Singapore Telecommunications Ltd

SGX:Z74

Earnings Call Transcript 2019-Q1

[Operator]

Ladies and gentlemen, welcome to Singtel's FY '19 Q1 Results Conference Call. [Operator Instructions] Ms. Sin, over to you.

[Yang Fong Sin, executive]

Good morning, everyone. A warm welcome to all investors and analysts. You are listening into Singtel's earnings conference call for the first quarter ended 30th of June 2018.

My name is Sin Yang Fong and let me introduce management on the call. We have Ms. Chua Sock Koong, Group CEO; Mr. Allen Lew, CEO, Consumer Australia; Mr. Bill Chang, CEO, Group Enterprise; Mr. Yuen Kuan Moon, CEO, Consumer Singapore; Mr. Samba Natarajan, CEO, Group Digital Life; Mr. Arthur Lang, CEO, International; Ms. Lim Cheng Cheng, Group CFO; Ms. Jeann Low, Group Chief Corporate Officer; Mr. Art Wong, CEO, Global Cybersecurity; Mr. Murray King, CFO, Consumer Australia; Mr. Ben White, MD of Marketing and Product in Optus. They're also assisted by other members of the management team from Singapore and Australia.

Before we start taking questions, I would like to invite Sock Koong to share some highlights from this set of results.

[Chua Koong, executive]

Thanks, Yang Fong, and thank you all for joining us for Singtel's results for first quarter ended 30th June 2018.

Before getting to results, I'd like to highlight that we [indiscernible] from 1st April 2018, which is the start of financial year, the group has adopted all the applicable Singapore Financial Reporting Standards, international, and also what we have done is we have restated the results of prior periods for comparison. The new standards, however, do not have a material impact on the group's net results.

The group for this quarter reported resilient results and drove data monetization in the core business. Our focus on digitalization and automation of the core business lifted customers' engagement, productivity and drove cost savings. In constant currency, revenues rose 2% and EBITDA was stable. Optus maintained its momentum with mobile customer growth across the consumer and enterprise segments. Group Enterprise continued to drive growth in ICT services, although revenue in the short term was influenced by the lumpy nature of major infrastructure projects. And despite intense competition in India and Indonesia, Airtel and Telkomsel gained market share. Underlying net profit and net profit declined 6 -- 19% and 7%, respectively, on lower associates earnings and then increase in withholding tax on dividends. The group continued to deliver substantial free cash flow, which rose 13% on higher dividends from Telkomsel and Optus' lower capital expenditure.

For the quarter, underlying net profit was $25 million or 3% lower due to the weaker Australian dollar and most regional currencies.

So if I can just quickly go through the performance on Slide 7. Results for the quarter, as I've highlighted earlier, was impacted by intense competition, the lumpiness in the ICT business and adverse currency impacts -- effects. And exceptional items highlights included a gain on the disposal of a property in Singapore and also the group share of Airtel's exceptionals partially offset by [ staff ] restructuring costs. So net profit declined 7% on lower contribution from the regional associates, our lower economic interest in NetLink Trust following the IPO as well as higher withholding tax on dividends. So with that, I'm going to hand over to Yang Fong for the Q&A.

[Yang Fong Sin, executive]

Thank you, Sock Koong. I must advise that this call is being recorded for playback and transcription. We will now invite questions from participants. Our operator will assist you to put through your questions.

[Operator]

[Operator Instructions] Our first question today comes from the line of Miang Chuen Koh from Goldman Sachs.

[Miang Chuen Koh, analyst]

Three questions please. Firstly on Singapore Mobile business, if you look at the quarter-to-quarter increase in postpaid subs, it was actually behind M1, I'm just wondering was it due to the impact from MVNOs or were there other reasons driving that? And how would you expect trends ahead? Second question is on Australia. We've seen Telstra announced many changes to their plans, among which would be they have become significantly more generous in data allocations and also introducing some unlimited data plans, at the premium end for the postpaid customers. Wondering how Optus is assessing the situation and any guidance on a potential response. And lastly, on Digital Life, Amobee specifically. Revenues were down a bit due to some delayed marketing spend from customers. I'm wondering if this is in relation to a -- just 2 to 3 customers or was it more broad based in nature? And if possible, can you talk about Videology, giving us a sense of how the impact is on Amobee's revenues and EBITDA and how it enhances with your ad tech business?

[Chua Koong, executive]

Why don't I get Moon to do the first question. And then maybe Samba, you do the Amobee question first then we hand over to Australia to talk about the Telstra price plan, et cetera.

[Kuan Moon Yuen, executive]

Thank you for the question. And with regards to the quarterly net adds, we are tracking according to our plan when we look at subscriber growth. However, we have seen a bit of a shift in customers switching from prepaid to postpaid, especially with the introduction of $0 subscription, of postpaid plans by one of the MVNOs. We believe that would -- has shifted some of the prepaid market subscribers into the $0 subscription plan on MVNO. So I think you should look at it from the context of overall decline in prepaid, plus increase in postpaid to look at the overall size of the market.

[Chua Koong, executive]

And the post-revenue share would be probably a more meaningful indicator than just customer share.

[Kuan Moon Yuen, executive]

That's true. I think with -- Sock Koong is right, with the introduction of the $0 subscription plan, we will definitely now track a lot closer to the share of revenue and to track the trending that the real customers -- the revenue generating customers.

[Chua Koong, executive]

Samba?

