tens of thousands of SIM cards every month and every quarter. It has dried up completely.
If you look at the inbound, outbound and roaming revenues, they've all dried up. IDD, there are some sort of use or lose deals with carriers around the world. So -- but the usage is not there. So that side of the equation, we've seen the impact almost for about 4 to 6 weeks. Those will carry through in quarter 2. And depending on whatever version of circuit breaker we may be, we don't know the full impact beyond quarter 2. But certainly, in quarter 2, we will see the full impact. But we don't provide that split to our business. But it's been very severe. I've got to say, some of the revenue lines for roaming and IDD and prepaid sales to people arriving, it's a sort of cliff face to step change phase. It is not a gradual change.
The good news there is that at some point in time, when some normality and of course, we can all debate. Our crystal ball doesn't really say it's L-shape or U-shape or W-shape. Once we see some normality returning to the market, people start to travel, people start to arrive, those revenues are recoverable. Of course, the big debate is how long it will take.
Your third question was about guidance. Again, we're withdrawing guidance completely, and the guidance we offered you last time had 4 elements. Revenues, it had EBITDA margin, it had CapEx and it had dividends. So what we will do at the end of the second quarter, when the results are known and will come back to brief the market in detail, we will offer comments at that point in time. We think it's premature. We think it's far too many balls moving around, if I can use that expression, I apologize. There's far too much uncertainty. There's some positive initiatives from government to help us with various schemes. All of those have to be factored into the overall equation to be able to give you some guidance. There are far too many moving parts right now to also give you guidance on dividends, let's say, and not the other parts of the business. So please, you'll have to wait till the end of the second quarter.
Thank you, Arthur. Let's take the next question from Sachin.
A couple of questions. Firstly, we understand that cybersecurity, you were investing in talent acquisition and R&D expenses. In this quarter, we saw a good turnaround. So has cybersecurity business turned the corner or is something -- a very project-specific business quarter-to-quarter, we may see a lot of fluctuations, some quarter losses, some quarter of profit? Is that the kind of nature of cybersecurity business you are right now in? That's question number one.
Question number two is on your Mobile. I mean I think you added 15,000 subscribers in the postpaid business. So -- which is a pretty healthy addition. So trying to understand the levers behind it. You were more aggressive in the SIM-only plans or with the MVNOs who are more -- getting more customer or is that TPG? Because TPG has started from a free to a paid model now, and they always talk about 5% market share, and they already have it in terms of free subscribers. The question is they need to put new CapEx to get more people, right? I mean, which -- I'm not sure if they are putting or not. But the whole idea is what explains the 15,000 subscriber addition in this quarter? And lastly, on your -- this is a question. Now you are investing in 5G, and if you don't have 700 megahertz spectrum due another 1 to 2 years, what can we do with the 700 megahertz spectrum? Because if 5G is going to be the focus, what is the use of 700 megahertz spectrum going forward for you? These are the questions.
Thank you, Sachin, 3 questions. Definitely, first one about cybersecurity. Cybersecurity, we can't give you any guidance. As you know, every quarter, we're going to see a profit. Definitely, cybersecurity business was on a growth trajectory with what is happening in the marketplace. Some of the growth plans, opening other offices overseas, recruiting more people, developing more R&D. It's fair to say that some of those initiatives are now being sort of reviewed and temporarily being reprioritized. So that's one part.
The other part is that also, they had a good quarter with a number of government projects that were coming to fruition at the end of March. It's closing here, I think, for some ministries and some other organizations. So again, it's a seasonal impact of some of the projects. So we're not suggesting for a minute that cybersecurity will continue to deliver bottom line. Cybersecurity is still -- we're investing for growth. And because it's a peoples business not a CapEx business, the more people you invest in to develop capability today through the R&D, you pay for that upfront. And then the client -- you secure the client.
So I would say it's -- I will not -- what we say is that there is no confidence that, that number will be delivered every month. In fact, we do expect it will be fluctuating. But the growth in revenue, we're a little bit more confident about that.
