Singapore Telecommunications Limited (Z74) Earnings Call Transcript & Summary

Welcome back, everyone. My name is Adam. I have Victor with me.

Hi, everyone.

And today, we have a very, very special guest. He is the Group CFO of Singtel. His name is Arthur Lang. Thank you so much.

Thank you. Hi, everyone. Nice to be here.

Yes. So I think we wanted to do this roundtable because Singtel has been darling of the stock market in Singapore, blue-chip dividend stock. Can I say that?

Yes I guess it's been a long time since someone called Singtel the darling, but we're very happy and very grateful that it is happening.

I think that was my perspective. I was a retail investor myself, one of the blue-chip dividend stocks. And I think that changed a little bit when the industry opened up.

Yes.

And we wanted to seek your views about what's happening with Singtel right now. There's a strategic reset. We're going to cover that and then Singtel28. But before we jump all into that, maybe just a really quick introduction about yourself and what you do at Singtel?

Okay, sure. Thank you. Well, really nice to be here. Thank you to the both of you for inviting me. Well, as I've mentioned, some of you might have heard me or seen me before, I am the Group CFO of Singtel. My name is Arthur Lang. This is my -- I just finished 3 years at Singtel as CFO. I'm into my fourth year now, but this is my eighth year at Singtel. So when I moved, I started kind of my career as a banker, an investment banker for about 16 years in different countries. So Singapore mainly, but a bit of Hong Kong, a bit of New York. Then after that, went to be CapitaLand, another very well-known company to be the group CFO there for about 6.5 years. Then I came over to Singtel to be the CEO of the International Group. And about 3.5 years ago, when there was -- our previous leadership, many of them retired, there was a bit of a change in the management team, and I was asked to take on the group CFO role together with my CEO International role. So right now, I wear 2 hats, unfortunately, only 1 salary, but I'm very happy that I have the group CFO role, and I also look after the -- our regional associates. So that's my story.

Thank you so much. I think we are honored to have you here.

Thank you. Thank you.

You've been to Singtel AGM is quite a bit.

Yes. I mean I used to go to the Singtel AGM. I think since 10 years plus until now, I go very consistently. Until I think until a certain year, I didn't really go. And after that, this year, I decided to go back and go and take a look at Singtel, I was inside was shock I mean now the Singtel is different.

In a good way...

Shock in a good way. Singtel now is very different from the past because I feel that it's much more focused now. And you guys focus a lot on capital allocation and returning capital back to shareholders. I think our viewers also want to know what's happening to Singtel now. So that will be a good thing.

Yes. Okay. So year-to-date, Singtel has returned over 30%. So far, I think it's a tremendous performance in the stock market. I think there's a reason behind that. Some investors may already have picked that up. But for those who are watching this, who don't know what's happening with Singtel, I think it's a great opportunity right now to understand what's happening. I think maybe first with the strategic reset that happened 3 years ago and then this new growth initiative we have with the Singtel28 thing, I think we all want to learn what's happening.

