How Does Singapore Telecommunications Limited Make Money?

Singapore Telecommunications Limited (SGX: Z74) is one of the most recognisable companies in Singapore, given that it’s the largest telco in the country.

But, there is much more to the company than just providing telecommunications services here. In this article, I will discuss how Singtel makes money from three perspectives: By segment; by products and services; and by geography. Investors can make more informed investment decisions by knowing how the company earns its keep.

The segmental view

The table below shows a segmental breakdown of Singtel’s revenue in FY2018 (financial year ended 31 March 2018) and FY2017:

Source: Singtel FY2018 annual report

We can see that Singtel has three main business segments, namely, Group Consumer, Group Enterprise, and Group Digital Life. The first two are considered the core businesses of Singtel, and they collectively accounted for 94% of the company’s total revenue in FY2018.

Group Consumer is where Singtel houses its consumer businesses in Singapore and Australia, as well as its investments in other telcos in the region, such as Airtel in India and Telkomsel in Indonesia, among others. Meanwhile, the Group Enterprise segment provides a number of services (mobile, equipment sales, fixed voice and data, managed services, cloud computing, cyber security, IT, and professional consulting) across Singapore, Australia, the US, Europe, and other parts of Asia.

Group Digital Life is where Singtel aims to develop new revenue streams and growth engines for itself through the digital space.  The company has a focus on digital marketing, regional premium over-the-top-video services, and advanced analytics and intelligence capabilities.

The products and services view

Here’s a chart that breaks down Singtel’s operating revenue in FY2018 according to the products and services that it provides:

Source: Singtel FY2018 annual report

We can see that Singtel has five main product/services categories. The Digital Business category is essentially the Group Digital Life segment discussed earlier, while the other four products/services categories can be found in the Group Consumer and/or Group Enterprise segments. It’s interesting to note that mobile communications accounted for only 34% of Singtel’s total revenue in FY2018.

The geographical view

The chart below illustrates the geographical sources of Singtel’s underlying net profit in FY2018:

Source: Singtel FY2018 annual report

Although Singtel’s name features “Singapore,” our Garden City actually accounted for just 29% of the company’s total underlying net profit in FY2018.

The mention of Australia in the chart just above is pretty self-explanatory, but the Regional Associates term may require an explanation for some investors. The term refers to the telcos in the region that Singtel has investments in. The main investments include AIS and Intouch in Thailand; Airtel in India, Africa, and Sri Lanka; Globe in the Philippines; and Telkomsel in Indonesia.

The Foolish bottom line

Singtel is a huge telco that derives its income from various sources, in terms of both business-types, as well as geography. I hope that the discussion in this article will help you better understand Singtel’s business, and in turn, enable you to make a better investment decision with regards to the company.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.