+ Going digital to optimise costs further. As part of the cost optimisation strategy, Singtel invested in self-service channels to help reduce customer acquisition costs. An example is the launch of GOMO, a pure digital product with no physical stores and call centre support. We believe GOMO have aided 32k post-paid subscriber growth QoQ. Singtel have also been rationalising content portfolio, optimising headcount, standardising & simplifying price plans and shutting down legacy networks & systems. This has led to a cost saving of S$541mn in FY19. We believe these cost savings will be reinvested to further optimise Singtel’s operations. We expect a cost saving of S$490mn in FY20e.
+ Digital business gaining traction. Group Digital life (GDL) revenue spiked 33% YoY and accounts for 5% of total revenue in 4Q19. Growth is mainly attributed to Amobee and its programmatic platform business and also the incorporation of Videology operations. EBITDA loss for GDL is at S$92mn in FY19. Management guided mid-single digit increase in Amobee’s revenue and improvement in EBITDA in FY20e.
– Associates still weak. Airtel losses are at S$98mn. We believe the recent rights issue would strengthen Airtel’s balance sheet to continue its fight against Reliance Jio. Telkomsel profit improved 2% YoY, we believe recovery is on track as competition is rationalising after the SIM re-registration episode. Associates weak performance was cushioned by a 53% surge in Globe’s profits. The surge is mainly due to the monetisation of data and increasing demand in internet services.
– Erosion of enterprise margins. Group enterprise EBITDA fell 16% YoY due to a higher mix of ICT contribution. ICT services typically commands lower margin compared to core carriage services. There are major contracts that are up for renewal with downward price revisions. Over in Australia there was a short term freeze in the government sector due to federal and state elections. These factors led 4Q19 EBITDA margin to shrink 16% YoY to 23.2%.