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DBS Asian Insights

DBS Group Research • February 2018

Asian Telecom
Clear-cut View Via the Digital Prism
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Asian Telecom
Clear-cut View Via the Digital Prism

Sachin MITTAL
Head of Telecom, Media, and Technology
sachinmittal@dbs.com

Tsz Wang TAM CFA
Senior Research Director
tszwangtam@dbs.com

Chris KO CFA
Senior Research Analyst
chriskof@dbs.com

Produced by:
Asian Insights Office • DBS Group Research

go.dbs.com/research
@dbsinsights
asianinsights@dbs.com

Goh Chien Yen Editor-in-Chief

Jean Chua Managing Editor
Geraldine Tan Editor
Martin Tacchi Art Director
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04 Executive Summary

07 Why Should Telcos Embrace

Digitisation?

09 Potential Impact On Enterprise

Value By 2020
16 Digital Prism
Rationale Behind Our Digital Prism
Framework

20 Digital Transformation of
Telcos in Asia
Leaders in the Telco Field

23 Appendix
Explanation of the Framework
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Executive Summary

G
lobally, revenues of the telecom industry have come under pressure. Cannibalisation
of high-margin voice and SMS revenues by over-the-top services (OTT) services like
WhatsApp, coupled with the emergence of new entrants, is hurting telcos. On
the enterprise front too, telcos are seeing a shift from higher-margin connectivity
solutions to lower-margin infocomm technology (ICT) services. Digital transformation has been
widely hailed as a solution.
About 40% of service revenues are at risk on average in Asia

Source: Companies, DBS Bank

However, the fact of the matter is that the average return on incumbent digital initiatives is
below 10%1 — barely above the cost of capital – which indicates that something is not right
here. Many companies have been focusing purely on digitising the customer interface, which
has become a hygiene factor now. In our view, the real competitive advantage will come from
enhancing the scope of digitisation and investing boldly in securing new revenue streams by
repositioning the company in the value chain.
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Based on our estimates, by 2020, a telco that executes a well-defined digital strategy and
fully integrates digitisation with its operations (digital leader) will see a 40% rise in its
enterprise value versus a 40% drop for a digital laggard. A digital navigator, defined as
a telco in the early-to-mid stages of its digital transformation process, should be able to
preserve its enterprise value.

Digital leaders to trade at over 100% premium to digital laggards by 2020

Digital Leader Digital Navigator Digital Laggard

+20% growth in topline +5% growth in topline 9% contraction in topline

• Gains market share
from laggards (+2-3%
annually)
• Higher ARPU for digital
channels (60% digital)
• ~15% revenue from
non-traditional services
• Stable market share
• Higher ARPU for digital
channels (40% digital)
• ~8% revenues from
non- traditional services
• Market share loss (2-3%
loss annually)
• Contraction of legacy
revenue (20% digital)
• Negligible revenue from
non-traditional services

Stable EBITDA margins Stable EBITDA margins from 2% drop in EBITDA margins
supported by efficiency efficiency gains
gains

+40% rise in Enterprise +5% rise in Enterprise value 39% drop in in Enterprise
value over 2017-2020 over 2017-2020 value over 2017-2020

Source: DBS Bank

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With this idea, we have used our ’Digital Prism’ to help us identify telcos in Asia that
are at the forefront of digital transformation. Our framework considers both strategic
and operational aspects of the business to determine the progress in the transformation
journeys and was developed based on academic research and insights published on the
topic.

Based on our framework, we have identified Singtel to be a digital leader as the telco has
set itself a well-defined digital strategy and operational excellence through digitisation.

The real competitive advantage will come from

enhancing the scope of digitisation and investing boldly
in securing new revenue streams
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Why Should Telcos Embrace

Digitisation?

A
ccording to a study of developed telecom markets2, revenue growth of the
telecom industry declined from 4.5% to 4% while EBITDA margins contracted to
17% from 25% from 2010-2015. Among US telecom companies, for instance,
landline and mobile voice accounts for less than a third of total access now,
down from 55% in 2010, while data revenue has risen from 25% of total revenues in 2010
to 65% today. With the entry of OTT players such as WhatsApp, higher-margin revenue
streams of voice and SMS have entered a period of decline.

This has been further compounded by stiffening competition in most telecom markets
around the world, with the entry of greenfield 4G players and low-cost Mobile Virtual
Network Operators (MVNOs) that have no burden of legacy voice and SMS revenue and can
sustain at much lower margins. Many Asian countries have either seen a new entrant or are
expecting one in the coming 12 months.

A study by consultancy firm PwC3 has also indicated that the telecom industry has been
witnessing declining average revenue per user (ARPUs) since 2006.

Diagram 1. Greenfield operators entering various markets in Asia

Country New mobile entrant

Australia TPG
India Reliance Jio
Singapore TPG, Circles.Life
Malaysia Telekom Malaysia
Source: DBS Bank

On the enterprise front, revenues from legacy connectivity solutions have started to decline
in developed markets. AT&T, for example, recorded a 4% y-o-y decline in 3Q17 in revenues
from the enterprise segment, largely due to falling legacy voice and data services which
contracted 15% y-o-y. Verizon also reported a decline of 4% in its enterprise segment in
2Q17 after adjusting for the acquisition of XO Communications, a fibre-optic business. In
Europe, Vodafone Group managed to grow its enterprise service revenues by just 1.5%
y-o-y in 1Q17 vs. the 2.6% growth recorded in 1Q16.
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Other domains such as enterprise communications, IT hosting, and outsourcing have also
come under pressure with the emergence of cloud services and the entry of a number
of vertical-specific IT solution providers. For example, enterprise communication solutions,
which traditionally were hosted on-premise, are now going into the cloud. According to
IDC4, only 46% of enterprise communication solutions would have been hosted on-premise
in 2017 and this will further shrink to 43% by 2019.

Based on our analysis, close to 40% of service revenues of telcos in Asia are bound to decline
over the near term. Legacy revenues, defined as revenues generated from the provision of
legacy voice and SMS services (includes pay-TV revenues in Singapore), account for around
40% of service revenues of a telco on average in Asia.

Close to 40% of service revenues of telcos in Asia are

bound to decline over the near term
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Potential Impact on Enterprise

Value By 2020

W
e believe that the divergence of progress made by telcos on digitisation efforts
will lead to a valuation differential between telcos leading and lagging in
digital transformation. Based on our estimates, a telco that does not embrace
digitisation (Digital laggard) is likely to trade at a discount of ~60% by 2020
vis-a-vis a telco that fully integrates digitisation in all aspects of its strategy and operations
(digital leader). A digital navigator, which we define as a telco that is in the early-to-mid stages
of digitising operations and executing a digital strategy will trade at a discount of ~30% to a
digital leader. We also believe that the enterprise value of digital leaders will jump over 40%
by 2020, while losses in subscriber and revenue share as well as higher operational expenses
would lead to a non-digital telco destroying ~39% of enterprise value over the same time.
Diagram 2. Divergence between the enterprise value of digital leaders, navigators, and laggards

2017 2020
Average telco Digital Leader Digital Navigator Digital Laggard
Subscribers (a) 100 100 100 100
Subscriber market share 33% 33% 33%
- Annual subscriber growth 2% 2% 2%
- Industry subs growth (b) 6 6 6
- Annual subscriber share gain 2% 0% -2%
- Subscriber gain/loss (c) 6 0 -6
Net subscribers (a+b+c) 100 112 106 100
Subscriber composition (d)
- Subscribers on digital channels 20% 60% 40% 20%
- Subscribers on non-digital channels 80% 40% 60% 80%
ARPU (e)
- Subscribers on digital channels 50 47.5 47.5 47.5
- Subscribers on non-digital channels 50 45.0 45.0 45.0
Mobile revenues (a+b+c)*(d*e) 60,000 62,697 58,512 54,403
- New non-traditional revenue 0% 15% 8% 0%
as a percentage of total
New non-traditional revenue 0 11,064 4,744 0
Total revenues 60,000 73,761 63,256 54,403
EBITDA margin 35% 35% 35% 33%
EBITDA 21,000 25,816 22,140 17,953
EV/EBITDA 7 8.0 7.0 5.0
Enterprise value 147,000 206,531 154,978 89,766
Enterprise value gain/loss 40% 5% -39%
Source: DBS Bank
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1. Digital leaders to gain 2-3% subscriber share from digital laggards on an

annual basis

We believe that ~60% of a digital telco’s subscriber base will interact with it over digital
channels versus only 20% for digital laggards. A digital laggard would predominantly use
brick-and-mortar stores and other offline methods, such as customer care call centers, to
interact with subscribers.