[Samba Natarajan, executive]

Yes, sure. On Amobee, on your first question, on whether this decline in marketing spend was broad-based versus limited, it was largely limited to a few customers, 4 or 5 customers where some of our big customers had a pullback in their marketing spend which was unexpected. And so as a result of that, we saw the pullback in the growth numbers. On Videology, we think that Videology will strengthen our position as an omni-channel DSP with additional buying capabilities in the TV market in addition to what we already have in display: social; video; and e-mail. And so this is just another channel and media TV and programmatic TV are very fast growing channels and Videology gives us that technology as well as access to a premium video inventory. So we think that it strengthens our overall positioning in the market as an omni-channel player. In terms of how it will affect our financials, quite frankly, we're not in a position to amend the guidance of Videology for Amobee at this time because Videology was acquired under bankruptcy filing. And we will need more time to assess the financial impact, and we'll get back to you as soon as we are ready to do that.

[Chua Koong, executive]

Allen?

[Yoong Keong Lew, executive]

Thank you. I mean -- in regard to the -- your question regarding what is Optus' response to Telstra's plans, we are obviously -- we will look at what sort of traction it's getting in the market. But I suspect the new plans that they have announced, basically respond to some regulatory comments that were made about their unlimited plans, which were not being transparent to customers in terms of what they were getting. So I think they have hence segregated the plans into 2, where if you want truly unlimited without any capping of speed, you have to pay close to $200 for that a month. And then for people who are willing to accept capping for $10 a month at these speeds -- the [indiscernible] megabits per second, they have to pay $10 more. So I think it's more a follow-up reaction to initial plans they have in the market, than anything else. We will monitor the traction of that and if we need to respond, we will look at it appropriately. I think we are more focused on making sure that our own plans allow us to acquire customers in the market and eventually -- profitability as well.

[Operator]

Your next question today comes from the line of Arthur Pineda from Citigroup.

[Arthur Pineda, analyst]

Three questions, please. Firstly on the Singapore enterprise momentum. Just wondering what's driving this decline. Your competitors seem to have grown much faster in this side. Is this a case of market share loss or just a contract timing issue? Second question I had is with regard to the 5G deployments in Australia and Singapore, when do you expect to fully commercialize on these markets? Should we see Optus rolling ahead for fixed wireless broadband and maybe Singapore trailing in terms of deployment? Last question I had is with regard to the Digital Life revenues. Samba, you mentioned this actually declined because of some contracts being pushed back. Is it just a timing issue? Or should -- or have clients actually pulled back in terms of spending?

[Chua Koong, executive]

Okay. I think I will get Bill to talk about the enterprise business. And maybe talk about the 5G deployment in Singapore as well. And maybe I'll get Allen to jump in to talk about 5G deployment in Australia and then finish off with Samba's comments on Digital Life, Amobee revenues, particularly.

[York Chye Chang, executive]

Thank you, Sock Koong. Good morning, everyone. So on the enterprise side, it is really the lumpiness of the large contracts that we have. We had a large infrastructure project that was completed same quarter last year and basically, that's the one that affects the overall sort of revenue profile. Beyond that, when we look at all the major sort of key product lines in the enterprise services, we do not believe that there is any significant market share sort of movements. And this is all the organic. And looking inside of movements there, it would be good to try and look at a baseline comparison minus acquisitions made -- of other entities. On 5G, the focus -- we just recently launched the 5G showcase in Singapore, and that's largely around the enterprise use cases. And at this stage -- whilst there is a lot of interesting excitement, the showcase we've also extended that to the one-north facility sometime down the later part of this year. The enterprise use case will all be measured against specific customer requirements and also the business case behind that. So this is just ensuring that the customers have an early sort of a platform that they can engage in to do their applications and testing. And one-north is chosen because of its -- the nation's science and tech hub and there's a lot of activities around autonomous vehicles, testing of drones and various science and technology activities there.

[Chua Koong, executive]

Allen?

[Yoong Keong Lew, executive]

Yes. In terms of Australia, we clearly identify 5G as the new business opportunity for us. The standards have been finalized. We have the spectrum in the 6 capital cities, and we've run a tender and we are narrowing down our infrastructure supplier. So we are well on track to deliver a commercial service by early 2019. So I think we've also secured the sites in terms capital cities. So that's where you'll see the first 5G deployment for us in Australia.

[Samba Natarajan, executive]

And then Amobee's revenues, look, it's a combination of some pullbacks, some delay. But overall we're reiterating our guidance for Amobee to grow by midteens this year.

[Operator]

Your next question today comes from the line of Piyush Choudhary from HSBC.

[Piyush Choudhary, analyst]

A few questions. Firstly on Singapore. Are you witnessing change in the pace of adoption of SIM Only plans? [indiscernible] on the numbers and what's the [indiscernible] subscribers on SIM-only in the current quarter versus last year? And is handset leasing kind of leading to a higher adoption of SIM-Only plan? Secondly, we understand dividends from associates are secured for fiscal '19. However, considering earnings per share on Telkomsel this year, do you think dividends from Telkomsel could be cut next year or Telkomsel could use their retained earnings to maintain dividends. Any color there would be helpful.

[Chua Koong, executive]

Okay, Moon, and then Arthur.

