Operating and Financial Review
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Operating and Financial Review Contents 21 Overview 24 Business in Singapore 28 Business in Australia 32 Business in the Region 36 Group Five-Year Financial Summary 37 Management Discussion and Analysis 44 Shareholder Returns 46 Risk Factors 0 SingTel Annual Report 2006/2007 Overview SingTel is Asia’s leading communications group with operations and investments in more than 20 countries and territories.The Group provides services and solutions in fixed, mobile and data communications, Internet, IT and consultancy, and satellite. Its other businesses include subscription television and the sale of telecommunications equipment. Australia is a major market for SingTel. We were listed on the Australian Stock Exchange (“ASX”) in September 2001 when we acquired Optus, the second largest communications provider in Australia. We are aggressively growing our reach in Asia and have stakes in major regional communications companies, including AIS in Thailand, Bharti in India, Globe in the Philippines, Pacific Bangladesh Telecom in Bangladesh and Telkomsel in Indonesia. Incorporated in March 1992, SingTel became a public company in October 1993. The following month, SingTel was listed on the Singapore Exchange (“SGX”). Today, we are the largest company listed on the SGX with a market capitalisation of S$52 billion (US$33 billion) as at 31 March 2007. SingTel is majority owned by Temasek Holdings (Private) Limited, which holds 56.1 per cent of SingTel’s issued share capital. The rest of the shares are owned by the public. SingTel Group Structure Major Subsidiaries Major Associates and Joint Ventures Singapore Overseas Singapore Overseas SingTel Optus Pty Limited Singapore Post Limited Advanced Info Service Public NCS Pte. Ltd. (“NCS”) (“Optus”) (“SingPost”) Company Limited (“AIS”) Singapore Telecom Mobile Bharti Airtel Limited (“Bharti”) Pte Ltd (“SingTel Mobile”) SingNet Pte Ltd (“SingNet”) Globe Telecom, Inc. (“Globe”) Telecom Equipment Pte Ltd Pacific Bangladesh Telecom (“Telecom Equipment”) Limited (“Pacific Bangladesh Telecom”) PT Telekomunikasi Selular (“Telkomsel”) New Century Infocomm Tech Co., Ltd. (“NCIC”) Southern Cross Cable Holdings Limited (“Southern Cross”) SingTel Annual Report 2006/2007 Setting the Pace Transforming Lifestyles SingTel Annual Report 2006/2007 SingTel enables next-generation communications. We do more than deliver communications products and services. We pioneer revolutionary solutions that enhance and shape the way people live, work and play. Through relentless innovation, SingTel seeks new segments of growth and paves the way for next-generation communications. SingTel Annual Report 2006/2007 Operating and Financial Review Business in Singapore Leading the Way in Singapore Our Singapore business grew in an extremely competitive environment. We maintained our market leadership in broadband and mobile. Our market share reflects our reliability, innovativeness, customer-focused mindset as well as strong brand recognition. As at 31 March 2007, our mobile subscriber base increased nearly 10 per cent year-on-year to hit an all-time high of 1.82 million. The rise is impressive in the highly saturated mobile market that has a 107 per cent penetration rate. The number of 3G subscribers also grew more than three times to 466,000. In broadband, our customer base grew almost 20 per cent to 421,000 lines. Responding to market needs, we introduced our highly successful ‘no-frills’ plans, which offer lower monthly subscription rates as they are not bundled with gifts. In the fixed-line market, we remain the leader with 96 per cent of market share. Of notable mention was the high take-up rate for our innovative communications solution – Generation mio. As at 31 March 2007 and within three months of its launch, 14,000 customers had signed up for the service, exceeding our expectations. In IT and engineering services, NCS is well placed to maintain its leadership position as Singapore’s number one IT services provider in each of the government, healthcare, transportation and communications sectors. NCS is also ranked as the Singapore Government’s top IT services provider for the third consecutive year. 4 SingTel Annual Report 2006/2007 NCS’ government IT business, ranked by Gartner as the fifth largest in Asia, remains one of its key revenue contributors. Leveraging its core expertise in e-Government, NCS successfully secured a number of major contracts with the Singapore Government during the year. Key wins included a S$60 million contract with the Infocomm Development Authority (“IDA”) to provide application and eService hosting services under the Service Wide Hosting Environment. Other contracts were signed with the Ministry of Home Affairs, Ministry of Defence, Singapore