SingTel expands as competitors flood domestic market

Singapore Telecommunications must feel as though it's re-enacting a scene from Alfred Hitchcock's "The Birds". Since Singapore opened up its telecommunications market on April 1, dozens of companies have been awarded licences to set up rival telecoms operations, and they're already pecking violently at the 120-year-old former monopoly's market share.

Singapore's StarHub, whose shareholders include British Telecommunications, Japan's NTT, and Singapore Power and ST Telemedia (both owned by the Singapore government), has already initiated an aggressive price war for its fixed and mobile services. Others lining up to join the fray include Bermuda-based Flag Telecom, Davnet of Australia, MCI Worldcom of the US and a joint venture between Australia's Telstra and Singapore's Keppel Telecommunications and Transportation.

Licences were also granted to a slew of other companies to expand their services in Singapore, including MobileOne, the island's second biggest cell phone operator, Pacific Internet, the third biggest internet service provider and cable monopoly Singapore Cable Vision.

"Overall, the liberalization of the telecom industry in the near term will depress the stock of SingTel as it slashes the cost of long distance calls," says Brenda Koh, analyst with Grand Orient Securities in Singapore. "Everyone is trying to get a piece of the profit pie in an increasingly congested market."

Putting on a brave face

SingTel's strategy so far has been to put a brave face on the drubbing ahead, betting it will make up for declining revenue in its domestic market by expanding abroad to create a pan-Asian telecommunications network.

"It's inevitable for SingTel to move out of Singapore because the market is very small and its core earnings base is going to be eroded," says Chuan Yang Lim, an analyst at RHB-Cathay Research in Singapore.

Last week, SingTel agreed to pay HK$4.09 billion for stakes in Malaysia's Time Engineering and two of its units - Time dotcom and internet company Time Online. The acquisition will give SingTel access to Time's 3,600km fibre-optics network across Malaysia and give it a link to Thailand where it already has a 20% stake in Advanced Info Service, Thailand's biggest mobile phone company.

SingTel also owns about 30% of Globe Telecom, the second-biggest phone company in the Philippines, and is part of a consortium recently awarded a fixed-line license in Taiwan.

"If you look at SingTel's acquisitions over the past two years they've aggressively acquired internet-related companies with broadband assets and services," says Grand Orient's Koh. "The company is getting aggressive not only in Asia but in Europe as well."

SingTel, in which the government holds a 76% stake, is certainly gaining a sense of urgency, but the company will need to move even faster if it is to fend off rivals.

"Pacific CyberWorks has set a precedent in the speed of acquisitions and SingTel has to wake up to this fact," says RHB's Lim. "They have to move fast and make deals fast."

Setting the pace

If CyberWorks has set the pace, others are quickly following. Telstra has made no bones about its desire to become a pan-Asian operator.áTelstra's Singapore subsidiary and Singapore's Keppel subsidiary, DataOne, have agreed to form a joint venture to provide "a full range of telecommunications services to corporate and retail customers in Singapore and throughout the region."

The question for SingTel is whether it can adjust its historically staid corporate culture in time.

"Ultimately it all boils down to management strategy," says Grand Orient's Koh.

SingTel, which has enjoyed a long history of protection, has never been particularly nimble. Still, the company is moving in the right direction, analysts say, and today's tortoises may beat out tomorrow's hares.

"In Asia we are in the infancy stage of deregulation and liberalization," says Koh. "Right now, anything and everything can happen."

April 7, 2000