Singtel’s Playbook to be a Growth Stock Again! [Chills 176 ft Singtel’s CFO, Arthur Lang]

Candid Insights from Singtel’s Group CFO Arthur Lang on the Telco’s Strategic Reset

What prompted one of Singapore’s biggest companies to undergo a multi-billion dollar restructuring over the last three years? Singtel Group CFO Arthur Lang recently provided a refreshingly honest look at the thinking behind the telecom giant’s strategic “reset” with hosts Reggie and Anthony.

As Arthur jovially described himself, “I’m a father of three and a husband of one…a pretty boring guy, not so interesting.”

The Strategic Reset Origins

Arthur traced the reset’s origins back to 2021 when Singtel underwent a major leadership transition. Within a year’s span, the company had appointed a new chairman, CEO, CFO (Arthur himself), and several other senior leaders.

This retooling at the top came at a challenging time for Singtel and the larger telecom industry, which was facing disruption from digitalisation and over the-top streaming services. The COVID-19 pandemic had also created “major difficulties” for Singtel’s investments in India.

As Arthur candidly put it, “The rules that we were playing with at that time just had to change because the game has changed.”

The Three Pillars of the Reset

So what exactly did Singtel’s “reset” involve? According to Arthur , it centered around three key pillars:

Identifying and scaling up growth engines like data centers/digital infrastructure and IT services.
“A little known fact before this re-org was that we were one of the largest owners of data centers in Singapore. And we were the largest, Southeast Asia’s largest IT services provider,” Lang revealed. “But it was all kept under our enterprise business.”

To highlight these strengths, Singtel carved out its data center business into a new standalone company called Nexera, while separating its IT services arm NCS.

Aggressively recycling capital to fund growth initiatives while paying down debt.
“During the strategic reset period, the three years, we recycled about $2-3 billion,” said Lang. This included bringing on strategic investors like KKR’s 20% stake in Nexera, selling off underperforming assets, and monetizing infrastructure like towers and headquarters buildings.

Simplifying Singtel’s business structure for faster execution.

Lang cited the example of consolidating Singtel’s previously separated consumer and enterprise business units in Singapore and Australia into unified teams. “If you’re a small business owner, do you see when you use Singtel, you differentiate in your mind, ‘Oh, I’m actually dealing with Singtel as an individual versus a business owner?’ You don’t, right?”

What Worked and What Didn’t

By Arthur’s assessment, Singtel’s reset efforts achieved a “B+ or A-” grade overall. Positive outcomes included:

– Increased visibility into Singtel’s data center and IT services scale
– Billions in growth funding from capital recycling
– A streamlined business structure for faster decision-making
The biggest miss? Singtel’s stubbornly stagnant share price, which Lang attributed to a lingering “conglomerate discount” where the company’s valuable parts are worth more than the sum.

“It’s like you go to the market, you can buy the whole chicken at a certain price,” he analogised. “Or you buy chicken wing, chicken breast, chicken thigh…and you sum in all the different parts, it’s actually worth more than the whole chicken itself.”

The Outlook: Developing Market Tailwinds

Looking ahead, Lang expressed optimism that Singtel is positioned to capitalize on rising demand for connectivity and digitalization services across developing markets like India, Indonesia and Thailand.

Singtel has roots going back 20-30 years in these rapidly growing economies. Arthur highlighted the massive scale, noting, “In India alone, our business there Airtel, every quarter, about four times the population of Singapore gets added as new customers.”

While mobile was the key growth driver over the past decade, Arthur sees future opportunities in areas like:

Fixed broadband/WiFi for rising middle-class households
IT services for companies and governments digitising
Data centers needed for digital infrastructure
The 5G Difference Maker?
On the topic of 5G, Arthur acknowledged it has required heavy investment from Singtel and competitors alike. However, he argued Singtel can differentiate through intelligent network design, cutting-edge security, and taking advantage of 5G’s ability to offer customized “slices” for different industry/speed needs.

He cited Singtel’s 5G collaboration with Hyundai on autonomous vehicle production in Singapore as an example of 5G’s enterprise/industrial potential beyond just faster mobile video streaming.

The Chills Verdict

While the highly-produced interview contained some joking banter between the hosts, Arthur’s candidness stood out. He didn’t sidestep tougher questions about Singtel’s stagnant stock price or the strategic reset’s shortcomings.

Arthur’s developing markets outlook seemed plausible too, especially given Singtel’s long-standing partnerships and his data points around potential broadband and digitization tailwinds.

Of course, sustaining profitable growth across such varied regions and verticals won’t be easy. But Singtel showed its willingness to make bold changes over the past three years. As Arthur summarised, “The painful work has largely been done…It’s about cutting fat and building muscle so we can run faster going forward.”

You can check their full interview on Chills with TFC, Episode 176 on Spotify, YouTube, Apple podcast for a glimpse into the giant Telco’s strategic reset and what it offers in being a growth stock.

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