The Emergence of Asian Telecom Giants – SingTel, Hutch and Maxis

With the opening of telecom sector and the Government of India allowing 74% Foreign Direct Investment (FDI) in the same, we are now hearing of companies from Singapore, Malaysia and Hong Kong which have have high interest in the Indian telecom business, especially the mobile business.

SingTel (Singapore Telecom ) a cash rich company which started its operation in Singapore moved into Philippines in 1993 by acquiring 44.57% stake in Globe Telecom. In 1999-2000 when Mr.Sunil Mittal of Bharti Televentures was looking for a core investor for his telecom project, SingTel stepped up and till date they have invested SG $1.5 Billion(Rs4,600 Crores). SingTel also has board representation along with, they brought the expertise to establish and run a telecom business. SingTel also has 21% stake in AIS of Thailand, 35% in Telkomsel of Thailand and 45% in Pacific Bangladesh Telecom Ltd of Bangladesh. SingTel also controls Optus Telecom of Australia which is beyond the scope of our study. Excerpts from SingTel’s latest quarterly report (June-30-2006),

“The better operational performance of the associates drove the Group’s share of ordinary earnings from
S$376 million to S$495 million, up 32 per cent. Bharti and Telkomsel, the two main growth drivers, continued to post strong profits on the back of rapid subscriber growth”

SingTel’s investment in Bharti-Airtel today commends a market capitalization of Rs24,000 crores and rising everyday with increasing subscriber base of Bharti-Airtel. SingTel as a group has 35.5 million subscribers at the end of June-2006 quarter(pro-rated according to the stake it holds in various companies) of which mere 1.6 million subscribers are in Singapore. SingTel also derives significant part of its profits from Bharti, Globe, Telkomsel and Globe. Source: Management Discussion and Analysis report.

Another Asian telecommunications giant, Hutchison Telecommunications International Limited (Hutchison Telecom), which is listed on the Hong Kong and New York stock exchanges has a significant presence, and in many cases is a market leader, in nine dynamic markets, operating or rolling out mobile services in Hong Kong and Macau, India, Israel, Thailand, Sri Lanka, Ghana, Indonesia and Vietnam. For the half year ending June-30-2006, Hutchison Telecom reported profit for the first time since its listing. Excerpts from Huth’s press release,

The increase in turnover was driven primarily by the growth in India, which contributed 45% of the group’s turnover of HK$15,666 million. Details of Hutch’s Indian operations,
• Customer base increases to 17.5 million – 108% year-on-year growth
• Turnover increases 50.9% to HK$7,085 million
• EBITDA increases 46.7% to HK$2,316 million

Looking at Hutch and SingTel, Malaysian-Indian entrepreneur, Anand Krishnan, founder of Maxis jumped to expand his telecom business from Malaysia to India. Maxis also has operations in Indonesia through its subsidiary, PT Natrindo Telepon Seluler (NTS). Maxis entered India early this year buying out 74% stake in Aircel in Tamlinadu and is also expanding in 8 more cellular circles. Excerpts from Maxis’ Q2 report,

Maxis grew its Malaysia subscriber base by 3% to 8.47m users. In India, it grew total users by 23% to 3.2m. India’s Aircel contributed RM61m to PBT.

Telekom Malaysia, Maxis’ competitor on home turf, Malaysia, also has Indian operations in BK Modi controlled Spice Telecom. Results of Telekom Malaysia were not available.

Indian population long considered a bottleneck for her economic growth is now turining turning to be a blessing in disguise for all these telcos with global ambitions. A favorable Government policy so essential for investments has given these telcos the liberty to hold upto 74% stake in Indian telecom ventures. Next time when you bump into a report criticizing Indian economic policies, you can point them to this report and tell them that how favorable they have been, how big and profitable the Indian market is and how democratic and peace loving its citizens are 🙂

Emerging Asia, Singapore Telecom, Maxis Telecom, Hutchison