Sports Council and Civil Aviation Authority of Singapore. Transforming Homes into Digital Playgrounds In January 2007, Singaporeans were introduced to a dramatically new concept in telecommunications with the launch of Generation mio. The mio box transforms the phone line in every home into an integrated super highway. It connects separate communications devices and enables customers to enjoy value-for-money bundled fixed-line, mobile and broadband communications services. Generation mio also paves the way for a suite of next-generation services, such as interactive television and home monitoring solutions via telephone lines. In July and August 2006, residents at two condominiums were able to experience free unlimited high-speed Internet access during a six-month trial for Fibre-to-the- Home and residential Metro Ethernet technology. The trial, the first of its kind in Singapore, tested the delivery of voice, video and data services via broadband at ultra-fast speeds of up to 80Mbps. SingTel Annual Report 2006/2007 5 Operating and Financial Review World-Class Wireless and Mobile Solutions In October 2006, our proposal to provide WiFi services to the northern parts of Singapore was accepted by IDA under its nationwide Wireless@SG project. The expansion of wireless hotspots to around 2,000 by the third quarter of 2007 will boost mobility for users. They will be able to surf the Internet as well as receive and send email remotely. Customers can also access offers and information that are relevant and timely through contextual advertising and other location-based services. Such services play to SingTel’s strengths of a large customer base, extensive networks and strong business partnerships. As at 31 March 2007, 217,000 Wireless@SG customers had signed up with SingTel, of which 63,000 were non-subscribers of SingNet’s residential broadband service. We also introduced new value-added services, such as unlimited mobile Voice over Internet Protocol (“VoIP”) calls for a fixed monthly fee. SingTel was the first telecommunications company to roll out free Broadband on Mobile services in November 2006. The service uses next-generation mobile technology to offer users download speeds of up to 3.6Mbps, nine times faster than 3G, on their mobile devices. First made available as a trial along the Orchard Road shopping belt, Broadband on Mobile was launched in the Central Business District and will be offered islandwide later this year. Our customers will be able to move between the Wireless@SG hotspots and Broadband on Mobile coverage areas and enjoy Internet surfing, video streaming, music downloads and email access anywhere, anytime. Business Communications Made Easy Challenges faced by enterprises in the 21st century revolve around a global marketplace and a need for speed and efficiency. Businesses in Singapore appreciate the comprehensive suite of services and the unparalleled coverage that SingTel offers. This is evident from key accounts – both new and renewed accounts – that we have secured during the year, including Freescale and Philips. The ‘360’ suite is SingTel’s holistic and comprehensive response to dynamic communications needs. Launched in March 2007, the ‘360’ suite offers end-to-end solutions that help companies streamline their operations and optimise their performance. In support of entrepreneurship, Office360 caters to small and medium-sized enterprises (SMEs) while Enterprise360 caters to larger organisations. Office360 combines unlimited local calls on mobile and fixed-lines with free broadband access, email and web hosting services at one affordable rate. 6 SingTel Annual Report 2006/2007 Our efforts to simplify communications solutions for enterprises are not new. In October 2000, we launched an integrated voice, data and video solution on a converged IP platform for business customers. Named Meg@POP, the service offers customers a convenient and affordable way to marry their voice and data communications needs in a single solution. Meg@POP paved the way for an option of high-speed broadband Internet service using Ethernet connectivity. In September 2006, SingTel introduced Ethernet-Lite, a commercial high-speed broadband service based on shared bandwidth at a fraction of existing prices. With the potential cost savings offered by Ethernet, global companies welcomed SingTel’s introduction of ConnectPlus Ethernet-Virtual Private Network (“VPN”) in August 2006. The service, which is scalable and cost effective, offers customers any-to-any connectivity between two or more countries. In November 2006, SingTel became the first in Singapore to launch a commercial VoIP service that is fully interconnected to the fixed-line and mobile services of all local telecommunications operators. Businesses, and even employees travelling overseas, can