Your second question is about postpaid and the impact of competition and so on. What is happening in the postpaid markets is the following. Customers are still acquiring our products because that's how we're growing our total customer base for postpaid. But the additional customers that we're gaining are predominantly SIM-only. And the ARPUs for SIM-only customers, of course, are lower. Also, what we're seeing is that a lot of recontracting of our customer base, they're not going back to buy a bundle, a handset and a monthly plan over a 2-year period. They may buy a SIM-only for 12 months. They may renew on a SIM-only plan. So we're seeing those initiatives, which are very typical in a tough economic environment. Customers will not commit into having a higher expenditure by the latest handset, especially when the subsidies are not great these days. So customers are not willing to go that path. So they are renewing SIM-only. So we're seeing the SIM-only contribution growing in our customer base.
And before you ask what it is, we don't disclose the share of SIM-only but it is growing. And we believe in the next 1 to 2 quarters, that will continue until the new handsets come into the market towards the end of quarter 3, quarter 4, is the typical annual release of some handsets. And we also believe customers will wait till then, and others who are more budget conscious, will decide to maybe keep the existing handset and just on a month-to-month, shop around.
TPG, we -- again, we welcome them, as we said, in the market because now customers are paying for the product. They're making a judgment. And when you're paying something, you will actually decide whether you want to keep that or not. We're not aware of the total revenue impact, it's again far too soon. But we believe we see the number of customers porting from other carriers. And I can tell you, it's a healthy positive number for us, which again shows that we are acquiring customers. We're having a decent market share for subs, but the revenue per sub is not what it used to be. And we hope, as I said, customers will go back to getting a bundled proposition when they want a new handset.
Your last question was relating to a 5G investment and the 700 megahertz. At this point in time, 700 megahertz a few years ago when we bid for it, was all about providing more capacity for our network. Well, the spectrum has not been available. We're not quite clear when it will be available. Of course, there's going to be a 6-month notification from the regulator before we have to fund anything. And I think by the time, if we require and when the spectrum becomes available, of course, it will also be repurposed for 5G. It is natural. We expect quite a lot of the existing spectrum over the next 2, 3 years will be repurposed for 5G. So at this point in time, the investment has not been made yet and the spectrum 700 is not available. But if and when it comes, it will be for capacity, and will help with also 5G traffic loads as well.
Just a follow-up -- sorry, as a follow-up, have you seen any country using 700 megahertz for 5G so far?
To the best of my knowledge, I don't recall, and I'll have to go back on my CTO. I don't think the ecosystem is there yet for 700. And for us, as I said, it's not available yet. It's still -- our neighbors are still -- haven't released the spectrum from free-to-air and other activities they're using it. But look, I'll have to get back to you with some details, but from my memory, I don't believe I have seen the ecosystem for 700 maturing yet.
Thank you, Sachin. Let's take the next question from Rama.
A couple of questions from me, please. Firstly, with regards to the 5G cost savings of $210 million or so. Could you talk about how you expect to achieve it or is this cost avoidance or how we should we be thinking about these cost savings?
The second one, again, is with regards to the broader cost trends as well as the broadband. On the broadband side, could you talk about why the ARPU is down while the customers are up for this quarter? And on the cost side, to what extent is the cost base fixed versus variable, given that there's not much disclosure on the various line items there?
And the final one is really regarding the guidance again. I would like to understand you've withdrawn the guidance, but if you could talk through a little bit in terms of the intention behind the withdrawal because the free cash flow still looks okay, EBITDA looks okay versus your guidance. So the EBITDA margin looks okay. So is this withdrawal because of not knowing how the next few quarters would pan out or is it something that you are seeing at this point that makes you cautious and to withdraw the dividend guidance in particular?
Rama, thank you for your very carefully worded questions. We appreciate that. Let me, first of all, I need to rest my voice for a few seconds. I will ask Dennis to help us with your first question about the cost savings. I think, Dennis, let's again, remind the whole approach behind the $210 million, whether it's a bottom line or part of it will be funding future growth. So Dennis, over to you.
Okay. So Rama, as a recap. When we announced our $210 million 3-year transformation program, this involved almost every line of discretionary and controllable expenses that we could actually identify within our P&L. So if -- whether it is on repair and maintenance, whether it's on staff costs, and whether it's on marketing and promotion, content costs and so forth, we announced that if you recall in October of 2019, we're now about slightly past the halfway mark in the 3-year transformation program. And we also provided an update on the extent to which we have achieved this cost savings, when we announced our full year results in February, which was about 64%. And so we are -- and actually, this COVID situation has also caused us to look at and incentivize us rather to look at other areas that we can actually look at transforming the business, primarily around digital transformation of our business model and so forth.