Key drivers for digital leaders will be (i) fully digital customer on-boarding processes; (ii)
seamless online-to-offline integration to ensure swift delivery of hardware to any shop
near the customer and shorter time for fault repairing; (iii) targeted digital marketing
campaigns with the help of data analytics; and (iv) improved customer care offered via
digital channels. These drivers would allow digital leaders to lure subscribers away from
non-digital telcos. A survey5 also found that telcos optimising the use of digital channels
tend to have better Net Promoter Scores (NPS), with a resultant decline in customer churn.
High NPSs are considered to be a good indicator of customer satisfaction and could
further improve the appeal of digital leaders over digital laggards.

Greenfield players such as Circles.Life and Reliance Jio are already exploiting these digital
channels effectively. Reliance Jio, for example, managed to gain over 11% market share
in the Indian mobile market within the span of just a year with the combined effect of
heavy price promotions and the use of digital tools to acquire customers. Circles.Life, the
first full service MVNO in Singapore, was launched in May 2016 and gained ~1% market
share within just a year of operations without operating a single physical store and any
price promotions. Hence, in our estimates, we believe that digital leaders will be able to
capture ~2-3% market share every 12 months from digital laggards.

2. Subscribers interacting over digital channels will yield 5-8% higher ARPUs

We have accounted for an annual decline in ARPUs of ~3% over 2017-2020. We believe
that contraction of legacy revenues and pricing pressure on data yields imposed by
greenfield 4G operators would result in a continuous contraction of ARPUs in developed
markets, hovering at around 3-4% annually. However, we estimate that customers
interacting with the telco primarily over digital channels would generate 5-8% higher
ARPUs than customers over traditional channels.

Greenfield players such as Circles.Life and Reliance Jio

are already exploiting digital channels effectively
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Diagram 3. Digital subscribers will yield premium ARPU

Source: DBS Bank

A recent survey6 revealed that over 58% of customers surveyed were willing to switch
to a fully digital operator with no brick-and-mortar stores. High-value customers were
most likely to make the switch because of the perceived benefits of customisable mobile
plans and the ability to resolve issues using self-service mechanisms. Poaching high-value
subscribers would allow digital leaders to grow their blended ARPU.

The ease of purchase to lead to subscribers conducting more transactions. The ease of
purchasing with a fully-digital telco would prompt subscribers to conduct more transactions,
improving the life-cycle value of a subscriber. For example, customers can continuously
adjust services and quotas as per their liking through a smartphone app as opposed to the
hassle of calling or visiting a store. A study by McKinsey7 revealed that a European operator
that started selling its services via digital means managed to grow revenues by ~30%,
primarily driven by the ease of purchasing offered to customers. Digital telcos can also lure
subscribers to use more of their services through cross-selling. For example, a digital telco
that has expanded into OTT video services could offer a promotional OTT video service to
its subscribers, which may induce a digital subscriber to consume more data. We assume
more frequent transactions, combined with higher usage by digital subscribers, would add
a premium of ~3.5% to the ARPUs of a digital leader.

Better uptake of promotions through data analytics – Digital leaders would also be able
to use digital channels to make personalised offers to customers with the help of data
analytics, which could significantly improve a telco’s conversion rates on marketing
campaigns and lift ARPUs. For example, Verizon managed to improve its campaign close
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rates by over 250% by segmenting and precision targeting with the help of data analytics.
Another operator in Europe managed to improve the uptake of data plan renewal offers
to 40% from 1-2%, with the help of data analytics. We attach a 2% premium to the
ARPU of subscribers using digital channels due to data analytics.

3. New revenue from non-traditional services to comprise ~15% of total revenue

by 2020 for the digital leader

Digital leaders are also likely to pursue non-core digital revenue sources in areas
such as cyber-security, data analytics, digital advertising, and Internet of things (IoT)
communications. We believe these investments could add up to 15% to the topline by
2020. At present, telcos such as AT&T, Telefonica, and Singtel already generate materially
significant revenues from non-core digital services

Singtel’s digital and cyber-security segments now account for ~10% of its topline and
grew almost 55% in 2Q18, supported by acquisitions. AT&T generates ~7% of revenues
through fixed strategic services, which includes fast-growing segments such as cloud
services, security, managed hosting, and IP conferencing solutions. The segment recorded
the sole positive y-o-y growth in revenues of 6% in AT&T’s enterprise segment in 3Q17.
Excluding contribution from video services, Telefonica’s digital segment grew 29% y-o-y
in 3Q17 and now accounts for ~4% of Telefonica’s topline.

Whilst digital navigators would have expanded into these segments, their late entry and
the established client base of digital leaders may make it difficult for digital navigators to
gain traction in these new segments. Lack of a strategic direction would lead to negligible
contribution from new revenue sources to the topline of digital laggards.

4. Digital leaders to sustain EBITDA margins despite lower margin of new non-
traditional services by virtue of efficiency gains

New non-traditional revenue streams are likely to see lower EBITDA margins of 15-20%.
However, digital leaders will be able to offset this by cost savings brought about by new
digital solutions such as e-care solutions and digital subscriber acquisitions. A study by
McKinsey8 estimated that fully digitising internal processes could help telcos save ~18%
of their current operating expenses, supported by lower expenses in customer service and
distribution, reduced marketing spend supported by data analytics, and efficiency gains
realised through automation.

On the customer service front, a study9 pins the costs of implementing digital chats as
a customer care tool at just 56% of the cost of maintaining a call center. Implementing
online forums and FAQ sections are even cheaper at just 12% of the cost of operating
a call center. For example, a European telecom operator10 managed to realise 30% in
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cost savings on customer service operations by only partially migrating its customer care
services to digital channels. Another European telco managed to realise cost savings of
EUR5.75mn by adopting community-based eCare, where users answered one another’s
queries on online forums. Hence, adopting digital channels to provide customer care
could help save ~40% of customer service costs for telcos, in our view.

Investing in digital distribution channels such as online shops and effective online-to-
offline models could also help digital leaders cut down their distribution expenses. For
example, a European telecom operator that invested in a digital sales platform managed
to reduce its distribution expenses by ~30%. Use of data analytics would also help digital
leaders improve the conversion rates and return on investment (ROI) of their marketing
spend, providing leeway for digital leaders to tone down their marketing expenses. digital
leaders could also optimise network deployment with the help of data analytics. A study11
revealed that telcos are able to increase the ROI of network deployment by ~10% and
reduce capital spending by 38% by clustering customers according to their daily travel
patterns and optimising network deployment.

Hence, we conservatively estimate that digital leaders would be able to save ~5% of
current operational expenses by 2020, leading to a 300bps improvement in EBITDA margin
on telecom services. Higher EBITDA margin on telecom services would help digital leaders
offset the impact of lower EBITDA margins on non-traditional services and maintain their
blended EBITDA margins at ~35%. The cost savings of operational expenses would be
driven by ~20% savings on sales and distribution expenses and 40% savings on customer
service expenses which, combined, accounts for around 20% of a telco’s operational
expenses.

Digital laggards meanwhile would see an increase in their marketing and distribution
spend as they strive to compete with the digital leaders. The human-centric nature of
customer care and general administration would also boost telcos’ spend on customer
care and administration. We have estimated a 4% rise in operational expenses for digital
laggards over 2017-2020, resulting in a 300bps contraction of EBITDA margins on their
telecom services by 2020.
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Diagram 4. Digital leaders will maintain EBITDA margins at 35% by 2020

Digital Leader Digital Navigator Digital Laggard

EBITDA on Telecom
38% 36% 33%
services

EBITDA on new revenue

15% 15% 15%
sources

Contribution of telecom
85% 92% 100%
services to revenues
Contribution of new
revenue sources to 15% 8% 0%
revenues

Overall EBITDA margin 35% 35% 32%

Changes in Operating Expenses of Telecom Services

Marketing, Sales,
and Distribution -20% -10% +10%
(15% of Opex)

Customer care
-40% -20% +10%
(5% of Opex)

General
Administration
+5%
Expenses
(40% of Opex)

Source: DBS Bank
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New entrants to telecom markets such as Reliance Jio and Circle Life are already exploiting
digital channels to realise cost efficiencies. Reliance Jio, for example, was a pioneer in using
digital tools to on-board subscribers in India with minimal paperwork and time, helping
it gain market share while reducing costs. The company introduced the use of India’s
Aadhar number to validate identities and activate SIM cards within 5-15 minutes with
no other paperwork. This relatively frictionless process has helped Reliance Jio drastically
reduce the cost of on-boarding customers while improving the efficiency of the process.