[Kuan Moon Yuen, executive]

Good morning, Piyush. Thank you for your question. We are seeing continued adoption of SIM Only plan, of course, now with more options available in the market -- we're also introducing new combo X crossover, XO plan as well as leasing. We are seeing our customers are moving to other plans as well. The leasing SIM is really not to encourage more people to move over to SIM Only, but rather to complement the SIM Only sales and when someone has gotten a SIM Only plan, inevitably, they would need a handset. And that's how we introduce the leasing schemes to support some of these SIM Only plans customers and we do see a healthy switch of customers adopting the leasing plan. In general, you look at it, the base has not changed too much and we are still looking at single-digit SIM Only plans in our base.

[Tao Yih Lang, executive]

And then, Piyush, for your question on the dividends, I think for this year, I think the guidance, as per the investor presentation, has not changed in terms of dividends from associates so we maintain that guidance. As to next year, I guess we have -- for Telkomsel, that's another 2 quarters to go, and therefore, Singtel, we've got another 3 quarters to go. So it's perhaps too early to give any guidance for next year. But I would say, if you look at what the telco management has said last week, while the past quarter was certainly a weak quarter, in the month of July, post the Lebaran period there's been some price stabilization and they are in fact for many areas they have increased prices between 4% and 11%. And they are looking to continue that trend over the next few months. At the same time, they have also indicated their focus on cost and to manage costs down, which will then help on the profit side. So there's still another 6 months to come. So let's see.

[Piyush Choudhary, analyst]

And if I may ask one more, in Australia, on the working capital in this quarter has increased by $183 million quarter-on-quarter. What led to such sharp increase?

[Chua Koong, executive]

Murray?

[Murray King, executive]

It's Murray here. Essentially it was to do with the timing of around creditor payments and the like, so it was really a phasing issue more than anything else.

[Operator]

Your next question today comes from the line of Eric Choi from UBS.

[Eric Choi, analyst]

I just had 2, both on Optus. First one, just on TPG. I guess we've got greater visibility on what their Mobile network will actually look like now and also their pricing plans. So my question is, do you think that the industry perhaps has overestimated how much of a threat there will be in the Mobile handset market? And if so, do you think maybe we need to -- maybe the industry doesn't actually need to, I guess, reset handset pricing so much to compete? That's kind of the first question. Second one just on 5G. I think you've previously said, Allen, that it would be a fixed wireless product in January '19. So just wondering if that still stands. And then whether that will be just like an Optus branded only product or whether you'd look to MVNO it as well?

[Chua Koong, executive]

Okay. Maybe [indiscernible] you want to talk about the -- Allen will talk about both TPG and Australia and what you're doing on your 5G plan?

[Yoong Keong Lew, executive]

Yes. On the part of your question on TPG, I think the impact of TPG is more on the BYO market, it's not going to impact the handset market. I think there's already a lot of very aggressive price competition happening there. If you look at the MVNOs in the market and the sort of pricing that you have seen from people like Lebara and some of the other companies out there. So I think they are going to be coming and competing with their much smaller network than the existing mobile operator and going into a very price-sensitive end of the market. Obviously the other offer a free trial for a period of time and it remains to be seen how many customers will continue after the free period, bearing in mind the quality of the network. So -- for us in Optus, we have a number of MVNOs who are competing in the end of the market and we will let them cope with the competition from TPG. In terms of 5G, we are fully on track to deliver a commercial 5G service in the capital cities starting from [ January ] so there's no change to what we announced earlier.

[Eric Choi, analyst]

Just to -- sorry, clarify the first question, I guess it's more that it looks like they're going to launch a fixed wireless mobile product, just judging by I guess their mobile sites rather than I guess a mobility/handset product. That was more my question as supposed to handset business.

[Yoong Keong Lew, executive]

In this case, you don't really know. They haven't been fully transparent about what product they're going to launch. What we do know is the number of sites that they have and we do know that there's limitations to that product because it's only using VOIP or [indiscernible] -- so I think, so let's see what they announce, but I think it's very certain that they'd be competing at the price-sensitive end of the market.

[Operator]

Your next question today comes from the line of Luis Hilado from Maybank.

[Luis Hilado, analyst]

I have 2 questions. The first was regarding the Singapore Mobile business. Just wanted to get more color on the quarter-on-quarter rebound. Is it driven by the core subscriber base? Or you're also seeing some impact from your 2 MVNO deals? Or any other color on what's driving the growth. And second question is regarding, as mentioned by Arthur, the Telkomsel price hike. Have competitors likewise kept their prices high post-Lebaran? Or is it just Telkomsel holding it up?

[Chua Koong, executive]

Okay, maybe Moon first and then Arthur after.

[Kuan Moon Yuen, executive]

Thank you, Luis, for the question. I think when we look at quarter-to-quarter growth, we have seen of course a bit of a seasonality in play. But we do have some improved performance in roaming. And have seen a strong roaming pick up for both outbound and inbound roaming for the quarter. And the number of subscribers who are actually taking, signing on data roaming when they do an outbound roaming has increased as well. That has also uplift the performance of the Mobile business. In addition, we have also introduced some new plans like our combo crossover plans towards the end of the quarter as well as our leasing schemes have kicked in. We are giving our customers more varieties and options to pick the data plan that is suitable for them. So we've seen some encouraging take up in these 2 new plans.

[Tao Yih Lang, executive]

To answer the question, yes, we've seen Telkomsel's competitors also increase prices. But I would say for them, it's -- actually for one of them particularly it's in varying degrees in certain parts of the country. I think you should also look at the price differential between what the startup -- the dealers are offering in terms of startup packages between -- and what the operators are providing. You will see that their pricing differential is no longer existent. So I think that -- I think further shows that there is some pricing stability in the industry at this point.

