Singtel stumbles over diversification strategy

Singtel has been making considerable efforts to diversify beyond its core telecoms business, exploring new opportunities to provide a firmer basis for growth with a strong focus on enterprise.

However, the Singapore-based operator, which has just emerged from a somewhat bruising 2020 because of the effects of COVID-19, is now being forced to embark on a strategic review of two digital businesses.

Singtel, which aside from Singapore owns operators in Southeast Asia, Australia and India, said a review of digital marketing arm Amobee and cybersecurity business Trustwave is required in order to "sharpen the group's focus and ensure that these assets are positioned for growth."

Above and beyond: Singtel is having to rethink its diversification strategy in the face of the coronavirus pandemic.
  (Source: Fitch)
Above and beyond: Singtel is having to rethink its diversification strategy in the face of the coronavirus pandemic.
(Source: Fitch)

It acquired Amobee for US$321 million in 2012 and Trustwave for US$810 million in 2015.

The operator has booked non-cash impairment charges of US$438 million and US$250 million against Amobee and Trustwave respectively for the second half of the financial year to March 31, 2021.

Added to this, Australian subsidiary Optus is to book non-cash impairments and write-downs of A$197 million (US$152.5 million) for the second half of the year, mainly for its legacy fixed access networks.

As a result, Singtel said it expects to report full-year net exceptional losses of S$1.21 billion (US$907 million), of which S$839 million will fall in the second half.

Under pressure

Yuen Kuan Moon, Singtel's Group CEO, said the two businesses had been impacted by the effects of the COVID-19 pandemic, but also conceded that they "have come under increasing pressure in the last two years due to industry and operational challenges."

"Amobee saw an almost year-long contraction in advertising spend by some of the largest agencies and advertisers in North America. Against this backdrop, there is a clear need to review these major investments to identify ways to increase the probability of successful execution," Yuen said.

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He added that the review could involve the restructuring of product or business segments, a full or partial divestment or business combinations with other industry players.

"We are open to all types of strategic partnerships and deals including inviting investors who have complementary capabilities and can enhance the value of the businesses," Yuen said.

Yuen insisted that cybersecurity remains core to group strategy and ICT offerings, "and the review will be geared to ensure we capture the growth in Asia Pacific."

Singtel's full-year results announcement is scheduled for May 27, when Yuen is expected to provide further details on the group’s strategic direction and priorities.

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— Anne Morris, contributing editor, special to Light Reading

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