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The Battle of the Telcos: 6 Things You Need to Know about Singtel

The stock prices of Singtel, StarHub, and M1 have fallen since the announcement of a fourth telco to be introduced into Singapore to spur competition. One of the possible candidates, MyRepublic, plans to provide unlimited data packages for their mobile services which may be a competitive threat to the incumbent telcos as their data plans are based on fixed data usage.

Since the introduction of a fourth telco is inevitable, instead of worrying of the new entrant I decided to look in-depth in the existing three telcos and find out which one is in the best position to battle against its competition. This week, I’ll be covering Singtel and six important things you need to know about the company. But before I go into that, here’s a background on Singtel’s business model.

The Business

Singtel is 51.18% owned by Temasek Holdings and is the largest telecommunication company in Singapore. In 2012, Singtel restructured the group and formed three business units: Group Consumer, Group Enterprise and Group Digital Life.

Group Consumer

Group consumer is Singtel’s largest business unit; it accounts 61.3% of total revenue. It comprises Singtel’s consumer businesses in Singapore and Australia and also their investments in regional telecommunication companies in Thailand, India, Indonesia, Philippines, Sri Lanka, Bangladesh and Africa. These businesses provide services like mobile, pay TV, fixed broadband, voice data, and sales of equipment. Included in this group also is Singtel’s 23% stake in Singapore Post Limited.

Singtel’s Singapore consumer division is currently the market leader in the local telco industry with 4.1 million mobile subscribers, 0.6 million broadband customers and 0.4 million pay TV subscribers. Singtel’s Australian telco, Optus, is the second largest telecommunications company in the country with a 30% market share in Australia. For Singtel’s regional associates, most of them hold market leadership in their respective markets:

singtel stake

As we can see, Singtel has a strong presence around the region and doesn’t solely rely on the Singapore market to spur their growth.

Group Enterprise

Group Enterprise is the second largest revenue contributor to Singtel’s revenue accounting for 36.7%. This unit focuses on providing IT solutions to the government and corporates. They have a strong presence in the Asia-Pacific region and focus on these three segments:

  1. Cyber security – The power of the Internet has helped billions of people around the world stay connected regardless of location. In trend with the connected world, cyber threats are a serious issue and cybersecurity is now of paramount importance. Singtel aims to be a leading global cyber security service provider to enterprises and governments by partnering with cybersecurity firms like Akamai and FireEye.
  1. Enterprise cloud services – This segment provides a suite of cloud services for enterprises in order to help them to reduce costs, improve productivity, and improve innovation.
  1. Smart cities – With Singapore announcing plans to transform the island state into a smart nation. Singtel is positioning itself to develop innovative solutions that gear towards the smart nation programme in Singapore and across the region.

Group Digital Life

Group Digital Life (or Digital L!fe as Singtel spells it) is the smallest business unit among the three and accounts for 2% of Singtel’s total revenue. Singtel views this unit as the next phase of growth as people become more and more interconnected through the Internet. Because of the growing trend of mobile and Internet usage, Singtel has positioned themselves in three areas, premium video streaming, digital marketing, and data analytics, through these three brands:

  1. HOOQ is a mobile video streaming services that provides video entertainment and content to subscribers for a fee. The business model is similar to Netflix in the United States (but on mobile). So far, Singtel has launched HOOQ in Thailand, Philippines and India.
  1. Amobee. The growing trend in digital advertising has caused a dent in traditional advertising platforms like television and radio. In order to ride on this, Singtel acquired Amobee in 2012. Amobee is a US company that specializes in mobile advertising and offers its solutions to mobile operators, publishers and advertisers.
  1. DataSpark is a company that specializes in geoanalytics. For instance, it is able to gather information on where, when and how people move along in a mall. With this data, mall operators and retailers are able to formulate strategies to better serve their shoppers and customers.

Besides these three areas, Singtel also owns websites and mobile apps like, HungryGoWhere, Eatability, Pixable, NewsLoop, AMPed, Klink, TM Gamer, mio TV Go and mioPlay.