[Operator]

Your next question today comes from the line of Gopakumar from Nomura.

[Gopakumar Pullaikodi, analyst]

On Bharti Airtel, does central management think that the trends have bottomed out or is there more near-term pain left? And a follow-up question on Telkomsel, so it seems like management is expecting trends to improve in the second half. Just want to check that. Secondly, on Australia your Mobile growth is good but the pace of subscriber additions have sort of slowed down a bit. So is that driven by Telstra becoming aggressive as you said earlier or is it more driven by competition in the low end? Lastly, the growth in Australia managed services, is that due to any one-off product signings or is it a sustained growth that you expect on this particular segment?

[Chua Koong, executive]

Okay. Maybe we do the Bharti question first. Then maybe, Bill, you talk about the managed -- the business growth in Australia before turning over to Allen.

[Tao Yih Lang, executive]

Okay. So thanks for the question. So for Airtel, I think what you've seen in the past few quarters, the ARPUs have been degrading and have been coming down. And it's largely due to the fact, of course, the pricing competition. You have customer segments in the high-value range actually, there's been a downdraft towards the lower value plans. I think we have, as management of Airtel has also indicated, I think most of that downdraft is behind us. Although we feel that over the next few months and quarters, there will still be some downdraft but it will be incremental and also there's a possible event would be when Vodafone and Idea actually merge and it will be dependent on what the merged entity will respond in the market. But we think that most of the downdraft has already -- is already behind us. If you look at the operating metrics, I think for Airtel, they're very focused on increasing net adds at this point. So churn in the last quarter has actually come down quite significantly to 2%. And in terms of net adds, even if you exclude the Telenor numbers, they have actually increased our net adds of about 8 million to 9 million subscribers versus what Vodafone did, which -- who just announced it as 1 million. So clearly they're very focused on increasing net adds and eventually when ARPU is stabilized, I think there will be a benefit to Airtel. But this -- we expect things to continue to be soft over the next 6 months still. On -- I think there was a little question on Telkomsel. Management had indicated that with the price stabilization, the second half, we'll see more price stabilization happening. But again, it's very much dependent on the competitive dynamics in that industry and in the country. I think what is also worth highlighting, as management has indicated, that they are looking to focus on cost as well and bring costs down, and that's definitely as we all know, within the company's control -- more in control than kind of managing that top line on revenue side. So -- but I think the outlook for the next 6 months at Telkomsel as indicated it's a little bit more positive because price stabilization has returned to the industry.

[York Chye Chang, executive]

On the Australia ICT jump, it's primarily driven by a large infrastructure project that the Optus business team's doing for Q1, or has done for Q1. And also with the strong cybersecurity sort of growth in the Australian market for Q1.

[Chua Koong, executive]

And, Allen?

[Yoong Keong Lew, executive]

Yes, with regard to our net adds, I think the slowdown in net adds compared to the previous quarter was primarily caused by very strong competition in the lower-end, lower ARPU BYO market and the competitiveness of the retail offers some of our MVNOs. So I think the branded product continues to track very strongly in terms of postpaid market.

[Operator]

Your next question today comes from the line of Srini Rao from Deutsche Bank.

[Srinivas Rao, analyst]

There's couple of questions. First in Australia, there was a news about I think that suggested Optus looking at a amaysim. I mean, could you even could you suggest if there any strategic rationale for acquiring any of the MVNOs or bringing them inside Optus' fold? Is there a strategic rationale for that? The second question is with Telstra's new corporate structure, netco, kind of getting formed. Is there a chance that over time that, that is available to Optus too, in terms of access to that -- Telstra's pieces of network? That's my second question. Third, if you can just highlight -- it seems to me the impact of FIFA, at least on the Singapore consumer, has been practically neutral. Is that a fair comment, if you can highlight that? And finally, on the cybersecurity, you mentioned a fairly rapid commoditization of the payment card industry business. So that revenue is still reasonably large. So should we expect the decline to continue as we have seen? Those are my 4 questions.

[Chua Koong, executive]

Okay. Why don't we do the World Cup question, [ the piece here ], and then pass over to Allen.

[Kuan Moon Yuen, executive]

Yes, thank you for your question. I think your question regarding to the World Cup impact on the Singapore Consumer business. I think generally, we have disclosed that there's revenue coming from FIFA, but there's also associated cost on the content that comes from FIFA as well. You are quite accurate that they were quite neutral in the bottom-line position of FIFA. Yes. We actually introduced FIFA, the World Cup because we know that we have a lot of customers who are enjoying our sports content, especially in the Premier League and therefore bringing in the World Cup to Singapore, into consumer business in Singapore is important to retain our Premier League customers and that's how we have run the campaigns and we have gotten a very good response from our existing customers.

[Chua Koong, executive]

Okay. PCI business, we've got Art joining us. So I get Art to answer this question.

[Tao Yih Lang, executive]

With regards to the PCI business, the payment card industry compliance business, we've seen quick erosion in that business. A lot of it has been due to commoditization and lower pricing in the entire industry worldwide. We see that trend continuing. And that has been responsible for most of the decline in the security business, of which the PCI compliance business is not core to our security offering.

[Chua Koong, executive]

Allen?