So we are in the process of identifying our next chapter of our next phase of our cost transformation program. We will advise the market at this point in time. But effectively, that's how we've crafted the cost transformation program, and that's how we've advised the market up to this point.
Okay. Rama, Johan speaking on your question number two, related to the home broadband revenue. As you may remember, in the last call, we explained the migration path from cable to fiber which we did on the back of intensive promotions to make sure that the customers would stay with us. That's the reason why year-on-year, you actually see a decline in revenue. That's on the back of these promotional activities. If you look at Q1 compared to Q4, you can actually see that the revenue is coming up on a slightly higher base and ARPU actually is gradually improving. As we go forward through the rest of the year, a large part of these customers who have been enjoying specific promotional benefits will run out of these promotional benefits, and that will be value accretive. I hope that's answering your question.
And Rama, I'll take the third question about guidance and I think it's important. Thank you for the observation because we have a similar observation. A lot of the fundamentals of the business are very sound. Our customer base is there, some revenues are stabilizing. Our margins are there. We have liquidity in place. A lot of the fundamentals are in place. However, I think it's more of -- we -- I don't know what you think about us for the last couple of years, liaising with the analysts. But we don't like to offer guidance or to make statements that we can't deliver. So maybe we're taking a degree of being a bit more cautious because there are a lot of uncertainties in the marketplace. So it is not that we are sort of feeling some very fundamental issues underlying in business. If that was the case, we have an obligation to be very transparent.
So it is not that. It is the uncertainty and the combination of some benefits coming through various government schemes, some customers behaving in certain ways. So we need time to really understand the movement in our business before we stand up and offer you, with confidence, a new guidance. So that is the fundamental reason. We do believe that the fundamentals of our business are sound. In very short period of time, we secured refinancing. And I think some of us have been long around through various other economic, global economic cycles, how quickly we did it in a way could be interpreted. It reflects the fundamentals of the business. So it is not that we're worried about the fundamentals of the business. What we're not clear on, we don't have an algorithm, we don't have a crystal ball that we know the inputs and we can make some assumptions. A lot of things are moving.
So I think overall, we are confident about the fundamentals. We think it's better to be more conservative and cautious right now rather than make statements that we might have to change in a few months. We do believe quarter 2 will be fundamental because we would have seen about 4 months of full impact of all the different issues that are impacting the market, the customers' usage and so on. We would have seen whether customers have the ability to stay in business or not stay in business. That would have -- 80% of that would become more obvious in the next 3 months and we'd rather wait to see that before we confirm our guidance. But it is not a fear that some of the fundamentals may not be there. And you picked up all the right fundamentals. So I don't have anything more to say, and I don't know if, Dennis, you want to offer any more comments on the back of the question from Rama.
No, I think you've adequately covered it, Peter.
Peter, if I could just follow up on the guidance question. So what about CapEx? Is that guidance also withdrawn? And what is the ability you have in terms of the CapEx plans this year? Are they success based already or are they firm commitments?
Look, to be honest with you, we've taken the same approach, that disciplined approach to running a balance sheet as well as our cash flow into CapEx as well. We are renegotiating everything with every supplier, including existing contracts to either as benefit in terms of some discounts or to defer some payments. So at this point in time, the big impact on CapEx will be the 5G. But again, that will be a commitment. We do not believe there will be anything to be paid this financial year. The rest of the CapEx, again we're scrutinizing. We are fortunate that in some parts of our network, one of the government schemes allows us to be funded to try and improve our network in some areas. And that support has been given to all the operators. So again, it's more the new CapEx. But if revenues -- we expect the revenues to go up 1% to 3%. If revenues don't and the absolute amount of CapEx stays steady because of previous commitments, that ratio will change. We do not believe that the final ratio as we see it today will be -- will give you any cause for concern. Again, we'll offer you that guidance in quarter 2.
Thank you, Rama. Let's take the next question from Annabeth.
I have a few quick questions. One of them is on the impact of the recent service disruptions. I understand that the investigations by the IMDA are still ongoing, and I was wondering whether you could talk about the potential impact of any penalties or anything you expect on the regulatory front. As for 5G, wondering if you give a little more color on what you expect from the retail team because I understand that the JV will be doing the back-end stuff, but the retail will be individually through both StarHub, M1 and of course, the wholesaling potentially other players as well. And as for the third question, this is a little bit of housekeeping only. And I wanted to check when we talk about the profit in the cybersecurity unit, whether this is -- can I confirm that this is the first time that it has returned a quarterly profit.