Circles.Life operates as a digital-only player in Singapore, where new customers are able
to sign up for the service using an online login based on their email address. The SIM is
delivered to their address at a specified time. Similarly, Circles.Life relies heavily on referrals
for new customers, providing promo codes to reduce signup costs for new customers and
extra data for the referring customers. The company has been able to generate buzz
Digital leaders’ with the painless and smooth process as well as drive adoption with relatively minimal
growth prospects marketing costs.
and better
operational 5. Digital leaders will trade at over 50% premium valuation versus digital
performance laggards by 2020
could prompt
investors to The combined effect of subscriber loss, lower digital revenues, and contracting EBITDA
margins would likely lead to investors placing heavy discounts on digital laggards vis-à-
attach 10-15% vis digital leaders. Strong growth prospects and better operational performance offered
premium to by digital leaders could prompt investors to attach 10-15% premium to the current
current valuations valuations of average telcos. Lagging performance and a contracting bottomline would
lead investors to attach discounts of as much as 30% to the valuations of digital laggards.
Hence, we believe that digital leaders and digital navigators would trade at a premium of
over 100% and 40-50%, respectively, over digital laggards.

Diagram 5. No physical touch points

Sign up using email address. Receive SIM over post Manage subscriptions and
Customize plan using add-ons. contact customer care using
Choose phone number or port smartphone app
existing number
Source: DBS Bank
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Digital Prism

W
e have identified Strategy and Operations as two key areas to evaluate the
success of companies’ digital transformation. In developing the framework, we
rely on research and surveys on the differences between non-digital players,
digital laggards, and digital leaders published in reputed academic journals.

Rationale Behind Our Digital Prism Framework

In a study on 2000 incumbents across all major industries and countries, published in
the July 2017 edition of Harvard Business Review12, Jacques Bughin and Nicholas Van
Zeebroeck estimated that the average return on incumbents’ digital initiatives was below
10% — barely above the cost of capital.

The study found that successful digital transformations were significantly less focused
on cost efficiency and more focused on new products or new customers. The degree
to which a transforming company was willing to change its activity portfolio, i.e. overall
business, through divestments as well as acquisitions, had a direct impact on ROI and
growth. Also, it emerged that companies that are more willing to adapt their position in
the value chain, i.e. move upwards or downwards along the value chain, found digital
transformation more rewarding. The higher the share of cannibalisation and the higher
the investment devoted in comparison to competitors or peers, the bolder the corporate
strategy; such companies were more successful when they targeted new demand, new
supply or new business models.

Another article by Robert Bock, Marco Iansiti, and Karim R. Lakhani13 discussed tangible
differences in operating methods between digital leaders and laggards. The study
identified the use of data analytics in different areas of a company’s operations to improve
its performance as a key differentiator. For example, they found that digital leaders are
2.5X more likely than digital laggards to harness real-time data and analytics to deliver
tailored customer experiences. Hence, we have used questions that evaluate the use of
data analytics in the operations section. In addition to this, we have also included some
operational measures that are important in driving digital transformation for enterprises.
This includes areas such as offering customisation tools to customers and providing better
price transparency via digital platforms.

Based on insights gathered through these research publications and other resources, we
have identified two key aspects of digital transformation – strategic and operational. In
the Strategy section of our framework, we evaluate the scope of digital transformation
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strategies to identify companies that have made digital transformation a priority throughout
the organisation. Secondly, we try to evaluate the boldness of these strategies, which
gives an idea of the timeframe these changes will take place and gives them an advantage
ahead of peers.

In operations, we look at four key areas. First, is the number of customers using digital
channels. Secondly, we look at the company’s ability to fulfill the needs of its digital
customers almost instantly. Thirdly, we look at the use of data analytics in upselling or
cross-selling more services. Lastly, we look at how the company is using its digital channels
to provide customisable plans to its customers which was not possible earlier.

Diagram 6. Digital Prism framework - Key indicators and scoring metrics

Scope and Boldness Description Weightage %

Attempts to change the current Attempts to expand the company’s reach over 20%
position in the value chain the value chain or digitise to change the nature
of the value chain to gain new revenue and/or
cut costs

Investment directed towards Investments made by a company to acquire or 20%

digital transformation (%)
Introduction of cannibalising
products or services
Operations
establish a business unit that generates non-
traditional revenues as a percentage of capex
Willingness to promote businesses that directly 10%
compete with traditional business lines

Customer engagement, internal processes, and product development

Availability of tools for Use of online platforms and mobile applications 15%
customers to instantly fulfil to provide channels for customers to instantly
their needs purchase goods/services at their convenience
Percentage of the subscriber Number of customers that use online tools 15%
base using digital channels (%) and mobile applications to interact with the
company as a percentage of its total customer
base
Use of data and analytics in the Use of data and analytics to introduce new 10%
development or improvement products/services or change products/services in
of products/services order to improve user experience

Availability of tools for
customers to customise
products/services to their
requirements
Availability of online and mobile tools for 10%
customers to customise the product/service
offering as per their usage requirements
Source: DBS Bank
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Diagram 7. Framework scores for telcos

Singapore Thailand Indonesia

Framework Scores Singtel StarHub M1 AIS DTAC TRUE TLKM ISAT XL
Strategy
Attempts to change the
position in the value chain 20.0 10.0 5.0 5.0 0.0 10.0 20.0 10.0 5.0
(H/M/L)
Percentage of investment
directed toward digital
20.0 20.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
transformation strategies
(H/M/L)
Cannibalising revenue
2.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0
sources (H/M/L)
Total Strategy Score 42.0 30.0 5.0 5.0 0.0 10.0 22.0 10.0 5.0

Operations
Data-driven product/
service development 10.0 10.0 5.0 2.0 0.0 5.0 5.0 2.0 5.0
(H/M/L)
Means for instant
fulfillment of customer 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
needs (H/M/L)
Availability of tools for
5.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0
customisation (H/M/L)
Percentage of subscribers 10.0 10.0 10.0 5.0 5.0 5.0 5.0 5.0 5.0
using digital channels
(H/M/L)
Total Operational Score 35.0 32.0 27.0 19.0 17.0 22.0 22.0 19.0 22.0
Total Score 77.0 62.0 32.0 24.0 17.0 32.0 44.0 29.0 27.0

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Framework scores for telcos cont’d

Malaysia China Hong Kong

Framework Scores DIGI MAXIS TM Axiata China China China Smar Hutchison HKT
Mobile Telecom Unicom Tone Trust
Strategy
Attempts to change the
position in the value chain 5.0 0.0 5.0 20.0 10.0 10.0 5.0 5.0 0.0 5.0
(H/M/L)
Percentage of investment
directed toward digital
0.0 0.0 0.0 5.0 10.0 10.0 0.0 0.0 0.0 0.0
transformation strategies
(H/M/L)
Cannibalising revenue
0.0 0.0 0.0 0.0 0.0 2.0 0.0 2.0 0.0 0.0
sources (H/M/L)
Total Strategy Score 5.0 0.0 5.0 25.0 20.0 22.0 5.0 7.0 0.0 5.0

Operations
Data-driven product/
service development 0.0 0.0 0.0 5.0 5.0 5.0 5.0 0.0 0.0 5.0
(H/M/L)
Means for instant
fulfillment of customer 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
needs (H/M/L)
Availability of tools for
2.0 2.0 0.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0
customisation (H/M/L)
Percentage of subscribers 5.0 15.0 0.0 5.0 10.0 10.0 10.0 5.0 5.0 5.0
using digital channels
(H/M/L)
Total Operational Score 17.0 27.0 10.0 22.0 27.0 27.0 27.0 17.0 17.0 22.0
Total Score 22.0 27.0 15.0 47.0 47.0 49.0 32.0 24.0 17.0 27.0
Source: DBS Bank
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Digital Transformation of
Telcos in Asia

W
e have used our Digital Prism framework to identify digital leaders and
laggards among telcos in the Asian region. Based on our framework, we
have identified Singtel to be the digital leader among Asian telcos as it
has set itself a well-defined digital strategy and strives for operational
excellence through digitisation.

Diagram 8. Digital transformation scores

Source: DBS Bank

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Diagram 9. Digital Transformation matrix for telcos

Source: DBS Bank

Leader in the Telco Field

Digital leader - Singtel
We categorise Singtel as a leader as the company has clearly spelled out digital
transformation as a priority. Singtel scores high in both the strategic and operational
aspects as it has executed a well-defined digital strategy while digitising key customer
touchpoints and internal operations.

Realising the threat to legacy consumer and enterprise revenues, Singtel made strategic
investments in areas it had a natural competitive advantage in. Singtel announced
plans to invest ~SS2bn in strategic investments in digital businesses in 2013 and made
acquisitions in the managed cybersecurity services and adtech space. As a result, growth
segments, which comprise ICT services, Cybersecurity, and Digital Life (comprising adtech,
OTT video, and data analytics) contributed ~25% of Singtel’s revenues in 2Q18, up from
19% in 3Q16. We expect revenues from these segments to grow ~100% over the next
five years, contributing over 35% to Singtel’s topline, well compensating for potential
declines in legacy services.

