This article, written by Jennifer Tan (left, Director, Research & Products, Equities & Fixed Income, at the Singapore Exchange), originally was published on SGX My Gateway kopi-C. The article is republished here with permission.
When she's not managing operations, assessing risk, or evaluating strategy and deals, Singtel Group Chief Corporate Officer Jeann Low finds strength in solitude.
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Catalyst for Growth
With more than 130 years of operating experience, Singtel is Singapore's largest listed company with a market capitalisation of over S$68 billion. Listed on Singapore Exchange in November 1993, it is a component stock of the benchmark Straits Times Index (STI) with a 13.2% weighting. Singtel is also the third-best performing constituent of the STI, generating a total return of 17.2% in the year-to-date.
Looking back on her 18 years with Singtel, Low finds great satisfaction in the Group's track record and pan-regional presence. "If you look at Singtel today, it's recognised as a leading regional telco, with an enviable footprint. The operations of Optus, our regional mobile associates, and Singapore are all profitable," she said.
During 1QFY2017, the Group launched its 24/7 channel for English Premier League and sports app in Australia.
Photo: Company
The Group derives more than 70% of its net profit from overseas operations, which span India, Africa, Thailand, Philippines, Indonesia and Australia.
"When I see Singtel delivering positive returns, managing its overseas relationships well, scoring on customer satisfaction metrics, being appreciated for its financial discipline and prudent capital management, I feel proud for the company," Low added.
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Singapore Telecommunications |
Two decades ago, Singtel's decision to venture abroad for growth was a catalyst in the Group's development.
"At that time, the board made the decision to grow our business by going overseas, as the Singapore market was very small," Low recalled.
"In those early days, Singtel took stakes in European telcos as they were first in the industry to liberalise. But later, we decided to focus on Asia, because we are based in the region, and we do know and understand Asia better."
Strategic investments were subsequently made in the Asian countries. "Singtel's leadership had the foresight, and was able to act fairly quickly when opportunities arose. I believe we have executed well over the years - Optus was burning close to A$1 billion of cash when we acquired it, but we helped to turn it around with the management team in place. That's where disciplined execution comes in," Low said.
And Singtel has invested in the right places, she added. "Our mobile associates are in emerging markets, where the majority of the population access the Internet and social media through mobile devices. Fixed-line infrastructure is underdeveloped, so there are opportunities for mobile growth."
Singtel holds 32.9% of India's Bharti Airtel, 35% of Indonesia's PT Telkomsel, 23.3% of Thailand's Advanced Info Service, and 47.2% of Globe Telecom in the Philippines. All the wireless operators are leaders in their respective markets except for Globe, which is the number two operator. The regional mobile associates currently account for nearly half the Group's net profit.
| ♦ Expanding Footprint | ||||||||||||||
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Looking ahead, Singtel will focus on a few priorities in the area of mergers and acquisitions, Low said. One of them may involve supporting in-country consolidation. In May, both Philippine Long Distance Telephone Co and Globe agreed to acquire SMC's telecoms assets in a 50:50 deal valued at about 70 billion pesos (S$2.0 billion), which provides access to the critical 700 megahertz spectrum that would boost mobile Internet service quality in the Philippines.
As for other possibilities in the region, the Group will focus on areas where it can play a strategic role and create value for shareholders. That also means not overpaying for potential investments. |
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Morph and Evolve
In the digital arena, Singtel has transformed itself into a communications powerhouse with the ability to successfully navigate a data-centric world.
Its three-pronged focus on digital marketing through its Amobee unit, over-the-top (OTT) video entertainment through its HOOQ mobile streaming service, as well as data analytics via its DataSpark unit, is complementary to its core and infocomms technology (ICT) businesses.
"We look at our competitive strengths and resources, and will leverage these to build global platforms and capabilities to deliver services that can cut across different markets," Low said.
"At the same time, we need to continue growing our core businesses, and have the financial capacity to absorb startup losses in the initial stages, as these investments take time to scale and be profitable."
Cybersecurity is another case in point. Last April, Singtel bought 98% of US-based managed security services provider Trustwave, a move which boosted its portfolio of cloud-based services and enhanced its position within the managed services market.
"Cybersecurity is on everyone's mind these days, and Trustwave totally complements our core business. This deal has given us a credible business in the US, security operation centres around the world, and more than 1,000 cyber professionals. This is a good platform from which to grow our cybersecurity offerings," Low noted.
Meanwhile, trends in the infocomms industry are constantly evolving, and Singtel must morph in tandem with changes or be left behind.
"Our biggest challenges are technology disruptions and shifts in customer behaviour," said Low.
"There are companies emerging in Silicon Valley that pursue totally different business models, where profitability may not be their immediate or near-term metric. For us, our shareholders hold us accountable for earnings growth. So it can be quite an uneven playing field, and we need to balance short-term pains with long-term returns."
As telecommunications is a highly regulated business, the regulatory environment is another challenge, Low admitted. "The regulatory agencies and rules must keep abreast of changes in the industry to ensure sustainable investment and a level playing field for everyone."
| ♦ Born to Compete | |
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Meanwhile, competition in the domestic market is heating up, with Singapore's Infocomm Development Authority planning to auction additional mobile spectrum for use by a fourth carrier this year.
Singapore has a population of more than 5.5 million, and its mobile penetration rate stands at about 149%, which means many carry more than one mobile device. |
| Year ended 31 March (S$ m) |
FY2016 | FY2015 | FY2014 | FY2013 |
| Group Revenue | 16,961 | 17,223 | 16,848 | 18,183 |
| EBITDA & Share of Associates' Pre-tax Earnings | 7,804 | 7,670 | 7,357 | 7,306 |
| Underlying Net Profit^ | 3,805 | 3,779 | 3,610 | 3,611 |
| Net Profit | 3,871 | 3,782 | 3,652 | 3,508 |
| Quarter ended 30 June (S$ m) |
1QFY2017 | 1QFY2016 | YoY Change |
| Group Revenue | 3,908 | 4,209 | -7.1% |
| EBITDA & Share of Associates' Pre-tax Earnings | 2,003 | 1,907 | 5.1% |
| Underlying Net Profit^ | 954 | 895 | 6.6% |
| Net Profit | 944 | 942 | 0.3% |
^defined as net profit before exceptional items
Source: Company data
| Outlook | ||
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1. Group
2. Core Business
3. Group Digital Life
#Includes impact of decline in mobile termination rates in Australia *Includes a full-year contribution from Trustwave ^Excludes associates' dividends |
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Singapore Telecommunications Ltd
Singtel is Asia's leading communications and ICT solutions group, providing a portfolio of services from next-generation communication to technology services to infotainment for both consumers and businesses. For consumers, Singtel delivers a complete and integrated suite of services, including mobile, broadband and TV. For businesses, Singtel offers a complementary array of workforce mobility solutions, data hosting, cloud, network infrastructure, analytics and cyber-security capabilities. The Group has presence in Asia, Australia and Africa and reaches over 600 million mobile customers in 25 countries. Its infrastructure and technology services for businesses spans 21 countries, with more than 200 direct points of presence in 160 cities.
The company website is: www.singtel.com
For its first quarter financial results for the period ended 30 June 2016, click here.