Okay. No, thank you. So maybe I'll start off 3 years back. So this was probably early 2021 or within a few months, there's been a bit of a change at Singtel because many of the leadership team from the prior team retired, right? So they reached retirement age, they retired. And it was a time that we had to change because we were coming out of COVID. We -- the industry faced tremendous amount of challenges. We can talk about competition later in Singapore, but not just Singapore, more importantly, in the places like India, which have really hit us very badly in the beginning. And then we had this 5G CapEx wave where all the telcos had to build out a 5G network, but the use cases were not that clear, were not that apparent, overcompetition in many of our markets. So we really got whacked in many different directions. So the new leadership team had to really reorganize ourselves and reset ourselves, right, to really focus on the new challenges and how to face up to those challenges. So what we did, as you rightly said, right, it seems quite easy to understand Singtel now, right, compared to the past. So what we did was really to simplify the business, right? We had many different business units, which served its purpose maybe 10 years ago. But now each business unit has grown to a size where it's big enough, right? It's grown enough, but it was a bit confusing to everyone. So we started merging or combining different business units. So we had -- for example, in Singapore, we had a separate enterprise group, we have a separate consumer group. But both providing mobile data plans, both providing fixed broadband. So why do you have 2 different groups with 2 different bosses? So we combine it. We have 1 boss, one Singapore boss reporting to the group CEO, 1 CFO of that reporting to the group CFO. Same thing we had in Australia. We had 2 different units. There was just unnecessary layers, additional costs were still people were just -- if you are like a [indiscernible] , right, in Singapore, right? Are you a consumer customer to Singtel? Or are you an enterprise customer? And that created a confusion. So we simplified the business significantly, and we took out a lot of costs. So that's the first thing we did. I think the second thing, we had a lot of loss-making businesses. We -- in the past, we were -- look, I'll be very honest with you, right? We made mistakes. We went into many digital type of businesses. To be fair, it's not just us. Many companies, telcos and non-telcos went into those businesses, and they realized they should not have gone in, right? So we lost money, right? So what we did was we just clean up everything, right? We impaired some of the businesses. We shut them down, we sold them off. So now I can say almost every single business is not loss-making anymore, right? All the loss-making businesses have been sold and gotten rid of or shut down. I think the other thing we did was because of the capital intensity of the businesses, we also saw -- and we realized -- actually, sorry, before that, we realized that Singtel was not just Singapore and not just telco, particularly it's not just telco. So I always kid internally that we should be thinking about changing our name because in addition to our Telco business, we had a very large data center business, which is actually the largest in Singapore by capacity, but no one knew that. Another business that was pretty sizable was what I call the IT Services Arm, which is the largest in Southeast Asia called NCS. Again, it was hidden under our Telco business. So what we did was we separate these 2 out because these are growth engines. They are not telcos. The growth profile is definitely a few times its magnitude than the growth profile of telcos. And finally, what we did was we -- because it's so capital intensive, right, over time, during those difficult years, we had to cut our dividend twice. And that really killed the confidence in investors, right? But when I looked at the balance sheet of Singtel and the assets we hold, we hold so many assets that were undervalued, whether it's an office building, our headquarters, whether it's our shares in our regional associates, whether it's our Towers business in Australia, so many things that we could monetize, take that capital, reinvest into growth like data centers or IT services or even fund our 5G CapEx build-out, pay down the debt, especially in a rising interest rate environment and excess capital return to shareholders. So that's what we did. So we came out with this idea of very fancy name called Capital Recycling, right? But it's effectively monetizing assets, taking the money and recycle into businesses that we care about and want to grow and return the capital. So we recycled about $8 billion, that woke the market up because the market realized that, hey, these guys at Singtel, not only do you have operational cash flows to pay out dividend, you could also rely on asset monetization and asset recycling to return the capital. And I think that during the last 3 years of our strategic reset, we did all that, right? So we proved to the market. But okay, I think maybe I should stop soon because I talked too long really. But people were asking, hey, how come your stock price not doing well? Everything that the management did was the right thing, okay? Maybe I'll stop here.

I think that's fantastic. I think that this strategic reset has been a success. Did you say so?

Okay. I like the market and investors -- I thought we are happy.

I think what you shared was very enlightening to see the management just streamlining the business, what worked, what didn't work, correct? If it didn't work, just like to sell it or shut it down. I think not a lot of management do this correct so well, so successfully in this amount of time because Singtel is a big company. There's a lot of moving parts. And from what you shared, I think it's -- I think you guys did a really good job.

This is one of the first few times that I saw listed company really try to divest a lot of the noncore asset and kind of return capital back. I think the thing about Singtel is, I say just now, a lot of people don't know. I mean always in the market, but you guys did the treasury reset, but I was [indiscernible] telco, competitive, okay, just put it aside. I something kicks in and I look -- but 2024 AGM just shock me.

That's good to know. The strategic reset. This is a new growth initiative. Singtel28, could you tell us more about that one?