Now that you have a fair understanding of Singtel’s business model and growth direction, let’s move on to…

6 Things You Need to Know about Singtel:

  1. Majority of Singtel’s net profit is derived outside of Singapore. About two thirds of Singtel’s net profit is contributed by Optus and their regional mobile associates. As we all know, Singapore’s telecommunications industry is rather saturated and with a fourth telco coming in, this will heighten competition even more. But since the majority of Singtel’s profits are well-diversified and generated outside of Singapore, the introduction of a fourth telco may not affect Singtel that much.
  1. Airtel and Telkomsel are the biggest contributors among regional mobile associates. For the past ten years, Airtel’s and Telkomsel’s mobile subscriber bases have been growing at 35.7% and 20.2% p.a. respectively:airtel telkomsel subscribers But even though subscriber growth has been fantastic, the past 10-year net profit growth for both Airtel and Telkomsel is only 4.8% and 3% respectively. The slow earnings growth is caused by depreciation, amortization, and currency depreciation.Referring to the table below, you can see that Airtel’s net profit increased rapidly from S$244 million (2006) to S$848 million (2010). In 2010, Airtel acquired Zain Group’s African mobile operations. Since then, net profit started to fall. The reduction was caused by high depreciation costs and currency depreciation and till date the African mobile operator is still making losses. If you remove the African operation however, Airtel’s India operation is growing telkomsel profit
  1. Not all mobile associates work out well for Singtel. In 2008, Singtel acquired a 30% equity stake in Pakistan’s fourth largest mobile operator, Warid Telecom, which had fourteen million customers at the point of time. Referring to the table below, we can see that Warid Telecom has been making losses ever since Singtel acquired them in 2008. In 2013, Singtel decided to exit from this investment.warid profit
  1. National/international telephone are the only declining segments. The above table shows that revenue for the national and international telephone segments has been declining for the past ten years as more and more people shift to mobile and data & internet usage.
    singtel segmentNowadays, people are able to use mobile apps like Viber, Skype, and WhatsApp to make international calls. Of course, despite the decrease in national/international telephone, Singtel is compensated with an increase in their mobile and date & internet segments as consumers use more and more data as the world become increasingly connected. Excluding digital business, Singtel’s top three-growth segments are infocomm technology, pay TV, and sale of equipment which grew 11.3%, 8.1%, and 6.2% p.a. respectively for the past ten years. Singtel’s digital business segment only started contributing revenue in 2013 and grew 73.2% p.a. for the past three years.
  1. Singtel is aiming to be a global leader in cybersecurity. In April 2015, Singtel acquired Trustwave for US$810 million. Trustwave is the largest privately-held security service provider in North America and has business dealings in Europe and Asia-Pacific. The acquisition allows Trustwave to continue to focus in their key markets in United States and Europe while Singtel leverages on their technology and know-how to grow in emerging markets in Asia-Pacific. Prior to the Trustwave acquisition, Singtel had already formed partnerships with Akamai and FireEye and Singtel is aiming to be a global leader in this area.
  1. Singtel set up a venture fund to invest young, innovative companies. In 2011, Singtel set up their corporate venture fund called Innov8 with an initial fund size of S$200 million. Innov8’s objective is to invest during the seed or early stage of Internet and digital media companies which fulfill these two criteria: Of strategic benefit to Singtel, produce promising financial returns.Currently, Innov8 has 28 companies in its portfolio. Since most of these companies are start-ups, they’re able to generate very high growth which is why Singtel’s digital business segment grew at 73.2% p.a. for the last three years. Despite this, they are still making an operating loss. The loss is due to the high amortization cost of acquired intangibles. It will take some time for this segment to fully grow since it only contributed 2% of total revenue.


This wraps up my analysis of Singtel’s business model and how well-positioned they are to handle the entry of a fourth telco in Singapore. Next up, I’ll analyze M1 and see how well they’ll hold up. So stay tuned!

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Robin Han
Victor Chng

Victor Chng is an equity investor and the co-founder of the online investment magazine The Fifth Person. He is also the co-creator of The Investment Quadrant, an online multimedia stock investment course where students can learn how to invest profitably in the stock market. Victor has been featured multiple times on 938LIVE as a guest expert on MoneyWise and is also the co-author of Value Investing in Growth Companies which is internationally published by Wiley, Inc. The book can be found in all major book stores worldwide and on,, Barnes & Noble and Apple's iBooks. If you're interested to learn more about stock investing, you can join The Fifth Person Newsletter and receive free weekly insights on how you can generate higher returns and dividend income from the stock market.