Singapore Telecommunications Limited Has Its Eyes on a US$27 Billion Opportunity

Singapore’s communications giant, Singapore Telecommunications Limited (SGX: Z74), or more popularly known as Singtel, has its eyes on a new prize. But it has nothing much to do with phones or calls this time around.

What Singtel has set its sights on is the cyber-security industry, a market that is expected to be worth some US$27 billion by 2019. To put this into context, Singtel made S$17.2 billion in revenue in the financial year ended 31 March 2015 (FY2015).

Securing its future

Singtel partnered US-based cyber-security firm FireEye Inc in late 2014 to launch Managed Defense solutions for the Asia Pacific region. The subscription-based solution promises to help enterprises respond to cyber threats in dramatically less time.

In connection to that, both parties plan to train around 150 professionals to operate an Advanced Security Operations Centre (ASOC) in Singapore and Sydney. The first joint-ASOC with FireEye was launched in February this year.

Then in April this year, Singtel splashed out a hefty US$810 million to acquire a 98% interest in US-based Trustwave, a leading specialist in managed security services with over 3 million business subscribers.

Singtel expects the transaction to generate positive EBITDA (earnings before interest, taxes, depreciation and amortization) from the second year of acquisition and to contribute positively to Singtel’s earnings by the third year.

Foolish takeaway

The cyber-security initiative will be housed under Singtel’s Group Enterprise segment.

For FY2015, the Group Enterprise segment bought in S$6.3 billion in sales and a solid S$2 billion in EBITDA. The partnership with FireEye and the acquisition of Trustwave may bring about valuable new recurring revenue streams for Singtel.

The ability to generate recurring revenue is especially important for the telecommunications giant as it had recorded a net debt position of around $7.3 billion in the second-quarter of 2015.

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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 contributor Chin Hui Leong doesn’t own shares in any companies mentioned.