[Yoong Keong Lew, executive]

Yes. With regard to your first question, we do not comment on market rumors so I can't add any more color to this question. The second one regarding Telstra's InfraCore. I think it's important to understand 2 things. Number one, the Mobile assets are not in Telstra's InfraCore. So it's all their fixed line [ cables ] as well as the core network fixed line that they are put in their InfraCore. And today, we already by regulation, have access to the last mile as part of our ULL product and we do lease Telstra's fixed lines in intercity as well as in regional areas as well. So I think that is something that is already available to us.

[Srinivas Rao, analyst]

Understood. This is helpful. If I may ask just one more question on the cybersecurity side to Art. Just on the enterprise spends on cybersecurity, Art, could you talk about the competitive landscape? Whom do you compete against? In one of your presentations in the past, you've talked about system integrators also being present. How well are companies like Trustwave which are what you call MSSPs, doing there in that landscape?

[Tao Yih Lang, executive]

Yes. So Srini, first of all, in terms of the enterprise security space, we see that as still robust and still growing, with the number of cybersecurity attacks that continue to happen, we see the growth in that market continuing. In terms of our competition and our primary core business around managed security services, security consulting and incident response, we see that a lot of the competitors that we see out there. Yes, some of them happen to be integrators, but more of them happen to be the pure play managed security services organizations or organizations that have managed security services like a Secureworks or like a Symantec and many other regional players. I think that if you take a look at the Gartner Magic Quadrant for managed security services, where we have been one of the only companies in the last 3 years who have had our technology moved into the Leaders quadrant, I think that we are very competitive with anyone in that space with one of the market-leading offerings in that space.

[Operator]

Your next question today comes from the line of Prem Jearajasingam from Macquarie.

[Prem Jearajasingam, analyst]

[Audio Gap]

Singapore. I do appreciate that it creates a moat against TPG when it comes, but are you concerned about the longer term price implications of the MVNOs? And how far out do you see this threat kicking in, if so? And secondly, with regards to the content, the FIFA World Cup and all that. Is this just proving to us that maybe we should not be investing in content and let someone else do that to preserve shareholder value? I can appreciate why it makes sense in Australia. But in the Singapore context, do you think we need to continue spending on content if consumers are not willing to pay up for it? And finally, could you just update us what the -- what are you seeing as a result of these recent cyber-attacks in Singapore? If there a reevaluation of how the government spends money on cybersecurity, do you think we accelerate on that front or do you think there's a threat of more competition as a result?

[Yang Fong Sin, executive]

Okay. Yang Fong here. Do you mind to repeat your first question?

[Prem Jearajasingam, analyst]

Yes. With regards to the MVNOs, I do appreciate that they set a moat against TPG's entry into the market. But in the long term, do you think that you're going to have some significant pricing pressure as a result of these MVNOs being in the market? And how soon before you think that impact hits?

[Chua Koong, executive]

Okay. I'll get Moon to talk on the World Cup and MVNO and content in general. And then maybe Bill can take the Singapore cybersecurity spend.

[Kuan Moon Yuen, executive]

Hi, Prem. Thank you for your question. And regarding the MVNOs, I think it's really a shift in some of the consumers' behavior especially with the changes in smartphones being less significant -- I mean, the introduction of more smartphones into the market. You see a lot less differentiation of previous model. And therefore we see a shift in consumers' behavior in not wanting to replace their smartphones so regularly and therefore the emergence of a SIM Only plan coming into play. And many of the MVNOs are actually taking advantage of this shift in behavior to offer a lot of different options in terms of creating packages to cater to their needs. And this actually address only a certain segment of the market who wants to have the flexibility of mix and match between handsets and price plans. Some of them want high data allowance with no handset while others want low entry price with lower allowance and then pay-as-you-go type of arrangement. So this is really more a fragmentation of the market. And we see that the MVNOs can play in this segment very well. And, of course, when TPG enters, we do believe that the initial segment will be going after this group of SIM Only customers and therefore having more options with MVNOs and more varieties of plans will actually create more options even for our own customers looking at mix and matching their device and their service. So we think this will continue. But as I mentioned earlier on, the SIM Only plans in our Singtel base is still a very small percentage of our total customer base. But bulk of our customers do continue to retain and recontract on their existing combo plan and some have even moved up into our new combo crossover plans which actually combine high data allowance with handset subsidy. So we think we're well-positioned to take on more MVNOs who wish to enter to this market and position ourselves competitively against the new operator who will be coming in later this year. With regards to your question on the FIFA World Cup, we have always maintained that a one-off event like the World Cup, that happens once in 4 years over a period of 5 weeks presents a very big challenge in terms of how we can monetize or how we can create value in such an event. And therefore, sharing this content with the other 2 players in Singapore market actually makes sense for the whole of Singapore. And we look at it from a perspective of providing a bit of a retention option for our pay-TV customers who are actually primarily -- many of them come on because of our premier -- English Premier League sports content. So as a whole, we do believe content still has got a lot of value in the business. It's just that it's -- in Singapore, we are a bit unique because we have been bugged with a lot of piracy of content. And I think with -- these piracy conditions can be resolved with legislation and regulation. We will then be able to continue to bring value from content and content creation. So we look at content. It's not just as a once-off but also as a bundle because many of our customers still come in, stay with Singtel because they have got our TV business with us. They have got our broadband business with us, as well as our Mobile business with us and more so now there's more content, stand-alone content that they pick up in terms of music with Spotify, with Apple Music, content with Netflix, with Viu, with HOOQ content, so as well complete service offering, including all types of content, including our own acquired content through our Singtel TV platform, we believe this total offering of solutions will be meaningful and available for our customers and for ourselves.