Annabeth, and thank you for your questions. And of course, we wish everybody, health and safety, which is the #1 priority for all of us in these very difficult times.
Your first question related to the service disruption. We have submitted a very detailed report -- 2 reports to be, in fact, a preliminary and a very detailed report, to IMDA, and they will undertake their own investigations. And we expect to hear from them when and how, we're not privy to that. So there is a process that they follow. But from our point of view, everything that was requested, we made available to them. We have said previously that we do know the robustness, the resilience and the capacity of our network. And none of those were of question at any point in time because the peak loading on the network was and still is -- it is so low that sometimes, if you look at the CapEx utilization, sorry to jump to that, but if it's inefficient, we have a lot of CapEx because of quality of service requirements. So we'll wait to hear from IMDA. And of course, we will accept whatever decision they make. Potentially, there could be a financial fine against us.
There's a limit to that amount. But again, it's too early to jump to that conclusion. We know the reason for it. We've said that before. It was a change management process inside our own company. And we apologize because we disrupted tens of thousands of customers. There's no question about that. And there was an overall 6-hour disruption. And as you're very much aware, we offered the 20% rebate. So from that point of view, our network has been very stable. And if we didn't make that change management initiative on our own, we would not be seeing that congestion in the network. We have apologized and we have learned from it and we've got a very, very strict approach to everything we're doing in the network right now, until COVID and beyond period expires.
Your second question about 5G. Definitely, the factory, if I can use that word, is served, but the brand, the experience, the propositions will be delivered separately. So it will be service-based competition and infrastructure sharing. It's probably one of the best models for competition around the world because you don't waste all your money building, replicating infrastructure, you really compete and provide and fund a lot of service-based innovation. I think what you expect to see at the retail side, there are already trends coming around the world about what they call mixed reality or augmented reality or virtual reality, the consumer market is responding well to that. And 5G allows that to happen. Gaming is another big application potentially on cloud gaming on 5G and a whole host of use cases for B2B.
But the consumer side will grow quicker simply because when 5G is available and a customer is in the market to renew a contract to buy a new handset, they will always buy the latest available, which will be more 5G. And of course, it will work on both 5G and 4G, you'll switch. So you will see quite a few offerings on the retail side, separate buying one, separate by us, trying to appeal to customers the value of the brand and a whole range of consumer applications that go with it, and there'll be creative pricing, there'll be bundling, there'll be a lot of excitement, we believe, because there's no use, again, having a new network, and you don't do anything with it. But the take up rate, we believe, will be faster in consumer in the short-term than the enterprise. The enterprise side has to do a lot of systems integration and change process to accommodate the new business model coming from 5G capability.
Your last question about profit. Yes, it's the first time we're reporting a profit for our cybersecurity business since we announced the merged entity, the creation of Ensign.
I just wanted to clarify my second question on the 5G retail side. I was hoping you could share more about what you expect in terms of competition, not just from the other license holders but on the wholesale front as well, what kind of interest, tick up? And of course, the competition, how will that flow back into your revenues?
Good point, yes, sorry, I didn't cover wholesale. Again, wholesale, we have an obligation. Everybody who holds a license as an operator has an obligation to offer wholesale. At this point in time, wholesale will be offered on commercial basis. And again, we will see the fine print when finally the license is issued. And we welcome wholesale. I mean, for us, wholesale is a good part of the business. So we will welcome wholesale arrangements based on commercial negotiations and also those commercial negotiations had to take into account that we will be investing a significant amount of money upfront to create this network. So the commercial model has to take into account the massive upfront cost. It can be some operator doesn't pay anything for a fixed cost and from day one, they might get a variable cost. So all these details will be negotiated, and we're up into wholesale arrangements with other operators. And when that time is right, you will see the wholesale market over time evolving the same way it has evolved for 3G and 4G.
I see. So you were expected to be similar to what you have with your 4G MVNOs right now?
