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Singtel's non-traditional segments eat up 10% of revenue
DBS Equity Research placed it as a "digital leader" amongst Asian telcos.
Singtel is considered the "digital leader" amongst Asian telcos, because of the growth of its non-traditional services, DBS Equity Research said in a sector report.
It scored 77 for its DBS' framework for telcos, significantly higher than those other Singapore players StarHub and M1, which scored 62 and 32, respectively.
"We have identified Singtel to be a digital leader as the telco has set itself a well-defined digital strategy and operational excellence through digitisation."
DBS said the digital leader's revenue from non-traditional should comprise about 15% of total revenue by 2020.
Singtel’s digital and cyber-security segments now account for almost 10% of its topline and grew almost 55% in 2Q2018, supported by acquisitions.
"Realising the threat to legacy consumer and enterprise revenues, Singtel made strategic investments in areas it had a natural competitive advantage in," DBS analyst Sachin Mittal said.
Singtel announced plans to invest $2b in strategic investments in digital businesses in 2013 and made acquisitions in the managed cybersecurity services and adtech space.
Consequently, growth segments, which comprise ICT services, Cybersecurity, and Digital Life contributed nearly 25% of Singtel’s revenues in 2Q2018, up from 19% in 3Q2016.
Revenues from these segments are projected to grow by 100% over the next five years, contributing over 35% to Singtel’s topline, well compensating for potential declines in legacy services.
Moreover, Singtel is still one of the least exposed telcos in the region to the threat of declining legacy revenues, generating around 24% of its topline from legacy voice and SMS services.
Here's more from DBS Equity Research:
Furthermore, the telco is present in several aspects of the digital advertising value chain and specialises in niche segments such as the provision of brand intelligence and cross-device audience targeting, which do not face direct competition from the likes of Facebook and Google.
Amobee, the digital advertising arm of Singtel, is also able to leverage Singtel’s regional presence to gain traction in Asia, where SMEs remain hesitant to partner with big names in digital advertising due to hefty fee structures and the lack of an understanding of the regional market.
With digital and mobile advertising spend in the ASEAN region expected to grow at a CAGR of 17% from US$2.8b in 2017 to US$4.4b by 2020, we expect to see strong growth in Singtel’s digital advertising business.
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