[York Chye Chang, executive]

Prem, on the question on cybersecurity and the Singapore government spend. So essentially, firstly in the cybersecurity, we are not involved in that. It is an internal IT arm of the health ministry. And obviously with our cybersecurity capabilities, by lending support to the organization and also to CSA, who's a strategic partner of Singtel. In the cybersecurity span, obviously, you've seen news that the government announced that they would -- because of this, basically you just take a pause to evaluate all the cybersecurity postures of all the major ministries, agencies to ensure that they are all robust, critical infrastructures and they have also stated quite clearly that this does not mean any deviation from a Smart Nation plans. It's just a temporary pause to ensure resiliency is being planned in all the sort of major ICT programs. Being a major supplier to the government sector, we obviously are watching that and monitoring that closely and working with the various agencies to ensure that at the right point, when they start -- -- the projects will start moving in again. So this is just a temporary pause. Obviously with regards to this cyber incident, there is heightened interest and awareness across the entire sector, not just in the health care. Let me start with the health care sector. There is a lot of requirements now talking about Internet separation. We are obviously working and -- looking at ways to do this without sacrificing sort of customer experiences when Internet separation is done. So there are innovative security technologies to be doing this. I think it's in the press. They talk about web isolation capabilities. So there are a number of things that the agencies would need, not just in the public hospitals that we're engaging in and thinking about this, with this increased interest, but also in the private health care sectors, there's been an increased requirements there for us to engage them. And then finally, health care sectors around the region, we've also had queries coming in to look at what are the key learnings. So obviously we are sort of advising them. But knowing -- doing this to ensure that we do this in conjunction with the COI, Committee of Inquiry, and the findings so that -- these are all sort of learnings that we could share and also what of -- our technology perspectives for this. So there is increased interest. But at that the same time, this also mean a slight pause and we're working with agencies on the ICT programs to ensure that we navigate through this and to start the engine flowing again when the pause is lifted.

[Operator]

Your next question today comes from the line of Sharon Chen from MetLife.

[Sharon Chen, analyst]

I missed your earlier remarks, so apologies if I'm repeating something that you've covered. Can you comment a bit about Telstra's new price plans, how it's impacting the market, how it's being received and I see that your Australian consumer business performed very well this quarter. Do you think that's sustainable?

[Yang Fong Sin, executive]

Hi, Sharon. It's Yang Fong here. The question has been answered earlier. So what I'll do is after this call, I'll follow-up with you separately. Would you like to move on to other questions?

[Sharon Chen, analyst]

No. That's all.

[Yang Fong Sin, executive]

All right. Thanks. I'll talk to you later.

[Operator]

Your next question today comes from the line of Ranjan Sharma from JPMorgan.

[Ranjan Sharma, analyst]

Two questions from my side. Firstly on capital allocation for -- around Bharti. We've seen -- I mean, we have a pretty high leverage for Bharti while the market remains extremely competitive. If I provide some context to my questions, like over the last 7 quarters, you've probably seen Indian wireless revenues decline 30%-plus and that is not abating where Jio's market share is 17-odd percent, 17% but they have aspirations of 50%. So in the face of continuing decline in Indian revenues, and compression on free cash flows, what -- how do you assess the risk of a capital call at Bharti? And would you rather participate in it or would you see dilution and reduce exposure to that competitive market? Secondly on Indonesia, again, wireless seems to be a more challenging space right now compared to the fixed line space. If you could just share your views on potential restructuring of Telkom and Telkomsel that you end up taking a stake in the combined entity and then drive integration across the group.

[Chua Koong, executive]

Okay. Arthur, your question.

[Tao Yih Lang, executive]

Okay. Thanks for that. I think on Bharti, the leverage situation at Bharti. Well, first of all, I think as a stand-alone, yes, we continue to watch the balance sheet and so is Bharti, very closely, as you have heard the management team speak. But relative to the other players, I would say Bharti has -- the balance sheet is flexible on various fronts. First of all, if you look at the debt maturity profile, it is one of the longer maturity profiles versus the other telco players in the industry. I think the debt maturities are between 5 and 7 years. That's one. Two, if you look at the mix of currencies that the debt has. I think a great deal of it has been -- there's a natural hedge to the underlying balance sheet in terms of currency. And three, in the event there is any need for more capital, there are many ways in which Bharti can -- there are many levers that Bharti can pull. I think you have heard Gopal also say, there is always that stake in Infratel that possibly could be sold, if needed. Two, there is -- I think you have also seen that Bharti has sold a minority stake in the DTH business. The Airtel Africa IPO has been -- the preparations for the Airtel Africa IPO have also begun this year. So there are plenty of options and levers that one can pull to kind of -- to manage the balance sheet of Bharti. As to future capital calls, whether Singtel will be participating, I think it's speculative at this point. It is theoretical because there's no proposal that's made to us. So we will assess it, as and when -- if we actually do get something, right, on a case-by-case basis. So I think it's too speculative, too early stage to say anything now. I think on Indonesia, on the fixed line space and I think that's an issue between Telkom and Telkomsel, perhaps this is something you may want to direct that question to them.

[Ranjan Sharma, analyst]

Okay. Maybe as a quick follow-up, can you share the debt covenants at Bharti?

