Corporate watch: Singtel’s designated growth engine NCS to step up amid ‘reset’
During his seven years spent in China, Ng Kuo Pin picked up a passion for oil painting. He would look forward to the change of seasons so that he has something fresh to depict on his blank canvas. The view might be the same, but there would be different elements and a new perspective to appreciate.
Two years ago, Ng moved back to Singapore and took the helm at National Computer Systems (NCS), a wholly-owned subsidiary of Singapore’s largest telecommunications company Singapore Telecommunications (Singtel).
In an interview with The Edge Singapore, Ng confesses he no longer has that much time to indulge in his hobby. Yet, he sees similarities between oil painting and running the company.
With the backing of the parent company Singtel and reporting directly to group CEO Yuen Kuan Moon, Ng can tap the group-wide resources available: the infrastructure and the customer base across the various markets Singtel now operates.
Yet, he has the remit as well to “paint” a new vision for NCS that makes it befitting of the role Singtel wants it to play. Specifically, NCS, as part of Singtel’s “strategic reset”, is to become a leading regional B2B digital and technology services company in markets outside Singapore where the Singtel group has both presence and synergies.
The reset, announced by Yuen on at a results briefing on May 27, was followed by Ng on July 7 describing how NCS will operate within the broader picture. NCS will set up two strategic business units to focus on government and telecoms, while part of Singtel’s cybersecurity services unit Trustwave will be reorganised into NCS. NCS will also seek growth in the enterprise sector, particularly in healthcare and transport, communications, technology and media and financial services in Singapore, Australia and Greater China.
“NCS has been a key growth engine for the group over the years,” Yuen tells The Edge Singapore. “It will play an even more important role now as we look to tap new growth opportunities in ICT and digital services and capitalise on the rising trend of digitalisation.”
With the mass migration online over the last 18 months, the pandemic has further accelerated these trends that were already “redefining” the growth prospects Singtel wants to capture via NCS. “We are excited to grow NCS’ capabilities and capture new business from the enterprise sector and region,” says Yuen.
Targeted growth
As can be seen from Singtel’s full-year earnings for the FY2021 ended March 31, its various businesses were under pressure for one reason or another. Overall revenue dropped 5% y-o-y to $15.6 billion, reflecting NBN migration revenue tapering off for Optus’ fixed business as migrations neared completion, ongoing impact from Covid-19 and continued carriage erosion. There is stiff competition for its mobile business across the various markets. Earnings, as a whole, halved y-o-y to $544 million, dragged down partly by total impairment of the $1.2 billion Singtel took for its digital marketing unit Amobee and Trustwave.
Yet, a handful of businesses, specifically in the enterprise space, which accounted for a third of Singtel’s overall revenue, moved against the flow and stood their own. For FY2021, NCS reported revenue of $2.3 billion, up 6.2% y-o-y. Ebitda in the same year was $330 million, up 12.8% y-o-y, and ebit was up 18.8% to $249 million. If government subsidies were excluded, ebitda and ebit would still have grown by 6.2% and 15% respectively. “NCS and our data centre services proved to be bright spots, showing strong growth as enterprises rushed to digitalise and transform their businesses. We will be capitalising on this mass digitalisation with plans for a strategic reset to drive recovery and growth,” said Yuen on May 27.
In his July 5 sector report, UOB Kay Hian lead analyst Chong Lee Len described how because of low latency and high reliability (for the 5G SA network), 5G is expected to land new user cases across sectors, like remote robotics, massive IoT deployment and so forth. This will help telcos boost their 5G enterprise opportunities.
“We expect the gradual reopening of economic activities and business sentiment to boost demand for project-based services, for instance information and communications technology solutions and cybersecurity services,” says Chong.
And that is where Ng’s NCS is expected to shoulder a bigger burden driving Singtel’s overall growth. Coming from a 24-year-long career at consulting firm Accenture, Ng quips that he came in “with eyes wide open” and adds that while NCS can be the next big thing, there are plenty of changes to be implemented.
“Transformation is something we have to do. This was very clear since the first day I started here. I’ve been quite lucky that in my career, that is actually what I do — help my clients transform. So I’ve seen how certain clients were successful while others were less successful,” says Ng, who has used his knowledge to help NCS, which has four decades of operating history, to embark on its next growth stage.
As part of the new direction, NCS is to focus on growing digital services, scaling its government and telco business segments and capturing new growth opportunities in the enterprise sector, across the key regional markets of Singapore, Australia and Greater China, which markets make up a newly-created grouping dubbed “NCS NEXT”, which will be at the heart of NCS’s transformation.
