Saturday, January 23, 2016

Singtel Moves Up the Stack, and it Still is Very Hard

You would be hard pressed to identify any single "telco" that is having more success in the application realm than Singtel, even if app success is arguably still dwarfed by success in the "access provider" realm.

Long term, app success will prove crucial for "access" providers, for the simple reason that access revenues and profit margins will continue to face pressure. It will not be easy.

It always is harder to move "up the stack" than "down the stack." And as we already are seeing, many app providers are proving they can successfully move down the stack. 

Google is the single biggest brand to demonstrate that trend (Google Fiber, Wi-Fi and other access initiatives; as well as a big role in "transport, data centers and cloud computing." But there are others. Facebook, Amazon and Microsoft have shown they can master key skills lower in the stack.

Moving up the stack is much harder. If you are looking for some evidence that can be successful, one almost always finds oneself looking at Singtel or Softbank. Singtel might be the better example, as Softbank started as an app company and then become a big communications services provider.

Singtel remains primarily a "communications" company, though it is pushing aggressively to create competence and scale in digital apps.

Singtel has business advantages and disadvantages based on its small domestic market. Larger service providers might rationally build growth strategies on capturing more of a large domestic market.

Singtel cannot do that, as its domestic market is limited. But inability to grow domestically also means the strategy of expanding internationally makes fundamental sense.

So it is that Singtel owns 100 percent of Optus in Australia, 47 percent of Globe in the Philippines, 35 percent of Telkomsel in Indonesia, 23 percent of AIS in Thailand, 32 percent of Bharti Airtel in India, as well as minority stakes in a number of mobile firms in Africa.

More significantly is Singtel’s strategy of investing both in “access” assets (mobile service providers) but also digital content and app assets.

Singtel’s digital life division focuses on its Amobee digital marketing business, HOOQ regional premium video, and DataSpark advanced analytics and intelligence capabilities.

Singtel also makes investments in many firms through its Innov8 corporate venture capital fund.

Singtel also owns digital lifestyle services AMPed, Dash, HungryGoWhere,, and NewsLoop in Singapore.

Though it is true that scale matters for most telecom business opportunities, Singtel has proven that even a relatively small operator can create scale. Singtel also is among global leaders in trying to leverage related applications that build on its core telecommunications assets.

That is among the most-difficult challenges any telecom services company faces. Now that nearly all applications are created “over the top,” telecom service providers have limited ability to influence, control or own the application layer.

And yet, strategically, nothing might be more important than creating a viable role in the application layer, for at least some leading apps.

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