SingTel Bridges Gap Between Telecoms, Advertisement And Big Data

BMI View: In light of falling mobile voice revenues, strong competition in mobile data market and rising capex demands, telecoms operators must diversify their revenue streams beyond traditional communications services. Singapore Telecommunications (SingTel) has accelerated its implementation of this strategy with the announcement that its wholly owned subsidiary Amobee will acquire digital advertising firms Adconion and Kotera for around USD209mn and USD150mn, respectively.

The opportunities presented by data-centric businesses are demonstrated in SingTel's fourth quarter results for the year ended in March 2014, when it reported 114% year-on-year revenue growth in its digital advertisement segment, compared to 8% contraction in total operating revenue and a 12% drop in consumer telecoms operating revenue.

Mobile operators are uniquely placed to add value in the digital advertisement market, as they remain the best source of data on consumers' locations and interests, based on usage patterns on their mobile phones. As well as its more mature markets such as Singapore and Australia, SingTel is present in several Asian markets where the proliferation of low cost smartphones is contributing to a boom in 3G growth, thus creating a rapidly expanding user base to target with mobile advertising. The operator's investment in bolstering its digital advertisement business will therefore help offset declining revenues, while enabling it to capitalise on growth trends in its mobile markets.

Rapidly Growing Digital Ad Potential
3G/4G Subscriptions Growth In SingTel Markets (000), 2011-2018

SingTel Bridges Gap Between Telecoms, Advertisement And Big Data

BMI View: In light of falling mobile voice revenues, strong competition in mobile data market and rising capex demands, telecoms operators must diversify their revenue streams beyond traditional communications services. Singapore Telecommunications (SingTel) has accelerated its implementation of this strategy with the announcement that its wholly owned subsidiary Amobee will acquire digital advertising firms Adconion and Kotera for around USD209mn and USD150mn, respectively.

The opportunities presented by data-centric businesses are demonstrated in SingTel's fourth quarter results for the year ended in March 2014, when it reported 114% year-on-year revenue growth in its digital advertisement segment, compared to 8% contraction in total operating revenue and a 12% drop in consumer telecoms operating revenue.

Rapidly Growing Digital Ad Potential
3G/4G Subscriptions Growth In SingTel Markets (000), 2011-2018

Mobile operators are uniquely placed to add value in the digital advertisement market, as they remain the best source of data on consumers' locations and interests, based on usage patterns on their mobile phones. As well as its more mature markets such as Singapore and Australia, SingTel is present in several Asian markets where the proliferation of low cost smartphones is contributing to a boom in 3G growth, thus creating a rapidly expanding user base to target with mobile advertising. The operator's investment in bolstering its digital advertisement business will therefore help offset declining revenues, while enabling it to capitalise on growth trends in its mobile markets.

In 2012 SingTel acquired mobile advertising firm Amobee, which now forms the basis of its digital advertisement and big data business. Amobee's services are network agnostic, so while it is guaranteed to be able to leverage its parent's subscriber base of 524mn as at March 2014, its growth opportunities stretch far beyond it, both within and outside SingTel's mobile markets.

The acquisition of Adconion and Kontera will fill crucial gaps in Amobee's business, by expanding its reach from mobile advertising to digital advertisement across multiple platforms. Both Adconion and Kontera have taken a holistic approach for their digital advertisement and big data analytics platforms, looking at consumer behaviour across TV and video display, email, social media and mobile. Both companies have developed their digital advertising solutions with the assumption that what consumers share on social media is not necessarily representative of their online spending habits or where they are and what they search for on their mobile phones. This approach is in line with evolving consumer habits of relying of a wide range of devices to suit varying needs.

In BMI's view, as well as cementing SingTel's leading position in the digital advertisement market, through the absorption of Adconion and Kontera's high profile client lists, the acquisitions brings Amobee a much richer big data analytics portfolio, easily adaptable to consumer patterns in developing and mature telecoms markets. As relates to SingTel's mobile business, Adconion and Kotera's emphasis on multiple screens should help offset the pressure on mobile and enterprise revenues in its more developed markets of Australia and Singapore. Meanwhile, by the time consumers in its other markets begin using multiple smart-connected devices, SingTel will approach them with a wealth of experience and a leading position in the fields of digital advertisement and big data analytics.

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