SingTel’s NCS Strategy Hits the Right Notes, but Might be Looking in the Wrong Places

Summary Bullets:

m rogers
M. Rogers

• Singtel has announced a new strategy alongside its financial results, which includes a renewed focus on digital business and the expansion of its NCS unit internationally.

• While Singtel has identified the right trends to click into for NCS, the Australian and Chinese markets will be challenge and there could be other opportunities with its subsidiaries in ASEAN.

Singtel announced its financial results for the fiscal year 2021 ended March 31, 2021 on May 28, 2021. Singtel reported a difficult year across the group, in part due to the effects of the ongoing COVID-19 pandemic as well as structural changes with the NBN in Australia and more generally across the telco sector. However the company did share some bright spots, for example the performance of its NCS business. Further, as part of the associated analyst and investor presentation Singtel presented a new strategy going forward with the hopes of capitalizing on key growth trends in digital and ICT markets in Asia-Pacific region. These include “B2B digital services growth,” “digital ASEAN opportunity,” and “rapid digitalisation fuelling infrastructure demand.

What’s the Plan?

Specifically within the B2B digital services, which is a growth area, Singtel wants to become a more prominent player through its NCS business. NCS is Singtel’s ICT consulting and managed services arm and was one of the most successful business unit for the company in FY21. NCS posted year over year revenue growth of 6.2% in FY21 and 12.8% in EBITDA for the same period. This was on the back of its managed services which include infrastructure, network, data center, and end user computing managed services. The growth was also driven by its business applications segment, which entails bespoke and productized application implementation and management across environments like SAP and Microsoft. NCS has also been focused on what is titled NCS NEXT, a suite of digital services that includes data analytics, mobility, artificial intelligence, cloud platforms, and IoT. The NCS NEXT business performed very well during FY2021, posting year over year revenue growth of 25% to account for 45% of NCS’ overall revenue. Singtel’s new strategy for NCS involves creating new business units within NCS, namely “Telco+” which involves selling NCS services to and with other telco subsidiaries within the Singtel group, as well as “Gov+” to expand its specialization in working with the government sector. Beyond that, Singtel mentioned target verticals of healthcare, media and communications, and financial services. Alongside these new business units Singtel wants to continue to push the NCS NEXT portion of the business emphasizing 5G, AI, and cloud computing. Further, Singtel wants to pull through more services from its Trustwave cybersecurity business. In order to do so the company has set up innovation centers in Singapore, Shenzhen and Melbourne, in what it is calling “the Innovation Triangle.” The idea is to create a space where customers and potential customers can work with NCS to co-create solutions that then become productized. Lastly Singtel announced it intends to expand its NCS business to the Australia and Greater China markets through partnership and acquisition.

With this strategy Singtel has identified key areas of growth for ICT and digital services. Digital transformation projects and cloud migrations have only been accelerated by the COVID-19 pandemic. Operators around the region are engaging with enterprise customers to develop 5G use cases and AI has moved past the hype stage and is being implemented to automate systems from contact center, to network management to data capture and analysis and more. The company has also identified the importance of co-creation for these emerging services, as it offers a chance for market education, branding and for Singtel to productized solutions that are built. It has announced key co-creation opportunities with Hyundai for smart manufacturing, Surbana Jurong for smart cities, the Port Authority of Singapore for smart port, and Ubitus for cloud gaming.

Challenges and Opportunities

However, NCS is a very Singapore centric company and its revenue base is tied in heavily with Singapore government agencies. Mind share in the Australian and greater China markets is lower than global competitors such as Deloitte or Accenture. Further, while acquisition of local partners could help NCS grow in these new markets, Australia and China both have very competitive managed services markets, and picking the right acquisition target or even partner will come with risk.

Singtel also has assets across other markets in the region that was not mentioned as an expansion target for NCS. The company has large stakes in AIS Thailand, Globe Philippines, and Telkomsel Indonesia, all the leading mobile operators in their respective markets. Further, all three operators have recently increased focus on the enterprise market with an emphasis in key areas identified by Singtel such as cloud and applications. For example Globe recently acquired a cloud consultant company with specialization in AWS and Microsoft, which would be a perfect partner for the NCS strategic partnership plan. Increasing NCS’ involvement with these operators provides a good channel to market through existing enterprise relationships and pairs well with existing offers on the market from its subsidiaries. Further, the local markets for ICT managed services is less mature and Singtel would be able to have an easier time of building mind and market share. While Australia and greater China offer more opportunities to work with enterprises on next generation technologies like 5G, edge, and AI, Singtel has an opportunity to grow its brand in less mature markets, positioning it well to be the provider of those next generation services when the time is right.

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