The Motley Fool

What Investors Should Take Note of Singapore Telecommunications Limited Regional Diversification Strategy

Singapore Telecommunications Limited (SGX: Z74) or Singtel, is one of the three main telcos in Singapore. The other two are M1 Ltd (SGX: B2F) and StarHub Ltd (SGX: CC3).

The company recently published its annual report for the financial year ending 31 March 2018. Reading an annual report is one of the best ways to keep up with a company’s developments. So, I decided to go through Singtel’s latest annual report to understand the company’s prospects, and how it had performed in the last 12 months.

Generally, when reading an annual report, I will pay close attention to the letter to shareholders that the company’s chairman or CEO writes.

In this article, we will focus on one area that I found to be interesting: diversification.

Associates and joint ventures

For those who are new to Singtel, it’s important to know that the telco generates a significant amount of its profits from its overseas investments. Singtel holds significant stakes in companies such as Indonesia’s Telkomsel, Thailand’s AIS, India’s Airtel and Globe from the Phillippines.

Given the significance of these investments, it is important that investors know the management’s plans for its associates in the future. And here’s what SingTel’s CEO, Chua Sock Koong said in her letter to shareholders.

“We remain focused on the long term when it comes to our regional diversification strategy as it has given us exposure to high-growth developing markets where populations are not just growing but getting more affluent, promising greater smartphone adoption and increasing digitalisation, all of which are growth positive. Together with our associates, the Group now serves some 650 million mobile customers across 21 countries.”

In addition, Chua also gave some specific comments about the major investees:

India’s Airtel

“… Airtel in India had a challenging year as an aggressive new operator triggered unprecedented market disruption and price erosion. While competition remains intense, we believe fair regulatory policies and sector consolidation should lead to a more stable market structure in the mid-term. Our long-term view on India’s prospects remains positive as we increased our effective stake in Airtel to 39.5% last year.”

Indonesia’s Telkomsel

“… while Telkomsel’s earnings were impacted by declines in legacy services and heightened price competition, it continued to leverage its network superiority and rising smartphone penetration to grow its digital businesses and spur data usage.”

Thailand’s AIS and Globe in the Phillippines

“In Thailand, AIS’ profit grew on revenue improvement and cost management while Globe in the Philippines registered strong earnings growth, deepening its leadership in the market.”

Foolish Takeaway

In sum, SingTel remains committed to its overseas diversification strategy for the long term. The telco’s strategic intent is evident through its increased stakes in Airtel despite the competitive environment in India’s telecom industry.

Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.  

The Motley Fool’s purpose is to help the world invest, better. Like us on Facebook  to keep up-to-date with our latest news and articles.

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.