Having expanded into new segments at an early stage, Singtel has managed to gain itself
a strong competitive advantage against other incumbents. For example, Singapore’s Smart
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Nation programme aims to connect every aspect of city life including transportation, health,
waste management etc., with the help of IoT and Big Data. As a likely provider of network
infrastructure facilitating the programme, Singtel would naturally be among the favourite
candidates for monitoring and managing the programme’s cybersecurity assets. The lack of
comparable cybersecurity capabilities among other network providers in the country places
Singtel at a natural advantage over likely contenders for the Smart Nation project.

Furthermore, the telco is present in several aspects of the digital advertising value
chain and specialises in niche segments such as the provision of brand intelligence and
cross-device audience targeting, which do not face direct competition from the likes of
Facebook and Google. Amobee, the digital advertising arm of Singtel, is also able to
leverage Singtel’s regional presence to gain traction in Asia, where SMEs remain hesitant
to partner with big names in digital advertising due to hefty fee structures and the lack of
an understanding of the regional market. For example, last year Amobee, in partnership
with Optus, launched “Optus Xtra”, an app that provides free data quotas and credit
to users in return for allowing ads to be displayed on their phones. Securing this level
of collaboration with regional telcos remains a challenge even for the biggest names
in digital advertising. With digital and mobile advertising spend in the ASEAN region
expected to grow at a CAGR of 17% from US$2.8b in 2017 to US$4.4b by 2020, we
expect to see strong growth in Singtel’s digital advertising business.

Singtel is also embracing cannibalising of revenues sources. The telco has invested in an
OTT video service, HOOQ, which competes with its pay-TV business. Whilst other pay-TV
businesses struggle to compete with OTT video services such as Netflix, Singtel is looking
to gain from the booming OTT video opportunity.

Singtel has also invested in creating an omni-channel experience to customers with

seamless integration between digital and physical realms. Online shops of the telco are
well-integrated with physical outlets, and provide customers with the ability to make orders
online for pick-up at the store closest to the customer on the same day. E-care options such
as “Shirley”, a virtual agent, uses customer data such as location and usage to provide more
personalised resolutions to customer complaints and responses. Automating customer care
has allowed Singtel to greatly reduce costs on traditional call centers and customer care
agents, whilst improving customer satisfaction at the same time.

The Easy Mobile plans by Singtel allow users to customise their plans monthly according
to their needs over the smartphone app while SIM-only plans allow users to add on
varying levels of minutes, SMSs, and data, on top of the base S$20 plan. The ability to
build their own plan and optimise their spending creates greater customer satisfaction.
This improves customer loyalty to and competitiveness of Singtel.
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Appendix:
Explanation of the Framework
Strategy metrics – 50%

• Attempts to change the position in the value chain – 20%

Definition – While a supply chain is oriented around the flow of inputs and outputs from
raw materials to finished goods, a value chain is oriented around the generation of value
for the customer, as defined by the customer. Any change in the value chain is often
more transformative and driven by innovations in product development and customer
engagement. A pay-TV player expanding into content production would be an example
of this. Attempts made by a company over the last five years to change its position in the
value chain were taken into consideration for ranking purposes.

Example – India’s second-largest truck-maker Ashok Leyland launched in 2017 its digital
marketplace, a platform that offers solutions to tap opportunities in the highly unorganised
after-sales and services market of commercial vehicles. The total cost of usage over a
period of 10 years for any commercial vehicle is about fifteen times the purchase price,
which presents a big opportunity for Ashok Leyland. The company, through its digital
marketplace offering, is eyeing Rs 1000 crore (~US$150mn) in additional revenue over
the next three years.

Scoring metrics – 20

High (20) Four or more attempts made by the telco to change its position
in the value chain

Moderate (10) 2-3 attempts made by the telco to change its position in the
value chain

Low (5) A single attempt made by the telco to change its position in
the value chain

Not Applicable (0) No publicly available records of the telco attempting to change
its position in the value chain
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• Percentage of investment directed to digital transformation strategies – 20%

Definition – Investments made by a company to acquire or establish a business unit that

generates non-traditional revenue streams for the company. For a telco, these would
be investments in or the acquisition of capabilities in areas such as IoT, cybersecurity,
and digital advertising. A higher percentage in investment in digital initiatives indicates
that a company is prioritising digital investments over conventional segments, which are
prone to decline in the near term. Investing in and developing capabilities in upcoming
growth segments would help telcos reduce dependency on conventional segments and
maintain growth over the long run. This indicator allows us to identify the telcos that are
proactively moving into new segments.

We have looked at the investments made by companies from 2014-to date for purposes
of ranking. For companies that have made several investments over the period, the total
acquisition/investment as a percentage of total capex from FY14-17 was computed.

Example – Verizon managed to secure an early lead in transforming its business by

making a string of acquisitions to build a portfolio of businesses in new segments such
as digital advertising and telematics. Verizon acquired AOL, a digital content provider
and an advertiser, in 2015 and soon complemented the purchase with the acquisition
of Millennial Media and Yahoo! in 2016. The company further strengthened its in-house
IoT capabilities by buying Fleetmatics, Sensity Systems, and Telogis in 2016. Verizon has
spent over US$11b since 2015, accounting for ~20% of the telco’s capex and investment
expenditure over the period, to acquire businesses in the digital media and IoT space. At
the point of acquisition, AOL, Fleetmatics, and Yahoo! added over US$650m in EBITDA to
Verizon. The digital media and telematics businesses now account for ~7% of Verizon’s
topline and contributions from these units helped Verizon grow its 3Q17 EBITDA by 1%
y-o-y despite the 4% decline recorded by its local rival AT&T.

Scoring metrics – 20

High (20) >10% of capex during the applicable period was invested in
new digital businesses

Moderate (10) Between 5%-10% of capex during the applicable period was
invested in new digital businesses

Low (5) <5% of capex during the applicable period was invested in
new digital businesses

Not Applicable (0) Little to no public information made available on the new
digital investments of the company
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• New cannibalising revenue sources – 10%

Definition – Is the company willing to introduce products or services that compete

directly with existing legacy revenue streams and suffer an initial hit but secure potential
for revenue growth over the long run? For example, a telco that offers a pay-TV service
introduces an OTT TV service that directly competes with its pay-TV business. Exposure
to cannibalising revenue sources that are likely to gain popularity over time would help
telcos offset losses arising from traditional revenue streams.

Example – Adobe, the developer of creative software tools such as Photoshop, now
generates 95% of its revenue through Creative Cloud and other cloud subscription
services. Prior to this, Adobe had sold its software as box licenses. In the initial phases,
Adobe saw some decline in revenue and earnings as customers switch to cloud services
due to the lower upfront price versus upfront license revenue. But the recurring nature
of the subscriptions have allowed Adobe to generate more revenue over the customer
life-cycle compared to box licenses. Using the subscription-based model, Adobe has been
able to provide up-to-date software to its customers while benefitting from recurring
revenue.

Scoring metrics – 10

High (10) Release of three or more services that directly compete with
three existing business lines

Moderate (5) Release of two services that directly compete with two existing
business lines

Low (2) Release of a service that directly competes with an existing

business line

Not Applicable (0) No indication of releasing services that directly competes with
existing business lines

Operations Metrics – 50%

• Availability of means for customers to instantly fulfil their needs – 15%

Definition – Has the company provided sufficient means for customers to purchase the
products/services of the company almost instantaneously? For a telco, this would be
the ability to purchase mobile plans, hardware, and extra quota as well as interact with
customer care services as and when the need arises. Digital channels have become an
integral part of customers’ lives and a company that does not fully leverage the potential
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of digital channels will miss out on this revenue opportunity. This indicator allows us to
identify how well telcos are utilising digital channels to acquire and generate new sales
from customers. We have looked at the features and functionalities of smartphone apps
and online shops maintained by telecom operators to ascertain if sufficient means are
available for subscribers to instantly fulfil their needs.

Example – Giffgaff, the MVNO launched by British mobile operator O2, allows customers
to control their plans through the telco’s smartphone app. Users can check real-time
usage statistics, buy or adjust plans as per their liking, and buy extra quotas instantly
through the app. Users are also allowed to link their credit cards to the app, making the
process of completing a new purchase faster and easier. The MVNO also offers attractive
plans to customers, providing unlimited voice, text, and data plans for ~GBP 20 vs. 16GB-
20GBs offered on average by other telcos. This has helped the telco to become one of the
most popular providers in the UK. The telco was ranked the best for customer service and
value for money in a survey by a consumer association and topped the table with an 81%
customer satisfaction score. Incumbent operators such as Vodafone and Virgin Mobile
were ranked 10 and 13, respectively, with customer satisfaction scores of 62% and 50%.

