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Singtel wants to connect the fintech dots

The telco boasts a broad user base, but will its fintech ambitions generate profits?

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Singtel Group, Singapore’s telecoms provider, is working to connect a multinational group of individuals and merchants to a network of digital wallets, including its own. Thanks to a partnership with Thailand’s Kasikorn Bank, both parties’ users can use either partner’s electronic wallet to make cross-border payments between the two countries.

This is meant to be the starting point in a web of connectivity across nearly two dozen countries in which Singtel has an operating presence, says Arthur Lang, CEO of the telco’s international business, speaking at a recent conference.

The company is eager to portray itself not as just a Singapore corporation, but the second-largest telco in Asia after China Mobile, with around 700 million subscribers.

These numbers are sourced through its stakes in local telecom operators in Asia and Africa, as well as through partnerships such as the one with Kasikorn Bank.

Not just a local telco

“We’re not just Singapore and telecoms,” Lang said, noting the company has a number-one market position in Thailand, Indonesia and the Philippines, and number two in India and Australia.

The India deal is especially significant: its 36.5% stake in Bharti Airtel gives it access not just to India but to 14 other countries in Africa.

By trying to forge these markets into a fintech play, Singtel is wading into a crowded space, potentially taking on the likes of Grab, Go-Jek or AliPay – although Lang says the company is open to partnering with them too. The fintech it resembles the most is Revolut, but with a Southeast Asian spin, given Singtel’s emphasis on serving tourists.

The headline numbers for the Singtel empire look attractive, in that 75% of its profits are derived from outside Singapore; that 30% of its revenues now come from things other than telecoms, including digital payments, cyber-security and digital advertizing; and that 72% of its customer base is below the age of 35. Of these, only Singapore and Australia have older, aging populations. Singtel wants to expand its fintech offering in places like Indonesia, India and Africa, with large populations of people lacking access to banks or credit cards.

…but which users make money?

The challenge is that the countries with the most people are the ones generating the least revenue – or even losing money for the company.

“Singtel has high-quality mobile properties, but the ones with the most users are the ones that don’t make money,” a banker told DigFin.

In December, Singtel reported quarterly revenues of S$4.6 billion, with the most momentum from Australia, where it wholly owns Optus, the country’s second largest operator.

But while that quarter’s year-on-year revenues were up, that was despite the dragging performance from its Airtel holding. This accounts for the majority of Singtel’s 700 million subscribers, but a small share of earnings: S$342 for its “regional associates”. Moreover this figure was down by 35% YoY, due to intense competition in India. The India market lost S$50 million that quarter.

The African markets as a whole have been profitable, but the challenge remains: most of Singtel’s profits still come from mature markets with small population sizes, while the markets with the most users are losing it money.

Why go fintech

Adding digital payments won’t by itself reverse that situation, as Lang acknowledges. And although Singtel claims the number-three wallet in Singapore, it is nonetheless competing against 26 others just in that market, against banks, gaming companies and transportation companies.

So why attempt this? Singtel owns high-quality mobile operators in regional markets. But these are limited to domestic business by their licenses. But in the digital world. Singtel believes it has scale. Financial products will serve as the glue among other services, provided people and merchants in one place can seamlessly use Singtel-owned portals for payments elsewhere.

Moreover, Lang says the telco has not really exploited the fact that it is on the ground in so many emerging markets. The 700 million user-base has yet to be exploited, a competitive advantage that the company has only recently woken up to.

Connecting more partners

Lang likens the company’s approach to airline alliances in which a flyer on Singapore Airlines could use their points to book a flight on partner carriers. “We serve each other’s customers,” Lang said, noting this is the first regional network combining telcos, banks and potentially other types of providers. (The partnership is called Via.) 

As a telco, Singtel lacks the capital of a bank, so it is looking to add more partnerships, using its direct and indirect user base as an incentive.

The use case therefore is cross-border, particularly for tourists. So Singaporeans using Dash can now access the Kasikorn merchant base in Thailand and use Dash to pay for things in Singapore dollars, including local transport; and Kasikorn customers can use their own wallet to pay in baht for services from Singaporean companies or the MRT subway. Remittances are another use case for payments.

Singtel is in talks with Malaysia’s Axiata and Japan’s Netstars to plug their e-wallets into the alliance.

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Singtel wants to connect the fintech dots