[Tao Yih Lang, executive]

Okay. You know what? We'll come back to you on that. I just want to make sure what we share with you is accurate and is publicly disclosed.

[Operator]

Your next question today comes from the line of Sachin Mittal from DBS.

[Sachin Mittal, analyst]

A couple of questions. Firstly, you have guided for $500 million of cost saving and avoidance this year, are we already seeing those savings in the 1Q? Or these are going more back-end loaded towards end of the year or second half year? That's number one. Number two, should -- we expect resumption of NBN migration fee. So is that going to be something more in the second quarter, a big jump in second quarter? Or is it going to be in the third quarter in terms of the -- jump in the migration fee? And thirdly, we have seen StarHub talking about more variable content cost contracts, more variable cost kind of contract for content. So to my question is, does it mean -- is it something good for the industry? And are you already on the variable content cost contracts? Or you're on different kinds of contracts right now in Singapore? And lastly, on the digital side, we have seen revenue kind of dropping, but not really -- EBITDA is still breakeven for Amobee. Does it mean that you have taken some costs out of Amobee on a permanent basis? And what kind of costs are these which you have taken out?

[Chua Koong, executive]

Okay. Maybe I get Cheng to talk about the cost take-out programs for you.

[Lim Cheng, executive]

Thanks, Sock Koong.

[Chua Koong, executive]

And then after that we will talk about the content issue. And then the migration payment. We put at the end of -- and maybe Allen can take that. And now cost before -- the Amobee question on costs and Amobee.

[Lim Cheng, executive]

Thanks, Sock Koong. I think with regard to the cost savings question. If you look at our Slide 20 which is in the appendix of presentation today, you can see this broken down in terms of the cost savings and I think I would like to highlight that a lot of the increase in cost actually is related to volume-driven. So as the revenue increased, obviously there is some cost of goods sold and stuff like that, that goes with the increase. So and with regard to how do we see it panning out and things like that, we are still sticking to what we told investors of $500 million. Obviously first Q is always quite a slow start, so you see it ramping up in the next 3 quarters.

[Kuan Moon Yuen, executive]

With regards to content costs in Singapore. I think if you look at the traditional pay-TV business, generally, most of the content costs are structured in a fixed amount rather than a variable amount. And obviously over time when contract expires and when we renegotiate content, we do want to make sure that it matches with the business model that we are delivering. And we will always want to bring down the cost in terms of the fixed cost of content and sharing some of the risks. But however, it really depends on the content owner, the way they would like to sell their content. While we want to have variable content cost, they may not agree to the variable content and we choose not to sell to you if you insist on the variable model. However, having said that, some of the new OTT content players who are delivering on a totally different banner, they are actually open to such variable content cost structure and we will work with them on this basis as well. So in general, I would say we definitely look at content cost as one of the main cost out drivers that we looked at. But however, it's not always -- easy to enforce or request for a variable model.

[Chua Koong, executive]

Okay. Amobee's cost structure.

[Samba Natarajan, executive]

Yes, sure. Over the course of the last 12 months or so, we have looked at a couple of different costs. One of the costs that we've taken out permanently is the fees that we used to pay a third party for programmatic platform when we do not have a programmatic platform, as I said, before the acquisition of Turn. That cost has been permanently taken out because we have our own platform. We also benefited from scale, from having a larger company and looked at OpEx more closely to try and run the company more efficiently. And so that has also resulted in lower cost rate. And we continuously monitor the cost base just to try and keep being more efficient in OpEx as we run the business here.

[Chua Koong, executive]

Okay. Maybe we hand over to Allen to talk about NBN migration payments.

[Yoong Keong Lew, executive]

Yes. And -- on thing on NBN migration fee is that we are not in direct control of this NBN migration in terms of the HFC network. I think at the end of the day, NBN has to make a call as to ensure that when they are migrating onto the new HFC network that's part of one of their multi-technologies that it is reliable. So I think at the end of day, like getting small migration payments in Q1, we've guided the market overall core EBITDA taking out NBN migration payments. So at this point, I'd prefer not to talk about what is going to be forecasting ahead because we're really not in control of it. So perhaps I'll leave it at that.

[Sachin Mittal, analyst]

Just follow-up on these questions. So on the ground, there's no clarity when the NBN migration can resume on full scale, is that what you're saying, Allen?

[Yoong Keong Lew, executive]

There's no representation made on the ground about this ramp up, but certainly the actual volume and accuracy of the forecast is not in our control, so we'd rather not talk about it, nor do we ultimately rely on it.

[Sachin Mittal, analyst]

Okay. And just a followup on the Amobee question. Sorry I missed that part. The fees which you used to pay to other -- the fees you are saying which have been taken out is other platform, you said, fee. Is that what he said, Samba?

[Samba Natarajan, executive]

Yes. Because before we acquired Turn, we had to place programmatically -- we used to pay other third-party programmatic platforms. Now that we have our own programmatic platform, we don't have to pay the third-party fees.

[Operator]

Your next question today comes from the line Varun Ahuja from Crédit Suisse.

