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Tapping high-performing markets

Singtel says gains from enhancing its deemed stakes in top Indian and Thai telcos go far beyond increased earnings.
Monday, August 29, 2016 - 05:50
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Irrespective of whether a new operator emerges or not, Singtel is "innovating" to offer customers what they want, says Ms Chua

SINGAPORE Telecommunications' (Singtel) recent move to enhance its deemed stakes in the top mobile operators of Thailand and India, Advanced Info Services (AIS) and Bharti Airtel respectively, by buying shares from Temasek Holdings gives the telco increased access to two high-performing markets.

The two companies have a combined mobile customer base of more than 380 million across Asia and Africa. Thailand and India are attractive markets which are reaping the benefits of rapidly increasing smartphone penetration and mobile data adoption by a growing middle class.

Commenting on the deal, Chua Sock Koong, Singtel's CEO, says: "Our stated policy has always been to increase stakes in our associates when presented with the right opportunities." She adds that Singtel has "worked closely" with the two operators for "more than 15 years".

"We have built deep and trusted relationships, worked well together through the years, sharing knowledge and expertise and we have grown together, from strength to strength."

The benefits that Singtel sees from the deal go far beyond increased earnings due to higher deemed stakes. Ms Chua tells The Business Times: "While it is very common for us to use mobile data to surf the Web, connect on social media, watch videos and more in Singapore, the data revolution is only just beginning in the emerging markets."

There is significant growth potential in associates' markets, "spurred on by the proliferation of affordable smartphone devices and a fast-growing population of young, tech-savvy consumers", she adds.

The number of data users across these markets increased by 21 per cent from a year earlier to reach 198 million and year-on-year revenue growth from mobile data ranged from 21 to 65 per cent. Singtel hopes to cash in by offering its considerable expertise and technology built over the years.

"We always invest with a long-term view and we know the business well," says Ms Chua.

While Singtel's outward focus has resulted in a situation whereby more than 70 per cent of its earnings come from abroad - thus providing a nice earnings cushion - the Singapore domestic market also presents its fair share of opportunities. On the face of it, the Singapore mobile telephony market is stable and mature, with 150 per cent mobile phone penetration. This means every second person in Singapore has two phone lines registered under their name.

For the telcos, there is no first-time customers to grab in a growing market. Any new customer for a telco will be one less customer for a rival. However, at the same time, thanks to new use cases, such as data-only lines, machine-to-machine communication and Internet of Things, new opportunities are beginning to emerge for revenue generation - not from humans talking to one another but from machines talking to each other and to humans.

It's a market where a telco needs to offer innovative services and quality in order to not only attract new users but to keep existing ones from migrating and have a network that is ready as these new "smart" services come online.

Ms Chua feels Singtel has both the quality and innovation to provide value to customers. And there are big opportunities in data and digitalisation.

Data growth

Singtel recognised this trend early on and put "these at the centre of our business when we embarked on our transformation journey four years ago", she says. Singtel is focused on mobile data growth and in "realising the potential of enterprise services in cyber security, cloud services and smart city as well as digital businesses - digital marketing, OTT (over the top) video and advanced data analytics".

The Singtel CEO feels that despite new technologies emerging, Singapore is well served with its three-operator model. Commenting on the possible entry of a fourth mobile operator emerging, following the Infocomm Development Authority of Singapore's mobile spectrum auction later this year, Ms Chua notes that "everyone seems to think that we need a fourth telco to spur innovation and competition".

Her personal opinion is that competition is already alive and well in Singapore.

"Look at the network quality, pricing packages and handset subsidies available to customers today - do you think this came about without robust, even fierce competition?

"Fact is - if you look around the world, a profitable fourth player in well-penetrated markets such as ours - is rare. What is common is industry consolidation in markets with more than three players. And these markets are much larger than Singapore's. There's a very good reason for this."

She, however, adds: "That said, Singtel is no stranger to competition. We have always believed in competing on service innovation, network quality and services available."

Ms Chua says that irrespective of whether a new operator emerges or not, Singtel is "innovating" to offer customers what they want. "Data and content are big themes for us. In the past year alone, we have made a lot of strides in creating standalone plans, data add-ons and zero-rated music streaming."

Talking about OTT services, such as WhatsApp, which are being used increasingly by consumers to make phone calls, particularly international calls, and for messaging, Ms Chua notes that OTT services are disrupting many industries "besides ours".

"But it's not a zero-sum game for us. We are meeting the OTT challenge by looking at partnerships where possible and working in a complementary way with OTT providers. For example, we have teamed up with content streaming services like Netflix and Viu (which offers Korean drama) to enrich the range of digital entertainment we offer to customers across our multiple platforms. We have also found new ways to develop new revenue streams especially in the digital space." Singtel recently launched an OTT video portal app called Cast.

Noting that consumers are leading increasingly connected lives and spending more time consuming information and entertainment through their mobile device, Ms Chua says that Singtel is "capitalising on these changing content consumption habits through our digital marketing business, Amobee, which counts brands such as Airbnb, Red Bull and PayPal as clients; and our premium OTT video service HOOQ, which offers a rich content library featuring 35,000 hours of entertainment in the Philippines, Thailand, India and Indonesia".

In the enterprise space, businesses are rapidly moving from traditional IT systems to flexible cloud-based storage to manage costs and drive operational efficiencies. Singtel is capturing this market opportunity, "having invested in a suite of cloud migration and delivery capabilities over the past two years", says Ms Chua.

The Singtel CEO adds that the company's investments in cyber security are also starting to pay off, supported by its ability to monitor traffic flows "through our networks and relationships with existing enterprise customers".

She adds that the acquisition last September of Trustwave, a leading independent cyber-security provider in the United States, gives Singtel "the global reach and capabilities to provide managed security services 24/7. This is an area which we intend to scale globally".

Singtel is doing its bit with regard to Singapore's move towards becoming a Smart Nation. Singtel, says Ms Chua, has been awarded the contract to build Singapore's next-generation electronic road pricing system and, more recently, it has won the Smart Hub contract from the Housing & Development Board for estate planning and operations.

Bright outlook

Ms Chua notes that despite the headwinds, the outlook remains bright for Singtel.

"Change is not new to us. Over the last three decades, we have re-invented ourselves many times over: from a statutory board, we were corporatised, then publicly listed. Today, we have moved well beyond simply being a telco offering connectivity. We have become a regional communications and ICT (infocomm technology) solutions company with a presence in some 23 countries globally.

"How did we get here? Each and every transformation we went through required a corporate tenacity that wasn't afraid of change nor what the future would bring. As technologies changed, as the industry changed, as what customers' wanted were changing, we responded each time with forward-looking actions. I believe this mindset of change and adaptability is what has taken us from leadership position in Singapore to the forefront in the region," Ms Chua adds.

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