Connecting Your World ANNUAL REPORT 2017 Connecting Your World Technology has the power to enrich lives and draw people closer. Two friends across continents connect in an instant, businesses reach customers in a flash, and entertainment is available round the clock, thanks to a host of technologies working hard behind the scenes. As a leader in communications technology, Singtel is proud to play a critical role in enabling such interactivity for millions of people across the world every day, through our investments in network infrastructure, product innovation and service excellence. But that’s not all. We believe the digital revolution should benefit everyone and empower even those who may not have ready access to digital technology. This year’s report throws the spotlight on how our staff and company initiatives are championing positive change in our communities, from training youth in digital literacy to supporting social entrepreneurs who are innovating tech solutions or simply helping the elderly use mobile devices to plug into the web. Because at Singtel, it is not simply about technology – it’s about you and connecting your world. CHUN HUI EN NCS Senior Assistant, Business Development Before she embarked on her volunteering trip in the Philippines, Hui En was worried she wouldn't be able to communicate with the children. As it turned out, all it took was a hug and a smile to break the ice. Despite the language barriers, many memorable moments were created and friendships forged. Today, Hui En remains in touch with her Pinoy friends via social media and looks forward to the next overseas volunteering opportunity. Table of Contents OVERVIEW An overview of our businesses, our performance, key achievements and value created, as well as our strategy moving forward 1 Financial Highlights 3 Achievements in FY 2017 5 Chairman’s Message 7 GCEO Review 11 Who We Are 13 Our Businesses 14 Our Strategy 15 The Value We Create 17 Board of Directors 22 Organisation Structure 23 Management Committee 28 Senior Management BUSINESS REVIEWS Insights into each of our business units 29 Group Consumer 43 Group Enterprise 51 Group Digital Life 59 Key Awards and Accolades GOVERNANCE AND SUSTAINABILITY Our corporate governance, risk management and sustainability efforts 61 Governance and Sustainability Philosophy 63 Corporate Governance 91 Investor Relations 93 Risk Management Philosophy and Approach 101 Sustainability PERFORMANCE Our financial performance 110 Group Five-year Financial Summary 112 Group Value Added Statements 113 Management Discussion and Analysis FINANCIALS Audited financial statements 123 Directors’ Statement 132 Independent Auditor’s Report 137 Consolidated Income Statement 138 Consolidated Statement of Comprehensive Income 139 Statements of Financial Position 140 Statements of Changes in Equity 144 Consolidated Statement of Cash Flows 147 Notes to the Financial Statements ADDITIONAL INFORMATION Our shareholders, transactions with interested persons and other corporate information 228 Interested Person Transactions 229 Shareholder Information 231 Corporate Information 232 Contact Points CHONG POH YOKE NCS Systems Consultant Poh Yoke is no stranger to volunteering. But when she went to the Philippines to teach English to the street children, she learned once again how little acts of kindness could make a big diff erence to others. The smiles and easy laughter of the children have not just taught her to appreciate the simple things in life, but have brought her out of her comfort zone. She feels this has made her a better person. Financial Highlights OPERATING REVENUE (1) EBITDA 2017 S$16,711M 2017 S$4,998M -1.5% STABLE 2016 S$16,961M 2016 S$5,013M NET PROFIT UNDERLYING NET PROFIT 2017 S$3,853M 2017 S$3,915M STABLE +2.9% 2016 S$3,871M 2016 S$3,805M FREE CASH FLOW SHAREHOLDER PAYOUT 2017 S$3,054M 2017 S$2,857M +12.4% +2.4% 2016 S$2,718M 2016 S$2,789M RETURN ON EQUITY RETURN ON INVESTED CAPITAL (2) (2) 2017 14.5% -1.1 2017 11.1% -0.6 percentage percentage 2016 15.6% points 2016 11.7% point Constant Currency NET PROFIT UNDERLYING NET PROFIT 2017 S$3,832M 2017 S$3,894M -1.0% +2.3% 2016 S$3,871M 2016 S$3,805M 1 NET PROFIT Contribution by Geography 30% 22% 48% Singapore (3) Australia Regional Associates REVENUE BREAKDOWN BY PRODUCTS AND SERVICES 3% 11% 12% 36% 18% Mobile Communications Data and Internet 20% ICT Sale of Equipment Digital Businesses Others (4) SHAREHOLDER PAYOUT Singtel has a track record of generous shareholder returns. Dividend per share (S¢) We pay between 60% and 75% of underlying net profit as 2017 17.5 ordinary dividends. 2016 17.5 For the financial year ended 31 March 2017, the Board has recommended a final ordinary dividend of 10.7 Singapore 2015 17.5 cents a share. Together with the interim dividend of 6.8 Singapore cents, the total ordinary dividends for the year is 2014 16.8 17.5 Singapore cents, unchanged from the previous year. It also represents 73% of the Group’s underlying net profit. 