Not -- we're not -- we don't know. We don't know because the commercial arrangements will be different to 4G. 4G has been around for a long time. There are a lot of sunk costs. So should the interested parties want a wholesale arrangement, we will see then. There's no commercial arrangements in place right now. Once we know the total investment to establish 5G, we will be able to develop a commercial proposition. And if MVNOs or anybody else is interested, we will have that commercial negotiation discussion. We believe it's far too early to have a discussion on 5G, keeping also in mind that 5G is not able to start next quarter. It's a proposition that will be delivered over many, many months to come. And I think we have the time available to negotiate a decent commercial agreement for us who are going to be making hundreds of millions of dollars investment and for an MVNO or another operator who has invested 0. So again, that requires careful negotiation over time.
Thanks Annabeth. Let's have the next question from Ranjan.
I have one major question. With the second wave ensuing up or closures of many shops and malls, and then a change in consumer behavior to adopting online channels. After we are through these challenging times, do you see the need to open many of these offline channels? Or can now these be permanently shut in order for permanent deficiencies for the business, because the consumers would have familiarized themselves with the online channel, which I guess is more profitable for the telecom operators.
Thank you. Let me say upfront that I don't believe from everything I'm seeing in the market, listening to professional commentators, economists, listening to other companies around the world. I think all of us can be certain about one thing, the other end of COVID, the operating models will change. They cannot be the same because the world has changed and distributed contribution to a business versus centralized contribution, distributed workforce, customers becoming more familiar not just for sales, but for service, which has been provided online right now. So a lot of behaviors are changing for our employees as well as for the customers.
So to answer your question, definitely, this is not something we will ignore. If you follow our industry and if you look at some of the new entrants, a lot of the new entrants are digital-only operators. There's no humans involved in customer service. There's no humans involved in selling and promoting a product, everything is done through social media promotions, through digital marketing, digital advertising. So there will be a lot of interest, and we're planning to maintain and grow this online capability. It is what customers find more convenient, someone who wants to buy something at 10:00 at night, they can. They can choose to pick it up from a retail store, through shopping click and collect or they can have it delivered to the premises. So the online world does provide flexibility to us and the customers.
We're not suggesting for a minute, I think companies will go 100% digital and online and forget about face-to-face, no. It's about successfully integrating the physical world and integrating the online digital world and getting the right balance and for some customers, that balance may be 80-20, for other customers, someone who just finished high school university, 100% digital for what they want is what works for them. So we have to have these capabilities. But more and more, I think you will see companies like us shifting to digital online capability for sales and service rather than retaining what we've currently been doing.
And by the way, it's got nothing to do with COVID. That's been part of our strategy for a long time. We're seeing that customers are not really buying enough from retail stores. They find convenience in digital online capability. So we've been working on developing this and this is part of the digital transformation of StarHub for quite a bit of time. What COVID is doing is accelerating that process and making customers becoming more aware of the benefits of online versus queuing up in a shop, finding a shop and so on and so forth. But as a company, we're going to have a hybrid model, and it's about getting the balance right, but it's shifting more and more to online. Thank you, Ranjan.
Can I just have a quick follow-up, please?
Yes, please.
Yes. So if you foresee a higher adoption of online channel by StarHub, and I guess, if you foresee that hybrid model, judging by some of the digital players in these markets, I would assume that your overall headcount should reduce. In the current environment, are there any concerns that you will not be able to pursue the right size of the company with a hybrid model, which might be a hinder -- which might be an obstacle to your plans?
Look, to be honest with you, I think every company has got an obligation to look at efficiencies, to look at digitization, to look at the changing behavior of customers and adjust their business model. I don't believe in the last 2 years that at least I can recall that I've been here, we stuck to a business model. We are transforming our business model. And that is also impacting on new people who are recruiting new skill sets. And if we have areas where we have surplus employees, every company has to deal with that.
So we don't believe this is different to business as usual. We size up the business, we look at the impact of technology, we look at the impact of outsourcing. We look at those critical skill sets we need inside the company. And the way companies are run today, it's the ecosystem of a partnership with external providers as well as our own capability. So basically, that will always go on. And if in some parts of the business, customers don't want to buy from shops, hypothetical example, and we've got too many people, too many shops, well, no company can ignore that. And we have to make adjustments.
So all of that will take place. It's an ongoing evolution of the business model and we will deal with any issues that come up, whether it's people, whether it's technology we invest in which is no longer relevant we may have to write it off, and so on and so forth. So yes, the business model will keep evolving. And in our industry, if you follow our industry globally, it's gone very much digital way, including the enterprise segment through software. SD-WAN, for example, the companies internationally take calls. It started as a traditional B2B telco, it's now all gone digital. So -- and yes, you have to adjust other parts of your business when you invest more in one part of the business, which is growing. So digital side is growing. People involved in helping us develop digital capability we need more of. And some other skill sets will be traded off for those skill sets that you need. And of course, every business going back to people has churn. And the churn, if we manage the churn properly, then you avoid those sort of any sort of step changes to workforce and other parts of the business. So I hope that gives you a little bit of feedback.
