Focusing on sustainable dividends, growth and returns
We delivered a resilient performance in FY2022 despite new waves of the pandemic, persistent structural headwinds and rising geopolitical tensions weighing on general market sentiment. This is a testament to our financial discipline and flexibility in the face of evolving market conditions. Achieving better capital efficiency with a proactive capital management approach has been my priority since I became Group CFO. We’re making good progress on this goal as we deliver on our strategy: transforming our core businesses with 5G, creating new growth engines, and unlocking the value of existing assets to reallocate funds to businesses with higher growth opportunities. Going forward, we intend to sustain this trend to improve returns on capital and increase value for our stakeholders.
Gaining momentum
In my message last year, I’d said we needed to transform our businesses and cost base by leveraging digital technologies and Group scale. Reinvigorating the core is critical to generating the returns and cash we need. This work is well underway and the positive trends we’re seeing, especially with Airtel’s solid turnaround in India and significant improvements in its African business bode well for growth. We’re also confident that our new strategic partner Gulf Energy will strengthen AIS’ business in Thailand. Looking ahead, we intend to continue to focus on a smart, well-paced 5G rollout and differentiated customer experiences to generate the right returns.
Capturing digital opportunities
Leveraging on the digitalisation trend we are seeing across Asia, we’ve developed new regional businesses that build on our expertise and partnerships.
Our ICT arm NCS is focusing on integrating its IT and digital investments in Australia into its core business. We expect NCS to scale even more quickly as it unlocks greater synergies to support the growing digital transformation needs of government and enterprise clients in the region.
The fast-growing ASEAN digital infrastructure market is another area we’re investing in. With demand for high-quality data centres continuing to outpace supply in the region, we plan to grow our regional data centre platform anchored by our Singapore data centre business. A standalone entity, led by a strong management team with deep industry experience, is being established to accelerate our regional push. Besides developing the growth pipeline in Singapore, we’re forming a joint venture with AIS and Gulf Energy in Thailand, and looking for further regional opportunities, including in Indonesia where we recently signed an MOU with Telkom.
Our digital bank with Grab is on track to launch in Singapore this year and we aim to redefine what banking should be by bringing our extensive ecosystems, technology expertise and fintech experience to serve consumers and small businesses better. With our acquisition of a minority stake in Bank Fama in Indonesia and the successful application for a full digital banking licence in Malaysia with a Grab consortium, we’ll also be able to drive greater financial inclusion in the region where the low penetration of banking services and increasing digital adoption offers huge untapped potential.
Our regional associates have also incorporated local digicos and begun building customer engagement. In Indonesia for example, Telkomsel’s new apps in edu-tech and fitness health tech are already hitting high monthly active users. Such digital services will augment customer experience as we continue to develop these digicos while looking out for monetisation opportunities.
Unlocking value
Capital recycling is an integral part of our asset-right strategy to fund future growth while we set aside operational cash flows for regular operations and dividends. Together with our regional associates, we have monetised a part of our stakes in assets and companies such as wholly-owned subsidiary Australian Tower Network, regional associate Airtel Africa, Globe’s digital financial services subsidiary Mynt and Telkomsel’s towers. These moves will support the rollout of 5G and other growth initiatives, including NCS’ regional expansion.
Our plans to redevelop our corporate headquarters Comcentre and maximise its site potential is another way we are optimising the capital we can unlock to fund our growth initiatives. Comcentre will be divested to a joint venture company formed with the appointed developer, Lendlease, and we’ll hold a majority stake.
Active capital management
In anticipation of the rising interest rate environment, we’ve locked a significant majority of our debt into fixed rates coup led with strong interest rate cover. We’ve also been diversifying our funding sources which is an important pillar of our capital management approach. Our first digital sustainability-linked bond launched under our sustainable financing programme Olives this April, reaffirms our commitment to sustainability and to bringing the benefits of digitalisation to everyone. This is important not only in ensuring a more diverse group of investors can participate in Singtel’s growth, but also in accelerating the adoption of new technologies in our financial ecosystem while taking care of our earth for future generations.
Reducing our environmental impact remains a business imperative even as we pursue growth. We’re engaging with our investor base to help them understand our goals and the progress made as ESG considerations are fast becoming an important investment criteria. We’re also studying the broader financial implications of climate risks – both physical and transitional – such as the Singapore government’s carbon taxes announced in February.
Emerging stronger
While we’ve accomplished a lot in the last 12 months, there is still much work to be done to improve our return on invested capital, which underpins profitable growth and sustainable dividends, in the medium to long term. We’ll continue to build up our growth engines and actively explore crystallising the value of other infrastructure assets that sit on our balance sheet. As the Group’s financial performance continues to improve, supported by these growth engines, we’re confident that we can deliver better returns for shareholders in the coming years.