Okay. So all the 3 years of the strategic reset, I talked about the things that we did. But one consistent theme we're getting from investors is, hey, after Lang, Mr. CFO, right, Mr. CEO, Yuen Kuan Moon, I like what management team is doing. All the things you are doing, you said you were going to do and you have done them. But your stock price is not performing, right? So -- and they say, so we really spent a lot of time thinking how do we do all the things we did and we promised we would do, but yet at the same time, allow investors to benefit and realize the value. And then I realized that we need to return capital, right? So we decided -- and we need to be bold enough, but also wise enough to know that can we really return the capital on a consistent basis, not just one-off or special dividend. So we spend a lot of time thinking about our strategy for the next few years. And we realized that we can, right? And that's why we came out with the ST28 strategy. The ST28 strategy is simply looking at your core business, your underlying business and seeing whether it can improve. If it can improve based on our core dividend policy, which is 70% to 90% of our underlying profits. If underlying profit grow for the same dividend payout, the dividend will also grow. And we looked at it and said, you know what, I think we can. So that's why we guided to the market that our EBIT, which is our 4 main OpCos is Singtel Singapore, Optus in Australia, NCS and Nxera, our data center business, the 4 OpCo EBIT can grow at high single digit or low double-digit percentage. So we guided the market. And the reason why we were able to do that because all the bitter medicine was taken in the first 3 years. We shut down the businesses. We cut costs. We looked at -- took the 2 growth engines and positioned them well. And then if you look at our associates, our international associates, which we should talk more about, the worst seems to be over from a regulatory standpoint, from a -- there were many -- the overcompetition seemed to really hit our overseas markets in the first 3 years, but now things seem to have stabilized. In India, I remember when I first joined Singtel, there were 12 or 13 players. Now we're down to 3. In Thailand, now we're down to 2 players, right? So there is a story of an industry consolidation and market repair. So all this basically contributed to the fact that we could grow our underlying profits, which means our core dividend can grow. Then on top of that is what we call a value realization dividend, right, where we said, okay, all these latent assets that we talked about, right, whether it's office building, our shares in our listed associates, we could monetize some of it, right? And if we monetize -- and we got a lot of assets we can potentially monetize. We monetize, we kind of assure investors that we return that capital. So we said every year, $0.03 to $0.06 dividend. That's about $500 million to $1 billion every year. And we said it cannot be one-off. Because one-off, investors say, oh, good, then first year, we pay out, price can't go up and then next year it comes down, right? It doesn't...

For how many years would this go on?

Okay. We sit in the short -- in the medium term. We sit in the medium term. So of course, we cannot specifically say, but medium term to me is up to 5 years, right.

Yes. So I understand that the next 3 years, you are going to divest about $6 billion of asset Yes. How much of this $6 billion of assets is going to the VRD?

Okay. This one we need to keep the market guessing. But I know what the reality is that $6 billion, right? -- some of it has to go into growing our new businesses. So an example would be what we did last year with the KKR investment, right? KKR basically has signed up basically to put in $1.1 billion for 20% of our Data Center business. That $1.1 billion is to fund growth. So it's not to return capital, okay? You know what I mean? But in some ways, it's also good because you fund growth, then that new data center will generate more EBITDA and income, which then can be returned through our core dividend. So indirectly, it's returning money capital to investors, but it's really to focus on the growth. So part of that $6 billion will be used to fund this type of growth. But I would say a good portion of it will be used to return -- to fund that VRD.

You're going to pay down the debt also for using this...

Yes, part of -- again, we -- it's part of the capital management. If you look at, we paid down quite a bit of debt during the first 3 years when interest rates were coming up, right? So you'll see that for -- in a rising interest rate environment, I think we were one of the few companies that had interest rate -- interest expense coming down.

So I think maybe part of the reason maybe why the performance of Singtel this year has been pretty good is that this dividend policy has been upfront and center. Investors are aware of it. So like you said, there's growth among your 4 core businesses.

Yes, plus our associates.

Plus your associates. And then you have this VRD where you return capital. All of this is going to just, I guess, garner interest...

Garner interest -- because the underlying the core, if investors are confident that it can grow with all the efforts on strategic reset, plus the VRD where we have assured investors $0.03 to $0.06 per year, right? And they need to be convinced that we can do this and they look at all our assets, and I think they are convinced that we can do. This combined, you will see it actually then represents a very interesting and attractive dividend yield, especially with interest rates coming down, right? So I think from that perspective, I think we -- or at least the feedback we got from investors, both the retail and the institutional were very positive. And we want to maintain that, continue doing that.

So how about the -- I mean, I hear from your overseas associates, they are consolidating. How about the Singapore...

