Transforming with You Annual Report 2016 Ye ar s 137of Transforming Beep with You beep 1879 1955 1962 It all began when The Singapore Subscriber a trial connection Telephone Trunk Dialling was made between Board (STB) was was introduced, Raffl es Square and established as a enabling calls Tanjong Pagar using statutory board between Singapore a telegraph line. to provide local and Kuala Lumpur telephone services. to be made without an operator. 1998 1997 1994 1993 We launched Singapore’s Our internet We made our Singapore’s mobile market was arm – SingNet debut on the fi rst satellite, liberalised to spur was launched Singapore ST-1, into competition. to connect Stock Exchange space. Singaporeans and our fi rst We acquired NCS to to the World overseas provide seamless, Wide Web. investment end-to-end by acquiring a telecommunications stake in Globe. and IT services. 1999 2000 2001 2007 We acquired Singapore’s We acquired Optus, We ventured into the an initial telecoms our largest overseas cable television business stake in AIS. market acquisition, as well with mio TV, off ering was fully as an initial stake in quality entertainment liberalised. Telkomsel. to Singaporeans. We acquired an initial stake in Airtel. 1965 1971 1972 The Singapore Telecommunication We built STD became Department (STD) took over the Singapore’s known as the provision of telecommunications fi rst satellite Telecommunication services after Singapore’s earth station on Authority of independence. Sentosa island Singapore STB and STD looked after to connect (TAS) after a domestic and international Singaporeans re-organisation. telephone services respectively. to the world. 1992 19198888 1974 1973 We changed We rolled STB merged Paging services from a out with TAS were launched statutory Singapore’s to form to instant board to a fi rst mobile Telecoms. success. corporate network. company known as SingTel. 2008 2012 2015 We became We embarked on a We acquired cyber the fi rst mobile digital transformation to security fi rm Trustwave operator to provide strengthen our overall to strengthen our global high-speed 3G business performance. cyber security capabilities. networks in Singapore. We also acquired global We celebrated Singapore’s digital marketing fi rm Golden Jubilee amid Amobee to capture much fanfare. growth in the mobile advertising space. We launched Singapore’s fi rst 4G service. “Hello? Can you hear me?” Celebrating Singapore’s Golden Jubilee 2015 was a special year for Singapore, as the nation celebrated a much-anticipated coming of age. As a home-grown company, Singtel is proud to have played a vital role in helping Singapore become a world-class telecommunications hub. We supported a host of nation-building activities to commemorate this joyous occasion. National Day Parade 2015 99%SME Campaign Our exuberant Singtel contingent We launched a nationwide put their best foot forward at the campaign to rally consumers National Day Parade. to use products and services by SMEs. Developing the Arts Scene Supporting the SEA Games We contributed S$20 million We were the key multimedia sponsor to the National Gallery Singapore of the Games, providing over S$15 to raise the profi le of Southeast million in communications solutions Asian art, furthering Singapore’s and rallying the nation to cheer for ambition to be a global arts hub. Team Singapore! Singtel Carnival 1,500 Singtel staff put together a day of fun for our Singtel Touching Lives Fund benefi ciaries and children from special education schools in Singapore. Opening Singtel Enabling Innovation Centre We donated S$1.99 million to enhance the employability of persons with disabilities and help them lead m ore independentindependent lives.lives. Contents Overview An overview of our business, our performance, key achievements and value created, as well as our strategy moving forward 01 Financial Highlights 03 Chairman’s Message 05 GCEO Review 09 Who We Are 11 The Value We Create 13 Board of Directors 18 Organisation Structure 19 Management Committee 22 Senior Management Business Reviews Insights into each of our business units 23 Group Consumer 37 Group Enterprise 43 Group Digital Life 49 Key Awards and Accolades Governance and Sustainability Our corporate governance, risk management and sustainability eff orts 51 Governance & Sustainability Philosophy 53 Corporate Governance 81 Investor Relations 83 Risk Management Philosophy and Approach 91 Sustainability Performance Our fi nancial performance 100 Group Five-year Financial Summary 102 Group Value Added Statements 103 Management Discussion and Analysis Financials Audited fi nancial statements 113 Directors’ Statement 122 Independent Auditors’ Report 127 Consolidated Income Statement 128 Consolidated Statement of Comprehensive Income 129 Statements of Financial Position 130 Statements of Changes in Equity 134 Consolidated Statement of Cash Flows 137 Notes to the Financial Statements Additional Information Our shareholders, transactions