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Singtel is betting big on gaming, streaming, and financial services startups

Written by Vulcan Post Published on     5 mins read

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Amid several unsuccessful ventures, Singtel is looking to make strategic investments in a variety of startups as part of its “strategic reset.”

Singapore’s largest telecommunications service provider, Singtel, said last month 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.

Part of the reason for Singtel’s interest in strategic investments is due to the group’s net profit nosediving 93% in the second half of its fiscal year to SGD 88 million (USD 65 million), from SGD 1.2 billion (USD 890 million) a year ago.

Singtel said the operating landscape remains challenging for the telecoms sector, partly due to COVID-19. The group’s CEO Yuen Kuan Moon said that with digitalization sweeping across Southeast Asia, the company wants to make the most out of this growing appetite for digital services. The group did not reveal specific targets but expects its focus on digital investments to take several years.

Singtel International’s CEO Arthur Lang told KrASIA last year that about 65% of its customers are aged 18 to 35. As this group is the largest consumer of digital content, gaming, and e-sports, Singtel will focus on these areas to create engagement with its customers.

The telco may have an advantage in this area. A research report from PWC says having a connectivity infrastructure provides a solid base to create new gaming initiatives. Gaming can also help increase data usage and boost revenues. PWC said that telcos can also leverage data to generate insights about their customers and understand what they want.

Singtel has been slowly growing its interest in the gaming industry. In March last year, the group, together with Thai Telco AIS and South Korea’s SK Telecom, announced a USD 30 million joint venture with 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, which is largely dominated by Garena and Tencent. Initiatives the group has dabbled in include e-sports platform PVP Esports.

Fintech capabilities boosted by 5G

Singtel has been involved in financial services for some time. In 2014, it launched mobile wallet Singtel Dash. After a slow start due to a sluggish take-up rate, it is finally seeing positive results. Dash’s monthly active user base as of March this year rose by 43%, the group said in its latest earnings report. Dash’s remittance transaction value has 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. 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 the security of financial platforms and boost the digitalization of financial services. The high bandwidth provided by 5G will also make data collection for those services more robust.

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

Singtel is also not shying away from funding rounds. For example, it guided and supported Telkomsel’s participation in a USD 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 USD 175 million at a valuation close to USD 1 billion.

The COVID-19 pandemic has created significant demand for video streaming services. In fact, global over-the-top revenues rose 26.2% in 2020 to SGD 78 billion (USD 58 billion). Research firm PWC says the streaming boom has placed the industry on a new growth trajectory. Global streaming revenues are set to hit SGD 109 billion (USD 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. Singtel CAST, its digital streaming service, is set to feel the heat, and the telco should take this into consideration 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 lower compared to over 400 million visits to streaming giant YouTube and around 43 million visits to Netflix.

In fact, previous earnings reports from Singtel show CAST and TV Go viewers falling by 11% year-on-year to 191,000 as of the second half of its fiscal year. This comes after it managed to reach 215,000 users in the same period a year ago, before dipping to 204,000 at the end of last year, showing 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 their services. To gather near-term growth, firms have to be more measured in their offerings, with a focus on improving the customer experience. Although the group has been progressively exploring new opportunities beyond its core business, the strategy seems to be in a “you win some, you lose some” position.

In attempting to succeed in this digital space, it has faced several 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 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 SGD 84 million (USD 62.5 million) loss in its 2019 fiscal year. According to regulatory filings, Singtel had already injected at least SGD 161 million (USD 120 million) in capital.

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 reached out to investors that have complementary strengths and can bring synergies to drive growth for its businesses.

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

This article was originally published by Vulcan Post. The paragraph featuring Storms has been updated. The gaming firm clarified that it is “not working on a mobile-based community for gaming news and rewards, which is scheduled to be published later this year.”

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