Saturday, 4 June 2016

Singtel Group - The SoftBank Corp of Singapore?

SoftBank Corp, one of the largest company in Japan, started as a traditional telecom in 1981. Over the years, SoftBank grew under the visionary leadership of Masayoshi Son through acquisitions and investing in start-ups. Gradually, it evolved from a boring 'old economy' telecom into a multinational internet company, with operations in mobile broadband, e-commerce, technology, media and marketing, finance services, robotics and other businesses. SoftBank successfully channelled resources from its core telecom business into new growth drivers. Example, it is one of the earliest investors in Alibaba and still remains the largest shareholder of the Chinese e-commerce giant.

Singtel can take a leaf out of SoftBank's playbook seeing that the impending 4th Telco is about to take a slice of its domestic pie. Singtel has been outperforming its two smaller local rivals this year, thanks to its vastly diversified earnings base. Core earnings from its overseas mobile associates such as Telkomsel, Advanced Info Service, Globe Telecom and Bharti Airtel increased 12% to $699 million. Singtel is also building ancillary services around its core business. For instance, Singtel re-launched its mobile payment app, Dash. Customers can use the app on their smartphones to pay for rides on trains & buses, ComfortDelgro & Prime taxis, and for purchases at merchants such as NTUC Fairprice, BreadTalk, Cheers, Food Republic, KFC, Pizza Hut & Watsons.

Another new revenue stream is coming from the cyber security division. The global cyber security market is growing at 9.8% a year. Hackers are becoming more sophisticated and daring as shown by recent cyber attacks on SWIFT, Sony Pictures Entertainment and Panama Papers data leak. For every lock, there's someone out there trying to pick it.

I was originally sceptical of SingTel's ambitious foray into the cyber security business in 2015, but watching the drama series 'Mr Robot' truly opened my eyes. This show is a masterpiece on the dangers of hacking. There is a huge shadowy world out there in cyberspace! Nerve Wrecking!

PwC estimates there are about 100 million cyber attacks every year, including data theft, leakage of intellectual property, corporate sabotage & denial-of-service attacks. That's 200 new cyber crimes committed every minute. The Singapore government wants to build a 'Smart Nation'. However, with greater use of connected devices like smartphones & tablets, comes greater vulnerability. Can a 'Smart Nation' be a 'Safe Nation' too? Will we be sufficiently protected from cyber terrorists? Singtel is poised to exploit opportunities in this rising and urgent demand for cyber security.

The pursuit of new growth engines requires substantial resources. This challenge could be solved soon. There are strong rumours of Singtel planning an IPO for NetLink Trust by 2H2017. If successful, the deal could raise as much as US$2 billion. Singtel will be armed with a huge warchest for pursuing new revenue streams as well as fight against the 4th Telco.

1 comment:

  1. Singtel business is in fact quite diversified. It has one gem in its business, NCS. NCS is in the communications engineering and ICT segment and is a 100% subsidiary of Singtel. The ICT segment is the third largest revenue contributor to Singtel Group