NetLink NBN Trust: Threads Through Digital Singapore

This article by Jennifer Tan (left, Director, Research & Products, Equities & Fixed Income, at the Singapore Exchange) was published in SGX's kopi-C: the Company brew series on 28 September 2018. The article is republished with permission.

TongYewHeng Tong Yew Heng, CEO of Netlink NBN Trust.
Photo: Company For book buff Tong Yew Heng, reading is the gateway to learning.

In his downtime - whether it be on the road or just before bed, the Chief Executive Officer of SGX-listed NetLink NBN Trust devours e-books and audiobooks on subjects ranging from philosophy and medicine to technology and leadership.

On rare occasions, he can be found with his nose in a Tom Clancy or Dan Brown thriller.

"I have a passion for reading, but I try not to read fiction too often - once you get started, you can't put it down, and I have to work!" Tong grinned.

"Books are so accessible these days - I just borrow e-books or audiobooks through the National Library Board app, download them on my phone, and I can read or listen to them on the go," he added.

And his current reading list? "The Black Swan" by Nassim Nicholas Taleb and "The Brain's Way of Healing" by Norman Doidge.

"Reading helps me pick up new ideas for self-improvement and business," he said. "You can also learn something useful to share with your friends and colleagues."

It is this relentless pursuit of personal development that defines Tong, who has accumulated more than two decades of senior management experience in various industries, including power, infrastructure and infocomm technology.

Prior to joining NetLink Trust as CEO in January 2016, he was the Executive Vice President, Corporate & Market Development, for Singapore Technologies Electronics. Before that, Tong was the CEO of CitySpring Infrastructure Trust, now known as Keppel Infrastructure Trust.

The Bachelor of Engineering with Honours graduate from the UK's University of Strathclyde also holds a Master of Business Administration degree from Nanyang Technological University, and is a member of the Institute of Singapore Chartered Accountants.

Listed on SGX Mainboard last July, NetLink NBN Trust has a market capitalisation of over S$3 billion. It is a constituent of the FTSE ST Large & Mid Cap Index and the MSCI Singapore Small Cap Index.

The Trust designs, builds, owns and operates the passive fibre network infrastructure (comprising ducts, manholes, fibre cables and central offices) of Singapore's Next Generation Nationwide Broadband Network (Next Gen NBN). The Next Gen NBN provides nationwide, ultra-high speed Internet access to residential homes and non-residential premises, both in mainland Singapore and its connected islands.

Little Red Dot

"NetLink plays a very important role in putting Singapore on the global map - we've been ranked highly in various global studies on broadband connection speeds, and this is something we can all be proud of," Tong pointed out.

According to US-based Ookla's Net Index, Singapore surpassed 132 other countries in July 2017 to clock the fastest average broadband surfing speed on computers. In a separate report by UK-based Internet consultancy firm Cable.co.uk, the city-state also topped a ranking of 189 countries for average surfing speeds, based on data collected across 12 months up to May last year.

"Today, Singapore has one of the highest wired broadband penetration rates in the world, and more than 85% of these wired broadband connections are delivered via our fibre network," he added.

The Trust's network is the only fibre network with nationwide residential coverage in Singapore. Of the 1.5 million households in Singapore, 1.2 million are users of its network, which translates to a household penetration of 80%. This business segment contributes the bulk of Group revenue, accounting for nearly 60% share.

"Over the next three to five years, the 300,000 households - which are not using broadband or still on older technologies like broadband on cable or copper wires - will start moving to fibre-based broadband," Tong said.

NetLink also continues to expand its penetration in new housing estates, such as Sengkang, Punggol and Tengah. "Another growth factor is new households - whether HDB or private - which can come up to 20,000 to 25,000 additions per year," he noted.

According to independent industry consultant Media Partners Asia, residential fibre subscriptions are projected to increase at a compounded annual growth rate (CAGR) of 6.5% to 1.46 million by 2021, from 1.07 million in 2016.

For the non-residential market, the Trust has 45,000 connections out of a total of 128,000, representing a 35% share. These include commercial users like offices, shopping malls, government departments, hospitals and schools, and account for about 8.5% of Group revenue. It is also an independent network provider for retail service providers who do not have their own established infrastructure.

Media Partners Asia estimates that NetLink's non-residential fibre subscriptions could expand at a CAGR of 9.9% to 58,680 by 2021, from 36,640 in 2016.

The third business segment is non-building address points (NBAPs), which are locations in Singapore that do not have a physical address or an assigned postal code, such as bus stops, multi-storey car parks and traffic lights. Applications include infrastructure for telecoms operators, cameras, sensors, signs and outdoor kiosks. Currently, the Trust has more than 1,100 NBAP connections.

These NBAP connections are forecast to expand by a CAGR of 86.2% to 6,128 by 2021, from 274 in 2016, data from Media Partners Asia showed.

NetLink non resi

"The question is how to make Netlink's role more meaningful, and make solid contributions to Singapore's Smart Nation efforts."

- Tong Yew Heng
CEO
NetLink NBN Trust

Remaining Resilient

"We have a very resilient business model, with transparent and regulated revenue streams, including long-term customer contracts, as well as recurring and predictable cashflows," Tong noted.

"Pricing terms are regulated by the IMDA, while our primary customers are established players in the Singapore telecoms market," he added, referring to the Infocomm Media Development Authority, a statutory board that regulates the domestic telecoms industry and promotes adoption of infocomm technologies in the city-state.

