Operating and Financial Review Contents 23 Overview 24 Vision, Mission and Strategies 26 Business in Singapore 32 Business in Australia 38 Business across Asia 41 Group Five-Year Financial Summary 42 Management Discussion and Analysis 49 Shareholder Returns Operating51 Risk Factors and Financial Review 22 SingTel Annual Report 2005/2006 Overview SingTel was incorporated in March 1992 and became a SingTel was listed on the Australian Stock Exchange (“ASX”) public company in October 1993. The Company was listed in September 2001 when it acquired Optus, the second on the Singapore Exchange (“SGX”) in November 1993. largest communications provider in Australia. SingTel is majority owned by Temasek Holdings (Private) SingTel also has interests in several other communications Limited which owns 56.5 per cent of SingTel’s issued share companies outside Singapore, including AIS in Thailand, capital. The rest of the shares are in public hands. Bharti in India, Globe in the Philippines, Pacific Bangladesh Telecom in Bangladesh and Telkomsel in Indonesia. The principal operations of SingTel are in Singapore and Australia. The SingTel Group has subsidiaries that are Today, SingTel is the largest company listed on the SGX engaged in activities such as the provision of mobile with a market capitalisation of S$44 billion (US$27 billion) phone, Internet, IT and consultancy services, and the sale of as at 31 March 2006, and offers investors an opportunity to telecommunications equipment. own part of a truly regional communications group with operations and investments in more than 20 countries and territories. SingTel Group Structure Major Subsidiaries Major Associates and Joint Ventures Singapore Overseas Singapore Overseas Singapore Telecom Mobile SingTel Optus Pty Limited Singapore Post Limited Advanced Info Service Pte Ltd (“SingTel Mobile”) (“Optus”) (“SingPost”) Public Company Limited (“AIS”) SingNet Pte Ltd (“SingNet”) Bharti Airtel Limited (“Bharti”) Telecom Equipment Pte Ltd (“Telecom Equipment”) Globe Telecom, Inc. (“Globe”) NCS Pte. Ltd. (“NCS”) Pacific Bangladesh Telecom Limited (“Pacific Bangladesh Telecom”) PT Telekomunikasi Selular (“Telkomsel”) New Century Infocomm Tech Note: Co., Ltd. (“NCIC”) Please refer to Note 45 to the Financial Statements on page 165 for the comprehensive list of companies in the Group. Network i2i Limited (“i2i”) Southern Cross Cable Holdings Limited (“Southern Cross”) SingTel Annual Report 2005/2006 23 Operating and Financial Review Vision, Mission and Strategies SingTel’s vision is to be Asia Pacific’s best communications • Grow in Australia – We will continue to grow our group. Our mission is to break barriers and build bonds market share in Australia through Optus, which so that we make communications easier, faster, more is the leading challenger to the incumbent economical and more reliable for individuals and telecommunications operator. Optus aims to achieve businesses. At the same time, we want to create and deliver revenue growth and margin improvements. To reach value to our customers, business partners, shareholders these goals, Optus will deliver a simple, innovative and employees. and reliable experience to customers, ensure cost leadership in target markets, strengthen its ‘challenger’ To achieve our vision and mission, we have adopted five culture and leverage the scale of the SingTel Group as strategic goals: a whole. • Lead in Singapore – We will maintain our leadership position in Singapore by continuing to focus on • Partner across Asia – We will expand our regional growing usage, providing enhanced services to our franchise across Asia Pacific. Our focus is on executing customers and leveraging our strong brand equity. and maximising the value of our existing businesses Operating and Financial Review Left: As the number-one telecommunications service provider in Singapore, we remain committed to offering our customers the best value and the most innovative communications solutions to meet their diverse and changing needs. Top: Optus is the second largest communications company in Australia and is focused on capturing market share, stimulating revenue and achieving scale for continuous growth. 