5 Key Insights from Singapore Telecommunications Limited’s Latest Shareholder Letter

Singapore Telecommunications Limited (SGX: Z74) released its 2016 annual report a couple of months ago. The report contained its Chairman’s message to shareholders.  

A shareholder letter starts as a blank sheet of paper. From there, a company’s management team has the opportunity to say what they think is important and to give their points of view. Typically, management teams will give a broad overview of the current state of the company’s business. It is also a chance for management to put their best foot forward to convince investors about the investment merits of their company.

With these in mind, here are five key insights I picked out from Singtel’s latest shareholder letter.

A whole new world

In his message to shareholders, Singtel’s chairman Simon Israel wrote:

“Four years ago, we embarked on a journey to transform ourselves into a communications company operating in a data-centric digital world. The reason was simple – the mobile internet revolution was taking hold, threatening traditional revenue streams from voice and SMS.”

Singtel’s last reported quarter had signs that mobile voice roaming revenue was on the downtrend. In contrast, mobile data revenue is rising. Yuen Kuan Moon, Singtel’s chief executive for the Consumer Singapore business, said that there is a chance that mobile data revenue will one day “replace voice roaming revenue.”

All these may not have been possible if preparations for a data-centric world were not triggered earlier. Israel believes that Singtel is leading this change:

“We are among the leaders globally in making this successful shift.”

Come with me if you want to live

Singtel has stakes in a number of major telcos in the region. Among its associates are Airtel (with businesses in India and Africa), Telkomsel (Indonesia), AIS (Thailand) and Globe (Philippines). This could be a source of growth in the future, as Israel noted:

“The other piece of good news – the mobile internet revolution is only just beginning in the emerging markets where prices of smartphones and devices are getting more affordable for a growing middle class.

This puts us in an enviable position as we have a strong presence across Indonesia, the Philippines, Thailand, India and Africa, where our regional mobile associates operate.”

Israel believes that Singtel is in a position to help guide its associates to a data-centric world.

The cyber security dilemma and opportunity

Singtel is focused on enterprise as well. Israel highlighted the cyber security dilemma and the opportunity that it presents:

“Cyber security has emerged as a critical issue for governments and businesses. As cyber threats grow in frequency and sophistication, company boards and managements are waking up to the urgent reality that their firms are not adequately protected against these threats and the associated reputational, business risks and costs.”

Singtel has made a major move in the cyber security space by acquiring managed security firm Trustwave. Singtel has also partnered with US-based FireEye Inc to offer managed defense solutions for the Asia Pacific region.   

Expanding its circles

Israel also touched on Singtel’s move into digital solutions. He said:

“Since beginning our transformation journey, we have refined our digital strategy to focus on three main areas: digital marketing, OTT video and data analytics where our telecom assets give us competitive advantage.”

Singtel owns Amobee, a digital marketing business. According to Israel, Amobee’s brand intelligence platform is able to curate over 60 billion content engagements daily across the web, social media, video, and mobile. Singtel is also hoping that HOOQ, its mobile streaming service, will catch on in countries where it has a presence through its associates.

The five insights above tell you a little bit about how Singtel thinks about its business, and how it plans to create value over time.

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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.