NetLink's network also offers natural barriers to entry. "We've invested a significant amount in the design and construction of our network - in the last financial year, we put in more than S$100 million, and for our next FY, we've projected capex of another S$87 million," he said.

"The durability and longevity of the Trust's fibre cables means our existing network will continue to operate for many years without the need for material upgrades or replacements."

Beyond the next five years, NetLink will ride on the expansion of connected services driven by the government's Smart Nation initiatives, the proliferation of the Internet of Things (IoT), and adoption of 5G mobile technology, Tong said.

"The Smart Nation initiatives encourage different government agencies to deploy solutions to improve our quality of life, so that means more connections, which would support demand for our network," Tong said, pointing to potential deployment of intelligent cameras and smart street lighting to meet security and energy-saving goals.

Recently announced government Masterplans such as the Punggol Digital District and the Jurong Innovation District will also require greater connectivity and boost data usage.

"We're in a business that will continue to see a lot of growth - there're so many opportunities in Singapore, and still a lot more to be done here, so the domestic market will remain our focus for the foreseeable future," he added.

NetLink nbap

Evolving Dynamics

Despite the industry's relatively robust growth prospects, concern over changing dynamics occasionally keeps Tong up till the wee hours.

"Apart from the usual issues about improving our service delivery times, boosting operational efficiency and minimising disruptions, I spend a lot of time thinking about our role today versus how that will change in the future," he said.

"The question is how to make Netlink's role more meaningful, and make solid contributions to Singapore's Smart Nation efforts."

Industry competition, in particular, is always at the back of his mind. "We're not a monopoly in terms of providing fibres, and any telco with the requisite licence can develop its own network," he added.

"It boils down to a buy-versus-build decision - the telcos need to assess what is more cost-effective for them, and we need to convince them that it is better to buy from us than to lay their own fibre."

In particular, NetLink's network offers end-users a cost advantage. "We're regulated by a pricing framework such that higher usage rates translate into lower costs for consumers. So while we cannot wish away the competition, we can work hard to drive up our utilisation rates, which will directly benefit end-users," Tong added.

Outside the office, the 55-year-old focuses on family, spending time with his wife and children - three sons and a daughter, whose ages range from 20 to 25 years old.

"Some parents may engage their kids by giving them a list of do's and don'ts, and they believe that's the way to build a relationship with them. I prefer to set aside time to talk to them about things they can relate to," he said.

For many years, until his eldest son went to university, Tong gathered his children together every Sunday night for a family roundtable, sharing his observations on life and anecdotes about work.

"That's how I impart key values to them - underlining the importance of integrity and honesty, highlighting principles of self-discipline and self-control, as well as offering insights on how to build and maintain relationships with the people around them," Tong noted.

"Ultimately, these are the basic building blocks for success in life."

Financial results

Year ended 31 March (S$ '000)	FY2017	FY2016	FY2015
Revenue	300,144	258,000	217,931
(Loss)/Profit before income tax	89,720	44,626	(17,457)
(Loss)/Profit after income tax	75,708	36,556	(15,754)

Quarter ended 30 June (S$ mln)	Actual*	Projection^	% Change
Revenue	86.1	83.8	2.8
EBITDA	61.0	58.3	4.5
Profit after tax	19.0	15.0	26.9

Source: Company data; IPO prospectus

*Actual: Results for 1 April 2018 to 30 June 2018. No comparative Consolidated Statement of Profit or Loss and Other Comprehensive Income has been prepared as NetLink NBN Trust was constituted on 19 June 2017.

^Projection: Projection for 1Q was part of Projection Year 2019's projection as disclosed in the prospectus dated 10 July 2017.

Outlook

The Trust Group remains on track to achieve the number of end-user connections in both the Residential and Non-Residential fibre segments in the projection as stated in the Prospectus for FY19. Though the Trust Group expects revenues from key connection services to meet the projection for FY19, overall revenues may be affected by lower installation revenues.

The Trust Group continues to expand its network in new housing estates. The Trust Group has also been working proactively with Requesting Licensees (RLs) to anticipate future demand in the Non-Residential and Non-Building Address Points (NBAP) segments.

With its extensive nationwide fibre network, the Trust Group is well-positioned to support Smart Nation initiatives, developments in Punggol Digital District and Jurong Innovation District, and the fourth mobile telecoms operator in its mobile network deployment. In addition, the Trust Group is monitoring the development of the 5G network in Singapore and will explore opportunities associated with the new technology.

The Trust Group expects to deliver the FY19 projected distribution as per the Prospectus..

NetLink NBN Trust

NetLink NBN Trust's nationwide network is the foundation of Singapore's Next Generation Nationwide Broadband Network (Next Gen NBN), over which ultra-high-speed internet access is delivered throughout mainland Singapore and its connected islands. The Trust Group designs, builds, owns and operates the passive fibre network infrastructure (comprising ducts, manholes, fibre cables and Central Offices) of Singapore's Next Gen NBN. The Trust Group's extensive network provides nationwide coverage to residential homes and non-residential premises in mainland Singapore and its connected islands.

NetLink NBN Trust was listed on the Mainboard of Singapore Exchange on 19 July 2017, and is a constituent of the FTSE ST Large & Mid Cap Index and the MSCI Singapore Small Cap Index.

The company website is: www.netlinknbn.com.

Click here for the company's Stockfacts page.

For the quarter ended 30 June 2018 financial results, click here.

The company website is: www.ebwater.com
The ccompany's Stock Facts page is here.
For the company's financial results for the 2nd quarter ended 30 June 2018, click here.

NetLink NBN Trust: Threads Through Digital Singapore

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