Billion Dollar Club: TECHNOLOGY EQUIPMENT + TELECOMMUNICATIONS SERVICES

Singapore Telecommunications (Singtel) has emerged as the sector leader in technology equipment and telecommunications services. It won not only the overall sector title but also for returns to shareholders and growth in profit after tax. StarHub Cc3, the second largest telco here, has also beaten the rest for best-weighted return on equity (ROE).

Singtel, as the company is better known, is one of the most widely held stocks among Singapore-based investors. As the former sole provider of telecommunications services, Singtel continues to hold leading market shares in where it competes, despite more than two decades after the local telecommunications market has been liberalised.

Over the years, Singtel has radically transformed and grown from merely a Singapore telco to a regional powerhouse, owning significant stakes in a network of associates in markets ranging from India to Indonesia. It also fully owns Optus, a leading telco in Australia.

At its most recent earnings announcement for FY2024 ended March, Singtel further emphasised its capital recycling strategy. The company is actively monetising the latent value of its vast portfolio of assets and stakeholdings.

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From the proceeds of its divestments and monetisation, Singtel would then reinvest part of them as capital expenditures, such as next-generation mobile networks that can help support new and faster growth. It is also going big as a regional data centre player as it positions itself for a new tech ecosystem increasingly dominated by artificial intelligence (AI) capabilities.

Singtel is also committed to a more generous dividend policy. In addition to paying regular dividends from its operating income, it promises shareholders that it will also pay a portion of the proceeds of its asset monetisation and divestments as dividends.

In contrast to Singtel’s history of more than a century, StarHub, not yet three decades old is a relatively new player. Nonetheless, the telco is actively updating its systems and processes to capture new opportunities better.

As described by StarHub in its most recent FY2023 annual report, it is “evolving from a traditional telecommunications provider to a dynamic digital ecosystem player.” It is doing so by embracing cloud computing, cybersecurity, artificial intelligence, and the Internet of Things (IoT), which lets the company expand its product and service offerings for both enterprise and consumer customers.

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A key plank of StarHub’s current strategy is its DARE+ multi-year transformation programme where it is rebuilding its own tech structure and processes that makes it more agile and which will improve its cost efficiencies. StarHub expects to generate over $500 million in cumulative cost savings and gross profit growth between FY2022 and FY2027. The “value-accretive” programme aims to generate stable-state incremental net profit per annum of $80 million from FY2027 through the creation of new revenue streams and enhanced efficiencies driven by the adoption of new and advanced systems and platforms.