Singapore Telecommunications (Z74) Status update summary

Strategic reset and transformation

• Underwent a major strategic reset in 2021 due to leadership changes and industry headwinds, including digital disruption and COVID-19 challenges.

• Focused on scaling growth engines: carved out data center business (Nxera) and IT services (NCS), bringing in KKR as a strategic investor.

• Implemented capital recycling, monetizing assets and selling loss-making businesses, especially outside Southeast Asia, to improve profitability.

• Simplified business structure, merging enterprise and consumer units for greater efficiency and synergy.

• Despite asset value realization, stock price remains low due to HoldCo discount, which management aims to address through operational delivery.

Growth strategy and market outlook

• Positioned for growth in emerging markets, with over 70% of profits generated outside Singapore, leveraging early investments in India, Indonesia, Thailand, and Australia.

• Anticipates significant growth in fixed broadband and digital infrastructure as household penetration in key markets remains low.

• Data centers and IT services are key growth drivers, with new capacity being built in Singapore, Batam, and Bangkok.

• 5G investments are focused on industrial and enterprise use cases, such as autonomous manufacturing, rather than just consumer mobile.

• Partnerships with global tech leaders like NVIDIA enable new offerings such as GPU-as-a-Service, targeting enterprise AI adoption.

Capital management and dividend policy

• Committed to sustainable dividend growth, targeting a payout ratio of 70%-90% of underlying profits, with additional value realization dividends (VRD) from asset recycling.

• Asset recycling has raised SGD 8 billion over three years, funding growth, paying down debt, and supporting special dividends.

• Guidance for EBIT growth is high single digits to low double digits (8%-13%) for the current financial year, up from previous years' mid to low single digits.

• Bringing in private capital partners like KKR helps fund capital-intensive growth while protecting core dividends.

• Plans to maintain VRD of SGD 0.03-0.06 per share annually, with a pipeline of SGD 6 billion in further asset recycling identified.