[Varun Ahuja, analyst]

I have 2 questions. Just want to go back to the home Singapore market. It's been almost 6, 9 months of that M1 has been outperforming both Singtel and StarHub in terms of revenue growth. So just wanted to understand from the management, is it purely due to Circle.Life, their MVNO are doing better than what -- any color on that, that would be helpful because it's been a very long period and they've been doing well compared to the other 2 players. That's number one. Number two, just want to go back to Amobee. It's another second quarter where the revenue was a little bit below expectations. I know, Samba, you said that you expect the guidance to grow -- the revenue to grow in teens. But is it structurally you facing some problem because of GDPR or Facebook now saying that the growth in ad revenue will be low? So just wanted to understand is there any issues in the industry that you're seeing that, that would be helpful, a color on that. And lastly on the -- same on the Digital Life Videology. If I understand this, you have acquired because it gives you a capability to advertise on linear TV. But isn't linear TV itself a challenging industry? So I just wanted to understand the strategy behind it.

[Kuan Moon Yuen, executive]

With regards to your question on M1's performance, we -- I mean, you have to ask them directly whether the MVNO have contributed to growth. But from our analysis, we believe that the MVNO has definitely given them a lift in their performance. But bear in mind that they are the first to have introduced MVNO, have more than about a year of head start over the rest. We believe over time with more MVNOs coming to the market, that may equalize. I think it's more important to look at the long-term viability of the MVNO market and how many percent of those markets will actually be supporting the total MVNO space. We do believe that there's a segment of customers that will be addressed by different MVNO players in the market and we are expecting a few more to start before end of the year.

[Chua Koong, executive]

Okay. Videology?

[Samba Natarajan, executive]

On Amobee, last quarter which was January to March was seasonal which comes off a very strong quarter from October to December which is what we said in the last quarter results. We still grew from the previous prior year. In the case of this quarter, yes, the softening has been because of decline in spend by a couple of customers. We don't see anything structural in markets by I think, say, GDPR or Facebook. I think the market continues to grow. And we are therefore have reiterated our guidance around growth. As far as Videology is concerned, it adds to our omni-channel suite of capabilities around the advanced TV and video advertising market. It's not the traditional linear TV. It is around advertising on advanced or smart TVs or digital TVs and video advertising market, which is a very fast-growing market at the moment, at least in the U.S. And there are very few players who have the capabilities to be able to offer this kind of a platform that both combines the video inventory and the TV inventory and the digital side as well as the ability to then place it [indiscernible] platform with brands and advertising agencies. And so we think this is a -- it really does enhance our capabilities in a fast-growing market quite nicely.

[Varun Ahuja, analyst]

This is helpful. Just quickly for Allen. Is there an impact of World Cup streaming issues in Australia? The number doesn't show, it had a good performance. I just want to take -- was there was any negative impact on financials.

[Yoong Keong Lew, executive]

The World Cup streaming issue certainly has an impact on the brand but it hasn't manifested itself in terms of our operational performance. I think it's something that we will take in our stride, but right now, it has not had a significant impact on our operating performance.

[Operator]

And your next question today comes from the line of Eric Pan from JPMorgan.

[Eric Pan, analyst]

A few questions on Australia. On the postpaid front, ARPU continues to decline. How much of that is coming from out-of-bundle revenues falling away versus the move towards SIM Only plans? I mean, with the price point at most SIM Only plans around $40, that seemed like it's probably more the former rather than the latter? And if so, how much of your Mobile revenues does out-of-bundle revenue account for? And then secondly, Telstra has launched a value brand in order to target the price-conscious segment of the market. Do you have plans to do the same or do you still feel wholesaling to MVNOs is the way to go, despite not being able to capture all of the economics? And lastly, on the NBN, can you just talk a little bit about the new wholesale pricing scheme and the impact on your profitability?

[Chua Koong, executive]

Allen?

[Yoong Keong Lew, executive]

Okay. With regard to our ARPU decline, it's something that the industry faces. If you look at the results that were reported by one of our smaller competitors, they have seen that as well. And it's a function of, as mentioned, more customers moving over to BYO plans. It's also a function on the competitiveness that's happening in the market as people need more and more data allowances and if you look at -- now this is 1 year ago for the same dollar amount, there are getting significantly more data allowances, so that's putting pressure on regular ARPU. As to what percentage of our customers are on BYO plans, we don't disclose this publicly so I can't share that with you right now. I can only say that it's getting higher as an overall percentage compared to last year. In terms of our MVNOs, I think we do not have a wholly-owned MVNO, an [ openly owned ] brand that is sitting in the price-sensitive end of the market. We believe that our wholesale offer will allow our companies to -- let our companies that are partnering with us to offer a competitive offer in the price-sensitive end of the market. And you can see at that end of the market what our MVNOs ranked, #1 and #3 in those markets in terms of number of customers and revenue. And then finally, in terms of the new wholesale plans of NBN, I think they have come up with an attractive plan at 50 megabits per second that is basically something that we're focusing a lot of our marketing and our sales efforts on because it gives us the optimum margin for us. And that's where the bulk of our connections are starting to move towards.

[Eric Pan, analyst]

Got it. If I can just follow up on the postpaid ARPU. Would you say your monthly plan commitments are drifting down as well then, if people are moving down plans and to accounts with the increased data allowances?

[Yoong Keong Lew, executive]

There is -- there are some people doing that. But I think that our most attractive offer today is not actually down at the lower-end plans. The lower-end plans are something that MVNOs compete on. We keep our BYO plans targeted above the $30 level.

[Yang Fong Sin, executive]

Thank you very much for your interest in our results. On behalf of management in Singapore and Australia, thank you again, and we'll talk to you again next quarter.

[Operator]

Ladies and gentlemen, that concludes our conference for today. We thank you all for your participation. You may now disconnect.