Scoring metrics – 15

High (15) Availability of an app or an online platform that allows

customers to interact with a virtual agent; order and pick up
hardware on the same day from the nearest store; purchase
voice/text, data quotas, and top-ups; view real-time usage
statistics; manage other VAS; and pay bills

Moderate (10) Availability of an app or online platform that allows customers

to purchase voice/text, data quotas, and top-ups; view real-
time usage statistics; manage other VAS; and pay bills

Low (5) Availability of a platform (an app or web-based) that allows

customers to view usage statistics, purchase top-ups, pay bills,
and manage other VAS

Not Applicable (0) No platform available or platforms have limited features that
do not cover any of the above

• Percentage of customers using digital channels to interact with the company – 15%

Definition – Digital channels have become an integral part of the lives of customers and offers
a convenient, hassle-free. and fully automated mechanism for customers to interact with a
company. Analysing the percentage of a company’s customer base that uses digital channels
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for interactions allows us to understand how effective the company has been in providing
online channels and mobile applications that are easy to use and suits the requirements of
customers.

For the purposes of our framework, we looked at the number of downloads of the main mobile
applications released by a telco on Google Play Store and Tencent’s QQ app store (applicable
only for Chinese telcos) as a proxy for the number of subscribers using digital channels to
interact with a telco. Main mobile applications were defined as apps that provide general
account management functionalities to the user (E.g.: usage meters, bill settlements etc.).
As Google play store does not specify the exact number of downloads of an app, we have
considered the lower end of the range of downloads disclosed in Google play store as a proxy
for the number of downloads of a mobile app. We understand that the actual number of
downloads is likely to be greater than the lower range. However, due to the limited availability
of means to determine the exact number of app downloads, we have conservatively used the
lower range as a proxy for the number of downloads.

Example – Close to 75% of the retail customer base of Bank of America now uses digital
channels to interact with the bank. The bank also has over 23.6mn mobile banking users,
representing around 52% of the bank’s retail customer base. On average, close to 340,000
cheques are deposited at the bank daily via mobile platforms, equivalent to the number of
cheques placed at 880 brick-and-mortar financial centers. Payments conducted through digital
channels have also continued to increase, growing at a CAGR of 9% since 3Q14 and now
represent over 50% of total payments conducted by retail customers with the bank. Increasing
usage of digital channels has provided the bank some much-needed respite in terms of
overhead. Bank of America has closed nearly 230 physical financial centers which cater to retail
customers since 3Q15, yielding a 570bps improvement in the efficiency ratio (defined as the
percentage of non-interest expenses over total revenues) of the consumer banking segment.

Scoring Metrics – 15

High (15) Over 40% of the current subscriber base has downloaded the
main smartphone app/apps launched by the company

Moderate (10) Between 20%-40% of the current subscriber base has

downloaded the main smartphone app/apps launched by the
company

Low (5) Less than 20% of the current subscriber base has downloaded
the main smartphone app launched by the company

Not Applicable (0) The company does not have a smartphone app in place or data
on downloads of the app was not available
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• Use of data in the development of products and services – 10%

Definition – Does the company use data and analytics to develop or improve a product
and bring in higher revenues and profitability for the company? For example, a telco uses
data analytics to optimise network deployment, predict and prevent customer churn, as
well as execute targeted marketing campaigns. Data analytics could be used in a number
of ways to drive down costs, improve standards of quality, and yield better return on
capital. Investments to utilise the potential of data or examples of the company using
analytics could herald operational efficiency gains and overall better future performance.

Example – Nordstrom, a well-known US luxury fashion retailer, tracks Pinterest, a popular

social network, to identify trending products and uses that social data to promote popular
products in its brick-and-mortar stores with signage that induces shoppers to buy them.
Nordstrom has also merged its online and offline shopping experience by installing
interactive touchscreens in fitting rooms as well as providing Instagram images and
reviews of specific products in store on screens. Nordstrom stores also use sensors and Wi-
Fi signal to track the identity of those who visit the store, parts of the store they visit, time
spent, and other customer behaviors inside their stores. The collected data is used for in-
store product placement, planning, and identifying trending fashion items. The company
spends over 30% of its capital budget on technological innovations.

The company managed to grow its sales by 3% in 9M17 versus a 6% decline recorded by
one of its main competitors Macy’s. Nordstrom’s stock recorded a return of ~-4% in 2017
versus -29% and -7% decline recorded by peers Macy’s and Dillard’s.

Scoring metrics – 10

High (10) Use of data analytics to launch personalised marketing

campaigns to cross-sell or up-sell telco services, reduce
customer churn, provide pre-emptive care, and optimise
network deployment

Moderate (5) Use of data analytics to reduce customer churn, provide pre-
emptive care, and optimise network deployment

Low (2) Use of data analytics to optimise network deployment

Not Applicable (0) Little to no indication of the company using data analytics to
improve products/services or internal processes
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• Availability of customisation tools for customers – 10%

Definition – Does the company allow the customer to partially or fully customise the
product/service on offer? For a telco, this would be providing leeway for customers to choose
their own quotas of voice, text, and data on a mobile package. Customisation improves the
overall experience of the user as the customer only purchases what he/she really needs. This
is also likely to improve customer loyalty towards the telco as the user views the customised
plan as providing optimal value for money. We looked at the current plans and service
offerings of telcos to determine the level of customisation offered to customers.

Example – Coca-Cola, one of the largest beverage manufacturers in the world, provides a
variety of customisation tools through Coca-Cola Freestyle fountains. The fountains, which
dispense over 150 flavours of beverages manufactured by Coca-Cola on demand, allows
customers to customise their drinks by mixing different flavours. Customers can download
the Coca-Cola Freestyle app, create their personal mix using an array of different flavours
and brands, as well as link their devices to the Freestyle fountains through a QR code to
create their custom-made drink. Customers are also allowed to save and share their drink
recipes via social media.

The data collected from the customised drinks has provided Coca-Cola with much-needed
insights into the flavours that are in demand. The fact that customers often mix Sprite with
a cherry-flavour drink prompted the company to introduce an all-new cherry-flavored Sprite
in early 2017. Introducing a product highly in demand by customers helped Coca-Cola
record a mid-single digit growth in sales of the Sprite brand in 3Q17, which in turn helped
the company beat analyst expectations of revenues and profits for the quarter. Sprite-
branded beverages also recorded the highest growth in sales among Coca-Cola’s beverage
line-up during the quarter.

Scoring metrics – 10

High (10) Availability of fixed price plans that provide full freedom to a
customer to choose the quota he/she wants on voice, text,
and data services

Moderate (5) Limited availability of fixed price plans that allow customers
to choose the quota he/she wants on voice, text, and data
services

Low (2) Ability to add on voice, text, and data quotas to plans on offer

Not Applicable (0) No customisation options available to customers. Customers

are required to purchase the plans presented by the telco
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Scoring Methodology
Metrics Ranking Methodology
Strategy
Attempts to High (20) Four or more attempts made by the telco to change its position in the value
change the chain
position in the Moderate (10) 2-3 attempts made by the telco to change its position in the value chain
value chain Low (5) A single attempt made by the telco to change its position in the value chain
Not Applicable (0) No publicly available record of the telco attempting to change its position in
the value chain
% investments High (20) >10% of capex during the applicable period was invested in new digital
directed to digital businesses
transformation Moderate (10) Between 5%-10% of Capex during the applicable period was invested in
strategies new digital businesses
Low (5) <5% of capex during the applicable period was invested in new digital
businesses
Not Applicable (0) Little to no public information made available on the new digital
investments of the company
Expansions in to High (10) Release of three or more services that directly compete with three existing
new cannibalising business lines
revenue sources Moderate (5) Release of two services that directly compete with two existing business lines

Low (2) Release of a service that directly competes with an existing business line
Not Applicable (0) No indication of releasing services that directly competes with existing
business lines
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Scoring Methodology
Metrics Ranking Methodology
Operations
Availability High (15) App or online platforms that allow customers to interact with a virtual
of means for agent, order and pick up hardware on the same day from the nearest store,
customers to purchase voice/text and data quotas, view real time usage statistics, manage
instantly fulfil their other VAS, purchase top-ups and make bill payments
needs Moderate (10) App or online platforms that allows customers to purchase voice/text and
data quotas, view real time usage statistics, manage other VAS, purchase
top-ups and make bill payments
Low (5) Availability of a platform (an app or web based) that allows customers view
usage statistics, purchase top-ups, make bill payments and manage other
VAS.
Not Applicable (0) No platform is made available or platforms have limited features
Percentage of High (15) Over 40% of the current subscriber base has downloaded the main
Subscribers using smartphone app/apps launched by the company
digital channels Moderate (10) Between 20%-40% of the current subscriber base has downloaded the main
smartphone app/apps launched by the company
Low (5) Less than 20% of the current subscriber base has downloaded the main
smartphone app launched by the company
Not Applicable (0) The company does not have a smartphone app in place or data on
downloads of the app was not available
Availability of High (10) Availability of fixed price plans that provides full freedom for a customer to
customisation tools choose the quota they want on voice, text and data services
for customers Moderate (5) Limited availability of fixed price plans that allows customers to choose the
quota they want on voice, text and data services
Low (2) Ability to add-on voice, text and data quotas to plans on offer
Not Applicable (0) No customization options available to customers. Customers are required to
purchase the plans presented by the telco
Use of data to High (10) Use of data analytics to launch personalized marketing campaigns to cross
improve service sell or up-sell telco services, reduce customer churn and provide pre-emptive
offerings and care and optimize network deployments
internal processes Moderate (5) Use of data analytics to and reduce customer churn, provide pre-emptive
care and optimize network deployments
Low (2) Use of data analytics to optimize network deployments
Not Applicable (0) Little to no indication of the company using data analytics

