Boosting Singapore's data connectivity

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!" Mr Tong grins.

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

It is this relentless pursuit of personal development that defines Mr 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, Mr Tong was the CEO of CitySpring Infrastructure Trust, now known as Keppel Infrastructure Trust.

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.

"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," Mr Tong points 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.

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

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 per cent. This business segment contributes the bulk of group revenue, accounting for nearly 60 per cent 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," Mr Tong says.

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 notes.

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 per cent 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 per cent share. These include commercial users such as offices, shopping malls, government departments, hospitals and schools, and account for about 8.5 per cent 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 per cent 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 connections are forecast to expand at a CAGR of 86.2 per cent to 6,128 by 2021, from 274 in 2016, data from Media Partners Asia showed.

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," Mr Tong notes.

"Pricing terms are regulated by the IMDA, while our primary customers are established players in the Singapore telecoms market," he adds, 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 says. "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, Mr Tong says.

"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," Mr Tong says, 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 adds.

Despite the industry's relatively robust growth prospects, concern over changing dynamics occasionally keeps Mr 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 says. "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 adds. "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," Mr Tong adds.