This Company Might Be the Best-Positioned In Singapore for the New Economy

During the industrial revolution which started in the 1760’s, the world underwent a huge change with the more widespread use of steam power and machines. Over the past 300 years since, most improvements in technology had been focused on building better and more efficient machines to help grow the global economy.

But, is the past focus on building meaner and leaner machines going to be relevant in the current 21st century?

Many have described our current times as the age of the information revolution – the focus has now shifted to data in terms of its production, collection, management, and interpretation in ways that will be most useful for society as a whole.

There are many companies leading the way in building the infrastructure on the web to serve such purposes and taking charge on the global stage are – just to name a few – firms like Google, Facebook, Baidu, and Alibaba. This raises the question: Which company in Singapore might be the best-positioned for this new world?

It may come as a surprise for some, but the giant telecommunications outfit Singapore Telecommunications Limited  (SGX: Z74) could be a strong player in the new economy in the future. SingTel had reorganized its business divisions a few years back to include a Group Digital Life division that’s dedicated solely to investing in businesses focusing on using new technologies. This division has three core businesses in digital marketing, advanced analytics, and premium video content., Singtel’s digital marketing arm, wants to be the leader in “Real Moment Marketing Technology. The company is growing fast with its revenue more than doubling from S$128 million in the financial year ended 31 March 2014 (FY2014) to S$339 million in FY2015.

In the premium video content space, SingTel had also launched a new video content platform earlier this year in the Philippines and Thailand called HOOQ. Singtel has plans to further expand HOOQ, a low-priced monthly subscription-based video service, into India and Thailand in the near feature. HOOQ already has a strong catalogue of premium video content as the service is a partnership between SingTel and motion picture content producers Sony Pictures and Warner Bros.

To help its efforts in the digital space, Singtel has also created a fund worth US$250 million that’s used for investments and partnerships in this area. Currently, the fund has made 48 investments in nine countries.

Foolish Summary

It seems that Singtel is serious about positioning itself as a leading technology company in Singapore.

But, it’s worth noting that the Group Digital Life division is still much smaller in comparison with Singtel’s other two business divisions; for some perspective, Group Digital Life’s revenue of S$343 million in FY2015 was merely 2% of Singtel’s overall revenue in that year.

Will Digital Life’s tiny size prevent Singtel’s management from giving it the attention needed to grow the business? This is an important question to ponder, especially when we consider that Singtel’s new digital businesses might cannibalise its older cash-generating ones. To that point, a service like HOOQ, if introduced in Singapore, might cause Singtel’s mioTV (a pay-TV service) to lose some customers.

When old and new businesses collide, there’s the possibility of politics at play hindering any positive change happening within any firm. That’s something investors have to be mindful of, especially when dealing with an organisation as large as Singtel.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own shares in any companies mentioned.