Analysis of Singtel - Singapore Telecom

One of main issues that Singapore Telecom (SingTel) is facing is competition in the telecommunications market. SingTel felt threatened after StarHub, a full-service telecoms provider entered the market in April 2000. SingTel stated that it was its goal to maintain profitability and as much market share as possible. However, prior to the entry of StarHub, SingTel was already facing competition in the mobile sector because of the entry of M1 (MobileOne) in April 1997. SingTel’s position in the telecommunications industry was no longer as stable as before because not only did it have to deal with the competition in the mobile sector, they had to face competition in the fixed-line telecoms sector with StarHub.

StarHub’s entry into the telecommunications industry had a powerful impact as it was backed by some of the largest global telecoms providers, such as British Telecom, Nippon Telecom, and Telegraph as well as Singapore Technologies Telemedia (who has extensive financial wealth) and Singapore Power. StarHub managed to capture a significant part of the International Direct Dialing (IDD) market (that is very profitable) as well as a large portion of the corporate business segment.

In addition to having competitors in the telecommunications industry, the Asian crisis affected the performance of SingTel and technological advancements such as internet telephony were expected to be widely adopted in Singapore. As internet telephony would allow the bypass of networks of local telecoms providers to make overseas calls and the fact that it was inexpensive for users, telecoms firms’ revenue would be significantly affected. SingTel was no longer protected in its monopolistic environment and appeared to be in danger of collapsing.

5 Marks

Main issues in Singtel are:

a. With the deregulation of the telecommunications, there will be intense competition in Singapore

b. When it ends is monopoly, profit will dwindle

c. Harnessing the convergence of telecommunications, internet and other mobile technologies to give value to its customers

d. Saturation of the Singapore market in telecommunications service subscriptions

Accounting

Ever since SingTel was privatized, its assets have been used on a comparatively consistent efficiency of about 22% to 23%. However, when the Asian economic crisis hit Singapore, it resulted to a decrease in the return on asset (ROA).

The Asian economic crisis affected a large portion of SingTel’s accounts: The turnover for SingTel increased by S$2,884.9 over the last 8 years (1990 to 1998), but decreased in 1999; operating profit also increased by S$1,742 over the last 8 years, but decreased in 19999 .

However,