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Why Singtel is betting big on gaming, streaming and financial services startups in S’pore

Singtel digital initiatives

Singapore’s largest telco Singtel said in May this year that it is “open to taking significant minority stakes” in startups focused on financial services, streaming, and gaming.

This is part of its “strategic reset” to spur business recovery and growth, among other plans like ramping up its 5G business.

The news comes as it hits a snag. The group’s net profit nosedived 93 per cent for the second-half of its fiscal year to S$88 million, from S$1.2 billion a year ago.

Singtel said the operating landscape remains challenging for the telecoms sector partly due to Covid-19. Its group CEO Yuen Kuan Moon said that with digitalisation sweeping across ASEAN, the company wants to make the most out of this growing appetite for digital services.

The group did not reveal specific targets, but expects this focus on digital investments to take several years. We take a deeper look at what these new focus areas mean and what opportunities they present.

Bring it on, gamers

According to Arthur Lang, Singtel International’s CEO in media reports, about 65 per cent of the group’s customers are aged 18 to 35. 

As this group consumes digital content the most, gaming and esports will be what it is ramping up on to create engagement with customers.

The telco may have an advantage in this game.

A research report from PWC says having a connectivity infrastructure — what telcos have — make a solid base to create new gaming initiatives.

Gaming can also help to increase telcos’ data usage and boost revenues. PWC says telcos can also leverage the data to generate insights about their customers and understand what they want better.

Singtel has been slowly growing its interest in the gaming industry. 

singtel gaming
Image Credit: KR Asia

In March last year, the group, together with Thai Telco AIS and South Korea’s SK Telecom announced a US$30 million joint venture in gaming firm Storms.

Storms’ publishing unit focuses on casual and hyper-casual mobile gaming. According to Singtel, that arena has less significant competitors compared to the mid-core gaming space that holds Garena and Tencent.

Other gaming initiatives the group has dabbled in include an esports platform and a championship PVP Esports.

Financing capabilities boosted by 5G

Financing might not usually be the first thing on peoples’ minds when thinking of a telco, but Singtel has been involved in this space for some time.

singtel dash
Image Credit: The MileLion

In 2014, it launched mobile wallet Singtel Dash. After a slow start due to sluggish take-up rate, the results seem to be finally showing.

Dash’s monthly active user base as of March this year rose by 43 per cent, the group said in its latest earnings report. Dash’s remittance transaction value also tripled from the last corresponding period due to the growing remittance market.

Singtel expects growth to continue now that users can send and receive via PayNow on non-bank e-wallets such as GrabPay and Singtel Dash.

singtel 5g
Image Credit: Rendy Aryanto via VVS.sg

The telco also has an advantage with its 5G connectivity, and is likely to lean on that to grow its digital business. It says that 5G will enhance security processes of finance platforms and boost more online financial transactions.

The high bandwidth provided by 5G will also make data collection for those services more robust.

It is likely to make bigger waves in this space in the coming months. In 2020, the group’s joint venture with Grab won the bid for a full digital bank license, awarded by Singapore’s central bank. The bank is set to operate early next year.

Singtel is also not shying away from funding rounds. For example, it guided and supported Telkomsel’s participation in a US$100 million Series B funding round in Indonesian e-wallet LinkAja along with other investors like Grab and Gojek. 

It also supported Globe whose fintech arm Mynt recently raised US$175 million at a valuation close to US$1 billion.

Beware of streaming wars

The Covid-19 pandemic has provided a demand shock for video streaming services. In fact, global over-the-top (OTT) revenues rose 26.2 per cent in 2020 to S$78 billion (US$58.1 billion).

Video streaming growth
Global OTT streaming services expected to rise over the next few years / Image Credit: PWC

Research firm PWC says the streaming boom has placed the industry in a new growth trajectory. Global streaming revenues are set to hit S$109 billion (US$81 billion) by 2025.

However, it will be an uphill battle to compete as bigger players like Netflix and newcomer Disney+ are dominating the market share.

singtel cast
Image Credit: Singtel

Singtel CAST, its digital streaming service is set to feel the heat, and the telco should mull it over when investing further into this space.

Data from analytics firm SimilarWeb showed internet traffic to Singtel CAST for the month of May at under 190,000 visits. This is significantly low, as compared to over 400 million visits for streaming giant YouTube and around 43 million visits for Netflix.

Singtel CAST web traffic
Visitor traffic on popular streaming sites versus Singtel CAST / Image Credit: Similarweb

In fact, previous earnings reports from Singtel show CAST and TV Go viewers falling by 11 per cent on-year to 191,000 as of the second half of its fiscal year.

This is after it managed to get 215,000 users in the same period a year ago, before dipping to 204,000 at the end of last year, which shows that the telco will have some work cut out for it to keep its customers.

PWC says firms like Singtel will have to look at strategic objectives to grow its service. To gather near term growth, firms have to be more measured in their offerings, with a focus on improving the customer experience.

Fair share of setbacks

Although the group has been progressively exploring new opportunities beyond its core business, the strategy seems to be at a “you win some, you lose some” position.

hooq
Image Credit: Hooq

In attempting to succeed in this digital space, it has faced some setbacks. This includes the closure of its streaming video platform Hooq last year, and the decision to close its restaurant review platform HungryGoWhere last month.

The group had filed for liquidation for its streaming video platform Hooq due to it not being able to grow enough to generate sustainable returns.

The video service, which was created in 2015, recorded a S$84 million (US$62.5 million) loss in its 2019 fiscal year. According to regulatory filings, Singtel had already injected at least S$161 million (US$120 million) in capital.

hungrygowhere
Image Credit: HungryGoWhere

As for HungryGoWhere, the closure was a result of “severe challenges” in the industry.

The decision is in line with the group’s attempt to refocus its business. It agreed to exit the restaurant reservations market after a detailed review of HungryGoWhere’s prospects.

Experts have said that the exits are silver linings, as they allow Singtel to focus on core capabilities as well as other sustainable digital innovations that can help navigate it through the pandemic.

In its strategic reset note, the group called out to investors who have complementary strengths and can bring synergies to drive growth for its businesses.

As Singtel Group CEO Yuen puts it in the latest earnings statement: “This year’s results are disappointing given unprecedented headwinds from COVID-19 and ongoing structural challenges… We will be capitalising on this mass digitalisation with plans for a strategic reset to drive recovery and growth.”

Featured Image Credit: FMT News

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