Source: DBS Bank
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Singapore
Parameter
Attempts to change the
position in the value chain
Percentage of investments
directed toward digital
transformation strategies
Expansion into new
cannibalising revenue sources
Availability of means for
customers to instantly fulfil
their needs
Singtel
High
Based on our analysis,
Singtel has made over
four attempts to change
its position in the telecom
value chain.
Singtel has expanded in
to cybersecurity, digital
advertising, and data
analytics. Singtel’s pay-TV
business has expanded into
content production via
HOOQ.
High
Based on our analysis,
Singtel has invested over
S$2bn (translating to >15%
of its average annual
capex from FY14-17) on
acquiring companies in
the digital advertising and
cybersecurity space.
Low
Singtel has launched
a service that directly
competes with its existing
businesses. Singtel has
launched HOOQ, an OTT
video service that directly
competes with Singtel’s
pay-TV business.
High
Omni-channel integration.
With the recently launched
Collect @ Store, customers
who purchase selected
devices on singtelshop.com
can enjoy same-day pick up
at any Singtel shop.
E-care options such as
“Shirley”, a virtual agent
uses customer data to
provide answers, although
it is not powered by
Artificial Intelligence.
Also offers other features
as local peers.
StarHub
Moderate
StarHub has made three
attempts to change its
position in the value chain.
StarHub expanded into
content production via
mm2 and acquired Accel
systems to strengthen its
cybersecurity portfolio.
StarHub also provides
data analytics services to
corporates via Smarthub
analytics.
Moderate
StarHub has spent >10% of
its FY16 capex to acquire
Accel Systems, in a bid to
strengthen its cybersecurity
portfolio.
Low
StarHub has launched its
OTT video app “StarHub
Go”, available at a price to
non-StarHub customers and
is free for StarHub’s pay-TV
customers. .
Moderate
Happy Prepaid app allows
users to purchase additional
quotas when required. My
StarHub app provides a
range of services, including
usage meters, ability to
make bill payments, and
allowing customers to
make appointments at
service centres.
M1
Low
Based on our analysis, M1
has made a single attempt
to change its position in
the value chain by offering
managed cybersecurity
services to enterprises.
Not Applicable
Data on M1’s investments
in digital transformation
strategies is not publicly
available.
Not Applicable
No indication of M1
launching a service that
directly competes with one
of its an existing business
lines.
Moderate
E-care options such as
“Mindy”, a virtual agent
uses customer data to
provide personalised
resolutions to complaints.
M1 prepaid app allows
users to purchase voice and
data quotas when required.
MyM1 provides a range
of services which includes
usage meters, ability to
make bill payments, and
allowing customers to find
the nearest M1 store.

Singapore
Parameter
Availability of customisation
tools for customers
Use of data to improve
service offerings and internal
processes
Percentage of subscribers
using digital channels
Singtel
Moderate
EasyMobile plans of Singtel
allows customers to choose
voice, SMS, and data quotas
for a fixed price. Besides,
data x 2/3/Infinity add-on
plans also allow customers
to customize a data plan
that suits their individual
requirements.
High
• Deliver relevant
solutions to acquire
customers
• Develop offers to
retain customers - (i)
Home, (ii) Postpaid, (iii)
Micro-segmentation,
(iv) Prepaid
• Optimise business
processes, policies, and
network deployments
Its data analytics arm,
Dataspark, sells analytics as
a service as well as supports
internal data analytics
needs.
High
Singtel claims that 74% of
its Smartphone subscribers
use “My Singtel” app.
Multiple digital channels
1) Prepaid hap
2) eShop
3) Dash 500k registered
users
StarHub
Low
StarHub does not offer
customisable plans. Add-
on plans allow customers
to customise a data plan
that suits their individual
requirements.
high
StarHub uses analytics
to optimise network
deployments and use data
to upsell, cross-sell, and
reduce churn.
StarHub also provides
data analytics services to
corporates via SmartHub
analytics.
Moderate
Percentage of subscribers
that have downloaded
the MyStarHub and
Happy Prepaid apps
range between 20%-
40% of StarHub’s mobile
subscriber base, based on
our estimates. The company
does not disclose the
figure.
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M1
Low
M1 does not offer
customisable plans. Add-
on plans allow customers
to customise a data plan
that suits their individual
requirements.
Moderate
M1 uses analytics to
optimise network
deployments and uses
analytics to when launching
new plans or making
changes to existing ones.
Moderate
Percentage of subscribers
that have downloaded the
MyM1 and M1 Prepaid apps
range between 20%-40%
of M1’s subscriber base in
our estimates. The company
does not disclose the
figure.
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China
Parameter
Attempts to change the
position in the value chain
Percentage of investments
directed toward digital
transformation strategies
Expansion into new
cannibalising revenue sources
China Telecom
Moderate
Based on our analysis,
China Telecom has made
two attempts to change
its position in the telecom
value chain.
China Telecom offers
cybersecurity solutions
including managed SIEM
and firewall, security
consulting, and threat
management solutions
to corporates. The telco
also offers data analytics
as a service to corporate
customers.
Moderate
China Telecom invested
~7.5% of its FY16 capex
on digital transformation
strategies.
Capex on Information &
Application Services, which
includes investments in
data analytics and cloud
services, IoT, 5G, and mobile
finance solutions was
used as a proxy for capex
on digital transformation
strategies.
Low
China Telecom has
introduced one service that
directly competes with an
existing business line of the
telco.
China Telecom introduced
Yixin, an OTT messaging
app that directly competes
with the telco’s mobile SMS
business.
China Mobile
Moderate
Based on our analysis,
China Mobile has made
two attempts to change
its position in the telecom
value chain.
China Mobile has ventured
into content production
and delivery via Migu.
The telco also offers data
analytics as a service to
corporate customers.
Moderate
China Mobile invested
~9.5% of its FY16 capex
on digital transformation
strategies.
Capex on business networks
and support systems, which
includes investments in
data analytics and content
delivery networks, was
used as a proxy for capex
on digital transformation
strategies.
Not Applicable
No indication of China
Mobile launching a service
that directly competes with
one of its existing business
lines.
China Unicom
Low
Based on our analysis,
China Unicom has made a
single attempt to change
its position in the telecom
value chain.
China Unicom offers
data analytics as a service
to corporate customers
via a joint venture with
Telefonica.
Not Applicable
Based on our analysis,
China Unicom has made a
single attempt to change
its position in the telecom
value chain.
China Unicom offers
data analytics as a service
to corporate customers
via a joint venture with
Telefonica.
Not Applicable
No indication of China
Unicom launching a service
that directly competes with
one of its existing business
lines.