“We created an organisation called NCS NEXT some 18 months ago, which is focused on delivering capabilities around the digital cloud platform services. These may be buzzwords that you hear in the industry, but we decided to put them together in a new organisation and that team has grown from zero to 1,000 over the last 18 months,” explains Ng.
“NEXT will complement NCS’s other core service offerings in applications, infrastructure, engineering and cybersecurity, and provide a differentiated and comprehensive suite of end-to-end technology services,” he adds.
When asked why the company has picked Australia and Greater China for this organisation, Ng says: “Greater China and Australia are the second and third largest ICT markets in Asia Pacific.”
“We will be ramping up our offering of digital services as we reposition ourselves to capture new business from the enterprise sector and expand into the high-growth markets of Australia and Greater China where we have presence and synergies,” adds Ng.
Doubling down
NCS also unveiled a new brand identity and campaign, capturing its new purpose: to advance communities by partnering with governments and enterprises to harness technology and bringing people together to make the extraordinary happen.
As part of its new direction, NCS will be doubling down and scaling its business segment that services the Singapore public sector, which is actively pushing for various so-called smart cities projects of one kind or another. It has created Gov+, a strategic business group that will focus on building NCS’s digital government portfolio and strengthen its position as the leading digital catalyst for governments and smart cities across the Asia Pacific.
“With Gov+, we want to double down into the government sector to help the government agencies in Singapore digitalise even more in the next wave of digitalisation, which is now powered by cloud AI and 5G,” says Ng.
This strategic business group will focus on building NCS’s digital government portfolio and strengthen its position as the leading digital catalyst for governments and smart cities across the Asia Pacific. “If we do well in the Singapore market, we also want to expand into overseas markets in the Southeast Asia region,” he adds.
Apart from focusing on its work with government agencies, Ng explains that another area the company intends to scale from a position of strength is the telecommunication company — alongside its parent company Singtel.
Telco+ is a joint initiative between Singtel and NCS to help telecom companies transform digitally. The goal is to help telcos improve operational efficiencies and leverage data driven insights to deliver enhanced customer experiences. With the combined 5G capabilities of Singtel and NCS’ expertise in digital and technology services, Telco+ will develop a full stack of 5G-enabled solutions to help enterprises capitalise on the applications of 5G.
According to Ng, Telco+ is essentially a strategic initiative between NCS and Singtel. “If we do this well, we can not only serve Singtel or Optus in Australia, we can also take this initiative to Singtel’s associates around the region and potentially even outside the Singtel Group and into other telcos in the Asia Pacific region,” says Ng, referring to Singtel’s longtime investments in other mobile operators in Indonesia, Thailand and the Philippines.
“We are committed to working even more closely with government agencies and will invest in building deep digital government capabilities to support their digital and innovation needs. Similarly, working off synergies with Singtel, we stand ready to help telcos digitalise their operations so that they can go to market competitively and innovatively,” he adds.
Unlocking value
Some analysts believe Singtel is now undervalued, as it seems that the market has not
priced in Singtel’s core business in Singapore and Australia into its share price. As at July 5, shares in Singtel traded at $2.28.
As part of Singtel’s overall new strategy, it is known to be weighing divestment options of some of its assets, and NCS has been speculated as one of those key pieces that can possibly be spun off for its own listing.
When asked, Ng says that the focus right now is to properly execute this strategy to ensure growth for both NCS and Singtel. “There’s a lot of work to be done,” says Ng. Hence, at this juncture, there are no plans to separately list NCS to raise more funding for its own growth while giving the parent company a one-off gain. “When the right time comes for such a conversation, we will be sure to share that,” he adds.
For now, Ng is positive about NCS’s growth momentum and its new strategy. “We feel very positive about the momentum we are at, especially in the last two years when we have seen growth upwards of 6% y-o-y, which is something we feel good about. And with the new strategy shared, it will allow us to continue the momentum,” says Ng.
“But a lot of the things we do are not just about the financial numbers. It is also how we position ourselves, how we redefine and how we rebrand ourselves, to create better technology services for the Asia Pacific region. That will be a very major focus for us,” adds Ng.
As NCS has big plans for the future, much of these cannot be done without its talent. Ng knows the competition is tough as more companies undergo digital transformation of their own. To his end, he plans to hire 2,000 people with the right technical capabilities over the next two years.
“For NCS to play well in the bigger league of technology services firms in Asia Pacific, we must be committed to grow our people, our diversity of talent, and offer them exciting and rewarding careers and opportunities. We have launched a people transformation programme surrounding culture, skill specialisation and becoming a learning organisation. This is a top priority for us,” explains Ng. E