with interested persons and other corporate information 222 Interested Person Transactions 223 Shareholder Information 225 Corporate Information 226 Contact Points 1 SINGAPORE TELECOMMUNICATIONS LIMITED Financial Highlights OPERATING REVENUE (1) EBITDA 2016 S$16,961M 2016 S$5,013M 2015 S$17,223M 2% 2015 S$5,091M 2% NET PROFIT UNDERLYING NET PROFIT 2016 S$3,871M 2016 S$3,805M 2015 S$3,782M 2% 2015 S$3,779M 1% FREE CASH FLOW (2) DIVIDEND PER SHARE 2016 S$2,718M 2016 S¢17.5 Stable 2015 S$3,549M 23% 2015 S¢17.5 RETURN ON EQUITY RETURN ON INVESTED CAPITAL 2016 15.6% 2016 11.7% Stable 2015 15.6% 2015 12.1% 0.4 percentage point Constant Currency (3) NET PROFIT UNDERLYING NET PROFIT 2016 S$3,990M 2016 S$3,929M 2015 S$3,782M 6% 2015 S$3,779M 4% ANNUAL REPORT 2016 2 NET PROFIT – Contribution by Geography 24% 29% 47% Regional Mobile Australia Singapore Associates SHARE PRICE CHANGES 5-year 1-year 50 5 40 0 31% 30 -4% -5 20 26% 10 -10 -13% 0 -15 -10 -9% -18% -20 -20 Apr Mar Apr Mar 11 16 15 16 Singtel MSCI APAC Telco Index (4) Straits Times Index Singtel MSCI APAC Telco Index (4) Straits Times Index 26% 31% -9% -13% -4% -18% SHAREHOLDER PAYOUT (S$ billion) 2016 2.8 Singtel has a track record of generous shareholder returns. 2015 2.8 We pay between 60% and 75% of 2014 2.7 underlying net profi t as ordinary dividends. 2013 2.7 For the fi nancial year ended 2012 2.5 31 March 2016, the Board has recommended a fi nal ordinary 2011 2.5 1.6 dividend of 10.7 Singapore cents a share. Together with the interim 2010 2.3 dividend of 6.8 Singapore cents, the total ordinary dividends for 2009 2.0 the year is 17.5 Singapore cents, unchanged from the previous Ordinary year. It also represents 73% of 2008 2.0 Dividend the Group’s underlying net profi t. 2007 1.6 1.5 Special Dividend Notes: (1) Impacted by the regulated reduction in Australian mobile termination rates from 1 January 2016, and a 9% decline in the Australian dollar. Excluding these factors, operating revenue would be up 5%. (2) Decrease is mainly due to mobile customer acquisitions and retentions in Australia, and receipts last year from fi bre rollout completion. Concurrently, the Australian dollar and Indonesian rupiah fell signifi cantly. (3) Assuming constant exchange rates from FY 2015. (4) MSCI Asia Pacific Telecommunications Index. Chairman’s Message Dear Shareholders, Four years ago, we embarked on a journey to as consumers continue to shift from voice transform ourselves into a communications to data. Data revenues from Singapore and company operating in a data-centric digital world. Australia have grown signifi cantly as we’ve made The reason was simple – the mobile internet further investments in network, technology revolution was taking hold, threatening traditional and spectrum, and restructured our price plans revenue streams from voice and SMS. We saw that to meet the increasing need for quality mobile to stay relevant, we had to put data at the centre of internet at aff ordable prices. We are among the our business and transform our telecoms network leaders globally in making this successful shift. into high-speed data networks so that we could capture and monetise this growing demand for The other piece of good news – the mobile mobile data. As we take stock of the progress we’ve internet revolution is only just beginning in the made, we have protected our revenues while emerging markets where prices of smart phones creating a new set of opportunities around our data and devices are getting more aff ordable for a assets. Our FY 2016 results bear this out. Our net growing middle class. This puts us in an enviable profi t for the year was up 2% to S$3.87 billion but position as we have a strong presence across would have grown 6% in constant currency terms. Indonesia, the Philippines, Thailand, India and Africa, where our regional mobile associates We continue to deliver strong earnings as our core operate. Previously priced out of the mobile businesses performed well. This is despite regional data revolution, these developing markets currency weakness and the costs of investing in the are now making their respective transitions new enterprise services of cloud, cyber security as from mobile telephony to mobile internet, well as our digital businesses. moving up the ladder from 3G to 4G, just as we have. With insights and lessons from our own TRANSFORMING OUR CORE MOBILE BUSINESS transformation, we are well-placed to help steer The steps we’ve taken to transform our core our associates through this exciting move to a telecoms business are increasingly paying off digital world. 4 American Business Awards, Amobee’s Brand “Consumer habits are still Intelligence platform analyses and correlates more than 60 billion content engagements daily across evolving alongside the rapidly the web, social media, video and mobile, helping businesses optimise their media strategies to merging telecoms and internet improve brand awareness and engagement rates.