China
Parameter
Availability of means for
customers to instantly fulfil
their needs
Availability of customisation
tools for customers
Use of data to improve
service offerings and internal
processes
Percentage of subscribers
using digital channels
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China Telecom China Mobile China Unicom
Moderate Moderate Moderate
China Telecom’s app China Mobile’s app allows China Unicom’s app
allows users to purchase users to purchase or allows users to purchase
or terminate packages and terminate packages and or terminate packages
purchase additional voice/ purchase additional voice/ and additional voice/data
data quotas. data quotas. quotas via the app. Users
can also access customer
care services via the app.
Low Low Low
China Telecom does not China Mobile does not China Unicom does not
offer customisable plans. offer customisable plans. offer customisable plans.
Add-on features are Add-on features are Add-on features are
available for customers available for customers available for customers
looking to expand voice looking to expand voice looking to expand voice
and data quotas of their and data quotas of their and data quotas of their
existing plans. existing plans. existing plans.
Moderate Moderate Moderate
China Telecom uses data China Mobile uses data China Unicom uses data
analytics to optimise analytics to optimise analytics to optimise
network deployments and network deployments network deployments,
make targeted handset and make personalised ascertain the credit-
and package offerings to marketing offers to worthiness of subscribers.
customers. customers. and proactively predict
customer defaults.
Moderate Moderate Moderate
The percentage of The percentage of The percentage of
subscribers that have subscribers that have subscribers that have
downloaded the China downloaded the official downloaded the China
Telecom app ranges China Mobile app and Unicom app ranges
between 20%-40% of China Mobile apps offered between 20%-40% of
China Telecom’s subscriber by regional subsidiaries China Unicom’s subscriber
base. in Guangdong, Henan, base.
Sichuan, Jiangsu,
Shangdong, Zhejiang,
Ningxia, and Tianjin range
between 20%-40% of
China Mobile’s subscriber
base.
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Thailand
Parameter
Attempts to change the
position in the value chain
Percentage of investments
directed toward digital
transformation strategies
Expansion into new
cannibalising revenue sources
Availability of means for
customers to instantly fulfil
their needs
AIS
Low
Based on our analysis, AIS
has made one attempt to
change its position in the
value chain.
AIS has expanded into
content via ‘AIS Play box”,
an OTT video on-demand
service.
Not Applicable
Data on AIS’s investments
in digital transformation
strategies is not publicly
available.
Not Applicable
No indication of AIS
launching a service that
directly competes with an
existing business line
Moderate
MyAIS app allows
customers to purchase
additional voice and
data quotas at their
convenience. The app also
makes personalised offers
to customers and allows
them to interact with
Aunjai, the virtual care
agent of AIS.
DTAC TRUE Corp
Not Applicable Moderate
No publicly available Based on our analysis, True
information of attempts by has made two attempts to
DTAC to expand its reach change its position in the
over the telecom value telecom value chain.
chain.
True partnered with CJ
E&M to develop content
to supplement TrueVision,
the telco’s TV business.
True also partnered with
Axion Ventures to develop
smartphone games for
True’s mobile customers.
Not Applicable Not Applicable
Data on DTAC’s investments Data on True’s investments
in digital transformation in digital transformation
strategies is not publicly strategies is not publicly
available. available.
Not Applicable Not Applicable
No indication of DTAC No indication of True
launching a service that launching a service that
directly competes with an directly competes with an
existing business line. existing business line.
Moderate Moderate
MyDTAC app allows True iService app allows
subscribers to purchase customers to purchase voice
additional voice/data and data quotas when
quotas when required. required.
Mari, the virtual care agent
of the telco, is available
online and assists users in
selecting mobile packages

Thailand
Parameter
Availability of customisation
tools for customers
Use of data to improve
service offerings and internal
processes
Percentage of subscribers
using digital channels
AIS
Low
AIS does not offer
customisable plans. Add-
on features are available
for customers looking to
expand voice and data
quotas of their existing
plans.
Moderate
AIS uses analytics to
optimise network
deployments. Data from
AIS’s mobile application is
used to make personalised
offers to customers.
Low
The percentage of
subscribers that have
downloaded the MyAIS app
is less than 20% of AIS’s
subscriber base.
DTAC
Low
DTAC does not offer
customisable plans. Add-
on features are available
for customers looking to
expand voice and data
quotas of their existing
plans.
Low
We think DTAC uses
analytics to optimise
network deployments.
Data on DTAC using data
analytics to improve its
service offerings or internal
processes is not publicly
available.
Low
The percentage of
subscribers that have
downloaded the MyDTAC
app is less than 20% of
DTAC’s subscriber base.
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TRUE Corp
Low
True does not offer
customisable plans. Add-
on features are available
for customers looking to
expand voice and data
quotas of their existing
plans.
Moderate
True uses analytics
to optimise network
deployments and to make
personalised marketing
offers to customers.
Low
The percentage of
subscribers that have
downloaded the True
iService app is less than
20% of True’s mobile
subscriber base.
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Malaysia
Parameter
Attempts to change the
position in the value chain
Percentage of investments
directed toward digital
transformation strategies
Expansion into new
cannibalising revenue
sources
Axiata Group Digi.com Maxis Telekom Malaysia
High Moderate Moderate Moderate
Axiata Group has Digi offers a usage- Maxis has expanded Has made 2-3
made over three based insurance to provide mobile attempts to change
attempts to change platform for motor card payment its position in the
its position in the insurers via iFleet, solution (mPOS) value chain.
telecom value chain. the telco’s fleet and vehicle-tracking
management services (mDrive). Its 100%-owned
Axiata Digital has business. subsidiary, VADS, is
invested in 29 It also has a a fully Integrated
companies across It also launched an partnership with Connectivity/ICT/
digital advertising, e-wallet app (vcash) Vodafone to offer BPO which, besides
OTT enablement recently that is the latter’s IOT managed network
platforms, digital available to anyone services to businesses services, offers
marketplaces as with a Malaysian in Malaysia. cybersecurity and
well as digital phone number. smart services
entertainment and solutions for real
education. estate and cities.
TM ventured into
the provision of real-
time security and
surveillance services
for home and
business premises
via acquisition of
Gapurna Global
Solutions in 2013.
Low Not Applicable Not Applicable Not Applicable
Axiata Group has Data on DTAC’s Data on Maxis’ Data on TM’s
invested ~4.4% of investments investments investments
capex from 2014-16 in digital in digital in digital
in digital businesses. transformation transformation transformation
strategies is not strategies is not strategies is not
The group has publicly available. publicly available. publicly available.
invested US$160mn
in Axiata Digital
from 2014-16.
Total capex over
the period in
approximate USD
terms equates to
~US$3.7bn.
Not Applicable Not Applicable Not Applicable Low
No indication of No indication of No indication of Partnered with iFlix
Celcom launching a Digi launching a Maxis launching a to offer free OTT
service that directly service that directly service that directly video services for
competes with an competes with an competes with an its fixed broadband
existing business line existing business line existing business line subscribers, directly
of Celcom. of Digi. of Maxis. in competition with
its IPTV services
(HyppTV).
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Malaysia
Parameter Axiata Group Digi.com Maxis Telekom Malaysia
Availability of means for Moderate Moderate Moderate Moderate
customers to instantly Celcom’s XPax app MyDigi app allows MyMaxis app webe self-care app
fulfil their needs allows subscribers to customers to allows customers allows users to
purchase additional purchase add-on to purchase add- purchase Wifi passes
data and voice quotas at their on data and voice and access customer
quotas through the convenience. Users quotas at their care services via the
app. can also chat with convenience. app
customer service HotLink Red app
agents during allows customers
working hours via to access customer
the app. service agents
directly via the app.
Availability of Low Low Low Low
customisation tools for Celcom does not Digi does not offer Maxis does not offer Does not offer Unifi
customers offer customisable customisable plans. customisable plans. and webe plans that
plans. Add-on Add-on features Add-on features are customisable.
features are are available for are available for Add-on features
available for customers looking customers looking are available for
customers looking to expand voice and to expand voice and customers looking to
to expand voice and data quotas of their data quotas of their expand voice or IPTV
data quotas of their existing plans. existing plans. content services.
existing plans.
Use of data to improve Moderate Low Low Low
service offerings and Celcom uses DiGi uses data The company uses The company uses
internal processes data analytics to analytics to track data analytics to data analytics to
optimise network subscriber patterns optimise network optimise network
deployments and to and make changes deployments. deployment. The rest
make personalised or introduce new The rest of the of the information
marketing offers to offerings whenever information is not is not available
customers. necessary. available publicly. publicly.
Percentage of subscribers Low Low high Not Applicable
using digital channels The percentage of The percentage of The percentage The number of
subscribers that have subscribers that have of subscribers that subscribers of webe,
downloaded the downloaded MyDigi have downloaded the telco’s mobile
MyCelcom and XPax app is less than 20% MyMaxis and service, is not
apps is less than of Digi’s subscriber HotLink Red apps is publicly available.
20% of Celcom’s base. over 40% of Maxis’s
subscriber base. subscriber base.