24 SingTel Annual Report 2005/2006 and regional partnerships. This includes reviewing reliable and quality network solutions to our customers. opportunities to increase our shareholdings in We will enhance our service and network infrastructure existing associates and the flexibility to consider new to better serve our customers throughout Asia Pacific. investments, if they make sense both strategically and financially. • Innovate for the Future – We will enhance our position as an integrated provider of wireline and wireless services The geographic focus will remain in Asia Pacific, with a for consumers and businesses by providing innovative preference for strategic investments where we can add communications solutions to meet their evolving needs, value by taking an active role in management and where and nurturing our human and intellectual capital to such investments can be funded from internal cash flow achieve organisational excellence. generation. We measure our progress in realising our vision and mission • Connect Asia – Our network of SingTel Global Offices by delivering sustainable shareholder value, maximising and extensive infrastructure have allowed us to deliver customer satisfaction and being an employer of choice. Bottom: We work closely with our partners across Asia so as to maximise the value of our existing businesses and regional partnerships as well as to sustain our growth. Top: Our customers enjoy unparalleled reach across the globe with our advanced and extensive telecommunications infrastructure, and worldwide network of 37 SingTel Global Offices. SingTel Annual Report 2005/2006 25 Operating and Financial Review Business in Singapore We continue to be the leading telecommunications service With Free Sunday Calls and Free Outgoing Calls Everyday provider in Singapore. Despite the fiercely competitive – the first of their kind in Singapore – new and existing market, we gained 94,000 new mobile customers year- prepaid mobile customers can enjoy free outgoing local on-year and increased our total mobile subscriber base to calls everyday. Customers also benefited from more 1.66 million. Our broadband business also performed free calls with the launch of Free Incoming Calls and well, with the number of broadband lines rising 18 per Free International Direct Dialling (“IDD”) v019 Calls to cent to 352,000. In IT and communications engineering, 13 destinations. our wholly-owned subsidiary, NCS, maintained its steady revenue growth by creating and delivering value to its We were also the first to introduce the lowest prepaid card customers. value in the market – the S$10 Prepaid Card. The card gives greater value to customers as they need only pay S$8 to Mobile Services receive S$10 worth of calls. During the year, we continued to build on our value propositions. In addition, holders of the Kababayan Card – a co-brand prepaid mobile card with our regional mobile associate, In response to a growing prepaid mobile market, we Globe – became the first prepaid card users in Singapore to launched a series of innovative prepaid mobile features enjoy free IDD calls to Globe customers in the Philippines. aimed at bringing the most compelling value to our customers. 26 SingTel Annual Report 2005/2006 Opposite page & right: We constantly add value to our mobile services to cater to the needs of our customers. Among the new mobile features that we launched during the year were free outgoing local calls everyday for our prepaid mobile users. Our focus on adding value to our prepaid mobile services SingTel – together with two local telecommunications has provided us with a stronger competitive positioning. service providers – developed and launched a voluntary As at 31 March 2006, we had 456,000 prepaid mobile code in March 2006 to self-regulate mobile content in subscribers. Singapore. The code provides a common framework for the development and marketing of mobile content and The year also saw the availability of a 2-in-1 Subscriber is guided by the principle that such content should be Identity ModuIe (“SIM”) card where customers have the consistent with material that is available to the general flexibility of making calls and sending Short Message public on an unrestricted basis from other mainstream Service (“SMS”) through either of two mobile numbers media. with just one SIM card and one mobile phone. Forging Ahead with 3G In line with our efforts to promote mobile commerce, we Since the launch of our 3G service in February 2005, our partnered the Land Transport Authority to launch Easi- 3G subscriber base has been growing steadily. Today, we ERP during the year. Easi-ERP is an electronic payment lead the market with about 130,000 3G customers who are service that allows customers to conveniently pay their responding positively to our range of value-added services outstanding Electronic Road Pricing (“ERP”) charges that include video calls at voice rates, cheaper data charges through their SingTel Mobile bills and enjoy a lower ERP and free video streaming. We continue to offer the most administrative fee at the same time. extensive 3G roaming coverage to our mobile customers in Singapore. The popularity of our 3G service attests to We believe that protecting mobile users, especially how it is boosting mobile communications and making minors, from inappropriate mobile content is