How are we going for timing? Amelia, we've got maybe 2 or 3 questions left?
Yes, we'll just take the next -- 2 more to go. Next up we have Prem from Macquarie.
Just one from me. I mean, I appreciate that you've been -- you've controlled your costs. You can't provide any guidance. But I do -- I suppose last year, we were looking at opportunities to hire companies or skill sets to grow the business into the future. Do you see this current pandemic and the havoc that it's causing around the world, has it brought up any interesting acquisitions potentially that you may pursue given your balance sheet capabilities, et cetera, that you are pursuing now and maybe pricing is a little lower? Would you do anything in the next 6 to 12 months? Do you see anything exciting that's cropped up?
Thank you, Prem. I think there's a saying, "In business, never waste a good crisis". That does apply squarely to M&A. And I think there's a lot of correspondence. I was recently on a call with a consulting firm and they were sharing lessons from the past. And one of the comments they made is acquiring companies during difficult times, they tend to create more shareholder value. So the point is that part of maybe disciplined and a little bit of a cautious, conservative approach to maximizing cash is part of the reason for that aims to exploring any new M&A opportunities. Definitely, we're on the lookout. I can't give you if it's 6 months, 6 weeks -- definitely not 6 weeks, or 2 years. But we definitely, as we've shown in the last 18 months, we have the appetite. The balance sheet is solid. And for the right acquisitions that not only generate a critical returns today, but they have a path to grow, we do have an appetite. So yes, but we need to have the cash to be able -- and that's why we're a bit more conservative and building a nice little cash box to be able to take advantage of the right M&A.
It's -- on the other side, I wish every business out there -- we know how difficult it is for us let alone everybody else. So we wish a lot of businesses to find the liquidity and to get on with business and the world to come back to some normality. That's our first wish. But should there be interesting companies and should we be able to assist them through an acquisition, through a merger, I guess we're on the lookout for that, and we have the appetite to do that.
Sorry, just one follow-up. Any particular areas that you feel that you need to beef up more following the experience in the last 4 months?
Look, I think if you look at the last couple of acquisitions, they're all in the B2B space, in the enterprise space, in adjacent market segments to core connectivity. So that certainly does appeal to us because as companies and organizations, government organizations, private organizations digitize, the opportunity is more in B2B for systems integration, for digital services and so on. So we're certainly interested in that because we believe there is growth, right?
On the other hand, we operate here in Singapore. There are a lot of debates how big the market is, whether the market will consolidate and so on. So if there are interesting opportunities for mergers, acquisitions, consolidations in the local market, definitely, we're looking at that. So -- but we're looking more at growth and diversification of market segments we're in. That's got more appeal than maybe some consolidation. We think consolidation will happen eventually, but it's more in the enterprise because it has growth potential. The consumer market, whether it's Singapore or some other markets around the world, it's a very tough market right now. So buying into a consumer business in a different geography with the same sort of level of competition, same price points may not be the wisest thing. But as I said, our focus is more on business enterprise side.
Okay. Thank you for that. Next question, please, Amelia.
We will take the last question now from Foong.
And just for the others who we may not be able to answer their questions, we welcome, if you send us an e-mail and we'll follow up with you outside the call.
Basically, 3 questions from me. Firstly, on TPG's new offer, granted that they are now charging for the service from free before, but the pricing is still pretty aggressive, right, at $10 for 50 gigabytes of data. And as the TPG network narrows the gap to the incumbents over the next 18, 24 months, are you concerned that we could see significant ARPU pressures towards the $10 ARPU level or do you think it's not a sustainable pricing model or do you have a different way to think about this altogether?
Second question on MyRepublic which is an MVNO on your network, I've noticed that they have also recently bought wholesale capacity from M1 for one of its new lower-end plan. I'm wondering if you see wholesale competition brewing here.
And third question, maybe just briefly, if you can comment on cybersecurity. The growth was very strong in the first quarter. But noted on your comments about seasonality for the quarter, but do you think the growth momentum will remain strong for the rest of the year or could this segment also potentially be affected by COVID-19? Yes, those are my 3 questions.
