“Never invest in any idea you can’t illustrate with a crayon.”
— Peter Lynch
Singapore Telecommunications Limited (SGX: Z74) (Singtel) is the largest telco in Singapore, with 4.2 million mobile customers here. Investors who wish to invest in the company must understand what it does and how exactly it generates revenue. Buying Singtel’s shares without such knowledge is akin to gambling.
A dive into Singtel’s business segments
Let’s check out what business Singtel is involved in and how it makes money. The table below shows the revenue contribution for each of Singtel’s business segments for the financial year ended 31 March 2019 (FY2019):
|Group Consumer||S$9.82 billion|
|Group Enterprise||S$6.33 billion|
|Group Digital Life||S$1.22 billion|
|Total revenue||S$17.37 billion|
Source: Singtel 2019 annual report
Singtel’s Group Consumer business segment, which brought in the bulk of FY2019 revenue, consists of its consumer businesses across Singapore and Australia as well as its investments in other telcos. Such investments include AIS and Intouch in Thailand; Airtel in India, Africa, and Sri Lanka; Globe in the Philippines; and Telkomsel in Indonesia. Revenue from mobile, pay TV, fixed broadband, voice, and equipment sales come under this segment.
Next, the Group Enterprise segment comprises revenue from Singtel’s business-to-business market. The main services provided by this segment include mobile, equipment sales, fixed voice and data, managed services, cloud computing, cyber security, and IT services.
Singtel considers the Group Consumer and Group Enterprise segments as its core business, and they contributed a combined S$16.15 billion in FY2019.
Last but not least, the Group Digital Life business segment leverages on the internet and Singtel’s existing business to develop new revenue streams. This segment focuses on three key businesses: digital marketing (under Amobee), regional premium over-the-top video (under HOOQ), and advanced analytics and intelligence capabilities (under DataSpark). Innov8, Singtel’s corporate venture capital fund, is also parked under this segment. Since 2010, the fund has put money into over 80 investments in high-growth areas such as cybersecurity, the Internet of Things (IoT), data analytics, financial technology (fintech), digital health, and gaming.
Now that we know the basics of Singtel’s revenue streams, investors can delve into other aspects of the telco such as its profitability, strength of its balance sheet, and its cash-generating abilities before deciding whether or not to invest in it.
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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 Sudhan P doesn’t own shares in any companies mentioned.