singtel going abroad
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8/6/2019 SingTel Going Abroad
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R o b e r t C l a r k
Going abroad
Ever since deregulation began, it's
been the dream of incumbent tel-
cos to take tbeir business abroad.
Wby not? Tbey're market leaders,
tbey have experience, expertise and
massive resources. As we know, many bave felt
tbemselves called to this grand project, yet tew
bave been chosen.
During the boom years, European and
American telcos leveraged their high stock
prices to take unsustainable positions in A.sian
carriers, virtually all of which bave been
unwound. Tbeir global alliances fared no bet-ter.
Incumbent teicos just don't play well away
from home.
It's partly cultural and, let's be honest, ego.
These are companies not used to playing second
fiddle, especially not in an emerging market.
It's also had to do with scale; boar ds accus-
tomed to dealing in billions of dollars get
impatient with minority stakes with net pres-
ent value of a mere $100 m illion.
Well, that was then. Today, telcos from
mature markets don't even have a lot to offer.Their stocks are well down, their engineering
strengths have been commoditized and their
brands have never counted for mucb out of
their domestic market.
But it seems teicos are figuring out to
expand abroad.
The Asian example is Singapore Telecom,
whose revenue is primarily derived from off-
shore. Over a decade, it's taken a measured
strategy of investing in mobile in Asean and
Australia. It's a focused .strategy of going into
familiar territories. And, because the company
is com mitted to those markets, it hasn't expect-
ed returns overnight.
Each of these took place only with the sup-
port of the respective governments, as you'd
expect in Asia in a sensitive industry (and it's
not just an Asian sensitivity). This has been
underscored by tbe Malaysian government's
continual refusal to allow SingTel to buy into
tbat market.
It's not rocket science, but if you w ere going
to prescribe a formula for offshore investment
by a telco, SingTel's approach is it. Companies
like Vodafone, FT Orange and Hutcbison 3have also worked by slowly growing a chain of
mobile operators.
ernment telco can
vaporize shareholder
value abroad, it 's
Australia.
Telstra isn't alone in
making bad investmentcalls. Although its off-
shore business goes back
to tbe mid-80s, it has
never been able to settle
on an overseas strategy
(at one point ludicrously
basing its regional officein Hanoi).
Its government shareholder and the politi-
cally-friendly directors appointed to the board
bave no appetite for the bard slog of Asian deal-
mak ing. The carrier ope rates in a toxic political
environment, with public opinion sharply
divided over whether it should remain in pub-
lic ownership. We'll see which way tbe new
CEO Solly Trujiiio takes tbe company.
There is a reason for tbese ruminations,
which is that China's four listed telcos bave
received a public push to go international.Lu Yang, deputy director of the Mil's
te lecommunicat ions administra t ion, last
month told a conference that the government is
"encouraging" the carriers to invest globally.
"It's part of our overall strategy," he said.
It's not certain bow much credence we
should give this. Government officials love to
make such meaningless expressions of support.
And in tbe same speech Lu also claimed tbe
government welcomed investment from for-
eign telco.s and promised "fair competition."
But nonetheless it's reasonable to expect the
two biggest carriers, Cbina Mobile and China
Telecom, will chase opportunities abroad, just
as the Chinese vendors bave. Judging by the
market rumors of China Mobile's interest in
the Ho ng Kong market, it's som ething investors
expect, too.
Ironically, it will be to tbese carriers' com-
mercial advantage that tbey are state-con-
trolled. This will set them up sweetly for deals
in politically-friendly markets in Asia, Africa or
Latin America, where their engineering and
business skills will be worth a premium.
So, politics still counts for a lot. But for tel-cos investing abroad for com mercial reasons, it
helps to be focused, and in it for tbe long- term .
If y o u w e r e g o in g t o
p r e s c r i b e a f o r m u i a
o f f s h o r e i n v e s t m e n t
a t e i c o , S I n g T e i 's
a p p r o a c h is it
Robert Clark is a Hong
based technology journ
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