Thank you very much. Okay. I'm taking the last question first. We still see cybersecurity growing because the cybersecurity portfolio, it is not just Singapore-based. It involves a number of other countries where Ensign has capability right now. Also in the Ensign Group, we have D'Crypt, and they also have some -- the pipeline is very healthy. So we are expecting some continuous growth. I can't comment if it's going to be 130% or 80%, but we expect growth from the Ensign Group over the next few quarters, definitely in terms of revenue.
Your second question about MyRepublic and wholesale capacity, there's always competition in wholesale, and we always welcome competition. But again, there's no rules that one company should be only having one supplier. However, as the same way MVNOs have choices, we also have choices in terms of -- if you have an MVNO, which is more exclusive to your brand, that relationship is more valuable in the future than someone who basically is buying commodities and wants the cheapest taxes. So I think you're going to see the wholesale market evolving as I mentioned earlier to a previous question, and we always welcome competition. We don't believe -- wholesale has been competitive and will continue to be competitive. And the MVNOs will change partners over time. It's natural, and we will continue to provide wholesale capacity. And by the way, yes, MyRepublic is still one of our wholesale customers, and we value their relationship. But there are others who are approaching us, and we have 2 other MVNOs. Actually 3. We have 4 different brands on our network today. So wholesale arrangements are alive and well and will stay alive and well in the future.
Your first question about TPG's offer of $10 and 50 gigabytes and so on. Definitely, that could be an introductory offer. I remember when StarHub came to the market 20 years ago, we also had some silly offers at the time to make sure we attract some customers. I think the fundamentals rule apply. Today, I don't think you're going to see all the other telcos adjusting their prices to be $10 because the $10 offer comes with the right experience for network, for capacity, for coverage, for support and so on. So if customers only value a commodity product, of course, nobody's is going to pay a premium. So I think the customer base will adjust. You see us offering very different packages over a long period. And also, don't forget, we also have a digital operator with a very different cost structure, being able to match those type of offers because the cost structure is very low.
So you will see brands coming in. You will see silly offers being promoted. Is that a sustainable business for a company that invests hundreds of millions of dollars to have a network day 1, and then to have that network to be able to support customers everywhere and carry the traffic, video and voice. Can you do that on the back of $10 a customer? We'd like to think you cannot or you will find a niche. But very quickly, when you come to your capital refresh, your technology refresh, you will find out that $10 after you pay for overheads and so on, it does not cut through long term. So whether it's introductory pricing or not, we do not know. But what we do know is we have a business model that we can compete with those offers. If customers really want that product only, no frills, very basic, we have the capability to have this offer in the market.
But at the same time, we have the capability to offer a full-service bundle, TV, broadband, mobility, the right customer service. We have the ability to change your handset every year through the plan that we've offered through the Jump Phone and so on. So we offer a different proposition, but we're not ignoring a market segment that wants a very simple, very price conscious segment. We will have a product from the StarHub family, including our MVNOs that basically focuses on that segment. So again, that segment will be competitive. And nobody can afford in Singapore to ignore any price point, any market segment right now because there's no growth overall in the market. So if you ignore a segment, you do that at your own peril.
So you have to focus, but you can't have a high cost model focusing on our consumer who wants to spend a small amount of money which -- you have to have a different business model for that. So you will see us competing with them. And there's going to be pressure on ARPUs, definitely if silly offers like that come to the market and stay in the market for a long time and customers think there is value, all of us will adjust the business model to be relevant. And I think if you look at StarHub, we fight for our market share. So the -- we don't set the price in the market, but we fight to make sure the price is right, and we will retain the right customers.
And then when irrational pricing falls apart eventually, we've seen it in so many markets, then if you have the right market share, you will be able to repair your margins and your revenue flows at the right point in time. If you have a very low price, market segments are full of examples of companies that have gone in price only. And how successful they have been, history will judge them. I hope I've given you enough feedback on this point.
Thanks, Foong, and thanks, Peter.
Thank you, everybody, for your interest. If we didn't get to your questions, we'll follow up with you after this call.
We've now come to the end of our update call. Thanks for joining us this evening. As always, please feel free to reach out to us if you have further questions. And until our next call, please stay safe and have a lovely evening. Bye.
Thank you.