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Indonesia
Parameter
Attempts to change the
position in the value chain
Percentage of investments
directed toward digital
transformation strategies
Expansion into new
cannibalising revenue sources
Availability of means for
customers to instantly fulfil
their needs
Telekomunikasi Indonesia
High
Based on our analysis,
Telkom has made over
three attempts to change
its position in the telecom
value chain.
Telkom operates Blanja,
a digital marketplace
launched through a
partnership with eBay.
Telkom provides data
analytics solutions via
Telkom Sigma, operates a
digital advertising platform,
UAd, and offers managed
cybersecurity services via
Telkom Telstra, established
as a joint venture with
Australia’s Telstra.
Not Applicable
Data on Telkom’s
investments in digital
transformation strategies is
not publicly available.
Low
Telkom has launched
one service that directly
competes with an existing
business line.
Telkom launched OONA TV,
an OTT TV platform that
competes with the telco’s
pay-TV offering, Usee TV.
Moderate
MyTelkomsel app
allows users to purchase
additional voice/data
quotas at their convenience
via the app. Telkomsel has
also introduced a virtual
care agent that is accessible
via Line and Facebook
messenger services.
XL Axiata
Moderate
Based on our analysis, XL
has made at least two
attempts to change its
position in the telecom
value chain.
XL expanded into digital
advertising via AdReach, a
programmatic ad-buying
platform established
in partnership with
Mobiwella. XL had also
launched an e-commerce
platform “Elevenia” in 2013
in a joint venture with SK
Planet but sold its entire
stake in 2017.
Not Applicable
Data on XL’s investments
in digital transformation
strategies is not publicly
available.
High
XL did not hesitate to
cannibalise its voice and
SMS revenue by investing
boldly in 3G and 4G
services, leading to legacy
revenue contribution of
only 29% in 9M17 versus
40-50% for its local peers.
Moderate
MyXL app allows customers
to purchase voice and
data quotas at their
convenience.
Maya, the virtual agent of
XL, is accessible via Twitter.
Indosat
Moderate
Based on our analysis,
Indosat has made three
attempts to change its
position in the telecom
value chain.
Indosat offers managed
security services to
corporates and has
expanded into digital
advertising via the
establishment of Indonesia
Mobile Exchange (iMx),
a mobile-ad exchange.
Indosat also offers data
analytics solutions to
corporates via Eureka.
Not Applicable
Data on Indosat’s
investments in digital
transformation strategies is
not publicly available.
Not Applicable
No indication of Indosat
launching a service that
directly competes with an
existing business line.
Moderate
Myim3 app allows
customers to purchase voice
and data quotas at their
convenience. The app also
allows users to purchase
application-specific data
quotas (Data quotas to use
Facebook, Instagram etc.).

Indonesia
Parameter
Availability of customisation
tools for customers
Use of data to improve
service offerings and internal
processes
Percentage of subscribers
using digital channels
Telekomunikasi Indonesia
Low
Telkomsel does not offer
plans that are customisable.
Add-on features are
available for customers
looking to expand voice
and data quotas of their
existing plans.
Moderate
Telkom uses data analytics
to optimise network
deployment as well as
predict and prevent
customer churn.
Low
The percentage of
subscribers that have
downloaded the
MyTelkomsel app is less
than 20% of Telkomsel’s
subscriber base.
XL Axiata
Low
XL does not offer plans that
are customisable. Add-
on features are available
for customers looking to
expand voice and data
quotas of their existing
plans.
Moderate
XL uses analytics to
optimise network
deployment and to make
targeted marketing offers
to customers.
Low
The percentage of
subscribers that have
downloaded MyXL and XL
Postpaid apps is less than
20% of XL’s subscriber base.
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Indosat
Low
Indosat does not offer plans
that are customisable. Add-
on features are available
for customers looking to
expand voice and data
quotas of their existing
plans.
Not Applicable
Data on Indosat using data
analytics to improve its
service offerings or internal
processes is not publicly
available.
Low
The percentage of
subscribers that have
downloaded the Myim3
app is less than 20% of
Indosat’s subscriber base.
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Hong Kong
Parameter
Attempts to change the
position in the value chain
Percentage of investments
directed toward digital
transformation strategies
Expansion into new
cannibalising revenue sources
Availability of means for
customers to instantly fulfil
their needs
HKT Trust
High
Based on our analysis, HKT
Trust has made a single
attempt to change its
position in the telecom
value chain.
HKT Trust offers data and
video analytics solutions to
corporates.
Not Applicable
Data on HKT Trust’s
investments in digital
transformation strategies is
not publicly available.
Not Applicable
No indication of HKT Trust
launching a service that
directly competes with an
existing business line of
HKT Trust.
Moderate
HKT Trust operates three
apps to represent the three
brands namely, 1010, CSL,
and Sun. The apps allow
customers to purchase data
and voice quotas at their
convenience and directly
access customer care
services.
SmarTone
Moderate
Based on our analysis,
SmarTone has made a
single attempt to change
its position in the telecom
value chain.
SmarTone offers managed
security solutions including
managed firewall solutions
and security consulting
services to corporates.
Not Applicable
Data on SmarTone’s
investments in digital
transformation strategies is
not publicly available.
Low
SmarTone has ST WiFi
Calling that allows user
to call Hong Kong from
overseas when connected
to WiFi. This cannibalises its
tradition IDD business.
Moderate
SmarTone care app allows
users to renew plans and
purchase add-on quotas
via the app. Users can also
pre-order handsets via the
app. The online shop offers
same-day pick-up or next-
day delivery of handsets.
SmarTone lacks a virtual
care agent.
Hutchison Telecom
Moderate
No publicly available
information of attempts
by Hutchison Telecom to
expand its reach over the
telecom value chain.
Not Applicable
Data on Hutchison
Telecom’s investments in
digital transformation
strategies is not publicly
available.
Not Applicable
No indication of Hutchison
Telecom launching a service
that directly competes with
an existing business line of
Hutchison Telecom.
Moderate
My3 app allows users to
manage plans and purchase
add-on quotas via the app.
Users can also access the
telco’s online store via the
app and buy handsets.
3iChat service allows users
to access customer care
services anytime via the
app.

Hong Kong
Parameter
Availability of customisation
tools for customers
Use of data to improve
service offerings and internal
processes
Percentage of subscribers
using digital channels
HKT Trust
Low
HKT Trust does not offer
plans that are customisable.
Add-on features are
available for customers
looking to expand voice
and data quotas of their
existing plans
Moderate
HKT Trust uses data
analytics to optimise
network deployment
and make personalised
marketing offers based
on data-based customer
segmentation.
Low
The percentage of
subscribers that have
downloaded the CSL, 1010,
and Sun apps is below 20%
of HKT’s mobile subscriber
base.
SmarTone
Low
SmarTone does not offer
plans that are customisable.
Add-on features are
available for customers
looking to expand voice
and data quotas of their
existing plans.
Moderate
Data on SmarTone using
data analytics to improve
its service offerings or
internal processes is not
publicly available.
Low
The percentage of
subscribers that have
downloaded the SmarTone
care app is below 20% of
SmarTone’s subscriber base.
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Hutchison Telecom
Low
Hutchison Telecom does
not offer plans that are
customisable. Add-on
features are available
for customers looking to
expand voice and data
quotas of their existing
plans.
Not Applicable
Data on Hutchison Telecom
using data analytics to
improve its service offerings
or internal processes is not
publicly available.
Low
The percentage of
subscribers that have
downloaded the My3 app
is below 20% of Hutchison
Telecom’s subscriber base
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References
1. https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/how-
telecom-companies-can-win-in-the-digital-revolution

2. https://www.strategyand.pwc.com/trend/2017-telecommunications-industry-trends

3. http://carrier.huawei.com/en/trends-and-insights/enterprise-connections-and-
communications/cloud-enterprise-communications-whitepaper?ic_source=fmsh17

4. https://www.capgemini.com/resources/unlocking-customer-satisfaction-why-digital-
holds-the-key-for-telcos/

5. https://www.capgemini.com/consulting/resources/digital-for-telcos/

6. https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/how-
telecom-companies-can-win-in-the-digital-revolution

7. https://www.mckinsey.com/industries/telecommunications/our-insights/a-future-for-
mobile-operators-the-keys-to-successful-reinvention

8. https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/
why-companies-should-care-about-ecare

9. Ibid.

10. https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/how-
telecom-companies-can-win-in-the-digital-revolution

11. https://hbr.org/2017/07/6-digital-strategies-and-why-some-work-better-than-others

12. https://hbr.org/2017/01/what-the-companies-on-the-right-side-of-the-digital-
business-divide-have-in-common

13. https://www.emarketer.com/Report/Ad-Spending-Southeast-Asia-New-Forecasts-
Emerging-Digital-Region/2001958
 DBS Asian Insights
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Disclaimers and Important Notices

The information herein is published by DBS Bank Ltd

(the “Company”). It is based on information obtained
from sources believed to be reliable, but the Company
does not make any representation or warranty, express
or implied, as to its accuracy, completeness, timeliness
or correctness for any particular purpose. Opinions
expressed are subject to change without notice. Any
recommendation contained herein does not have
regard to the specific investment objectives, financial
situation and the particular needs of any specific
addressee.

The information herein is published for the information

of addressees only and is not to be taken in substitution
for the exercise of judgement by addressees, who
should obtain separate legal or financial advice. The
Company, or any of its related companies or any
individuals connected with the group accepts no
liability for any direct, special, indirect, consequential,
incidental damages or any other loss or damages of
any kind arising from any use of the information herein
(including any error, omission or misstatement herein,
negligent or otherwise) or further communication
thereof, even if the Company or any other person has
been advised of the possibility thereof.

The information herein is not to be construed as an offer

or a solicitation of an offer to buy or sell any securities,
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to provide any investment advice or services. The
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and/or employees may have positions or other interests
in, and may effect transactions in securities mentioned
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The information herein is not intended for distribution

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 Living, Breathing Asia

www.dbs.com