2013 16.8 Notes: (1) Impacted by regulated reduction in Australian mobile termination rates from 1 January 2016. Excluding this, operating revenue would be up 2.0%. (2) Based on enlarged equity base, as the Group issued new shares to acquire stakes in the associates. (3) Includes losses from Trustwave and Amobee. (4) Includes National telephone, International telephone and Pay television. Singapore Telecommunications Limited | Annual Report 2017 2 Achievements in FY 2017 The Group has achieved a lot since our last annual report. We launched new products and services, bolstered our core and digital capabilities, and deepened our relationships with our regional associates. Extended Global Connectivity Formed a strategic alliance with Launched Cyber Airtel in India to provide high Security Training for speed data connectivity through C-Suites 370 points of presence in 325 cities worldwide. Launched All-in-one Established Mobile Content Payments Creation Arm The Singtel Cyber Security Institute in Singapore is the first Introduced Singtel Dash, Globe in the Philippines set up of its kind in Asia Pacific to hone Singapore’s first all-in-one mobile Globe Studios and Globe Live to cyber skills and preparedness of payments solution for transit, retail create original shows and world- businesses and governments. and money transfers. class live entertainment events. APRIL 2016 MAY 2016 JUNE 2016 OCTOBER 2016 NOVEMBER 2016 Launched Deepened Relations Cyber Security with Regional Associates Services in Increased effective interests in AIS and Airtel in the high- Japan growth Thai and Indian markets through acquisition of shares in Intouch Holdings and Bharti Telecom. Partnered TIS Inc to provide Trustwave's cyber security services in Japan to help businesses build Launched Security Operations cyber resilience and protect critical infrastructure. Centre in Australia Optus Advanced Security Operations Centre in Australia helps protect enterprises against cyber threats. Invested in Cyber R&D Established NUS-Singtel Cyber Security R&D Lab to create innovative cyber security solutions for a smarter, safer Singapore. 3 Enhanced Digital Content Launched Cast OTT video portal app offering Hollywood and Asian content, and Singtel Newsstand offering digital subscriptions to leading local and international Launched Tripled the Data news publications and SPH lifestyle magazines in Singapore. International Mobile Video Competition X3 X3 Launched 24/7 X3 Sports Channel Optus Sport with on-demand and Launched "The 5-min Video Launched DataX3 mobile data live multi-screen capability was Challenge" across the Group to add-on to offer triple the mobile launched in Australia. generate original content. data allowance in Singapore. JULY 2016 AUGUST 2016 SEPTEMBER 2016 JANUARY 2017 FEBRUARY 2017 MARCH 2017 Introduced Invested in Launched Cyber Fastest Mobile Digital Marketing Security Services in Network Technology the Philippines Launched450 Mbps mobile data speeds nationwide in Singapore. Launched First Payments Bank Trustwave Managed Security Services was launched in the Airtel India launched India’s first Amobee strengthened its Philippines with Globe to payments bank, offering customers technological edge and scale with help enterprises protect against the convenience of cashless purchases the acquisition of Turn, a leading cyber attacks. using mobile money at over data management platform and Airtel retail outlets multi-channel programmatic 250,000 and over media buying platform. 1m merchants. Singapore Telecommunications Limited | Annual Report 2017 4 Chairman's Message "Transformation is at the heart of repositioning Singtel to remain relevant to our customers as well as building new sources of revenue for the mid to long term." 5 Dear Shareholders, CAPTURING NEW GROWTH IN DIGITAL As the public and private sectors increasingly go digital, FY 2017 was a challenging year as competition intensified demand for ICT-based solutions such as cloud, software across markets for both our consumer and enterprise as a service and cyber security are providing growth businesses. Taken in this context, Singtel delivered opportunities. a resilient performance while continuing to make significant investments for the future. Our net profit for Cyber security is a high-growth sector where we the year was stable at S$3.85 billion, underpinned by have established a global platform by leveraging our growth in mobile data, ICT and digital services. acquisition of Trustwave, a US-based leading managed security services provider. We are building out a global INVESTING FOR THE FUTURE cyber security business which we expect to become a We continue to invest in the digital transformation we key growth driver in our future. Coupled with our existing began five years ago, transforming our core business and ICT assets and capabilities, we are well placed to provide investing to grow to scale new global businesses in digital a comprehensive set of managed services with carriage marketing and cyber security. Transformation is at the solutions that will create more value in the long term.