Singapore tough market, very tough. Okay. If you see, Singapore is -- right now, there are 4 main players, or we call it MNOs, mobile network operators. Then you've got at least 12 MNOs, right, where they -- basically, it's a brand, but they rely on the network of any of the 4. And I can tell you, competition has been very, very tough, right? Because the market in Singapore is a good market, but it's a low growth market, not no growth, but low growth. And sometimes, unfortunately, is if we grow, it is because we take share from the competitor. And if the competitor grows, it's because they take share from us, right? It's not like in India or Thailand or Indonesia, where owning a mobile phone or a data plan for the very first time, there are people who still do have that new growth. That is amazing, right? That is something that we really find amazing, especially in our regional markets. Now while Singapore is tough, I guess, the relatively good news is that 75-plus percent of our profits actually come from outside Singapore, right? So we are quite diversified. Of course, Singapore is a very important market to us. It is critical, right? We cannot let it -- we need to continue to maintain our strong position, and we want to be profitable and generate good returns. So we need to be smart about how we operate. We need to continue to keep costs very lean despite the fact that we are #1 player. We need to be smart about CapEx. And you know what, we need to really think about new revenue growth, right? We need to think about how we can rely on 5G, right, and think of new ways because in Singapore -- in Singapore, we are one of the very few countries globally to have what we call a stand-alone 5G network, which means you can take the 5G network and split it up according to different needs. Some people like fast speed. So you can create this part of 5G and say, okay, I give fast speed to this particular customer. Some like high reliability, right? Speeds may not be that important. I can craft that on the same 5G network without causing a lot of interruption between the 2 needs. A classic example I can give is I think we all know we had Taylor Swift in Singapore early this year. And we tested, right? We said, okay, and we also tested this for the National Day Parade. And say, if you want fast speed, we all see Taylor Swift performing my favorite song, I record it. I still want to upload it on Instagram and look like a hero, right, because you want to beat everyone else to load it. So if you buy a specific -- what you call a specific plan with Singtel, during those few hours, you have kind of fast lane 5G traffic that you can upload. You just pay a few dollars. You can do that. And then you can upload it faster than everyone [ 4,999 ] people in the National Stadium. And you look at Hero, right? That's how the wonderful things we can do with 5G. So these are the new revenue opportunities that we're looking at.

Didn't know about that. I think a lot of people -- some -- I think Singtel has now grown beyond Singapore. I still remember when it was the first -- one of the first new stocks. When the government gave out Singtel shares, my parents may have some shares. I have no idea whether they still have them. But it's one of the things that, I guess, one of the catalysts that motivated Singaporeans to go start investing. So Singtel has grown beyond Singapore. You mentioned you have business in Australia, correct India. You have Philippines, Thailand as well.

Indonesia.

Indonesia. So I believe that in all these markets, you're either #1, #2 correct in this market. Where do you see the next phase of growth for Singtel? I know you mentioned data centers as well. And beyond these areas. I mean, beyond Singapore, you have all these countries as well. Where do you see the next key source of growth will be?

I think there are, I would say, maybe 4 areas of growth. One is linked to our current business, which is -- actually 2 are linked to our current business. One is on the mobile side is what I talked about 5G, right, ways of doing or using 5G to differentiate ourselves, right? Because if you just use 5G to watch video, I can tell you, it doesn't really differentiate versus the 4G. But if you use 5G to do what I talked about, Taylor Swift and all that or you do 5G for autonomous vehicle manufacturing for companies, we actually have that here in Singapore. That is a differentiator. So that's the first thing we do. Second thing is more for our emerging markets in ASEAN, Indonesia, Thailand, Philippines and India, fixed broadband. That means WiFi. Fixed broadband in Singapore, I think WiFi -- I think every home has WiFi, right, almost every home, so 99% plus. In places like Indonesia, the household penetration is still less than 20%. That means the growth is tremendous, right? And interestingly, our associates today, we have really in the last 3 years, focused on fixed broadband. So today, Indonesia, Thailand is the largest fixed broadband player, we own that, right? And with the penetration still so low, tremendous growth opportunity. India and Philippines, I think we're #2, so -- but still got good growth opportunity there. So those 2 are the ones that are linked to our business. The next 2 are, as you all, we talked about data centers. Data center is -- actually, we are very optimistic about that because one of our very strong enterprise relationship and government relationships -- everybody is talking about data centers for storage, compute and now AI, which requires a lot of data center capacity and needs. With the investment from KKR, we have a lot of capital that we can really grow and grow fast, right, in countries that we care about. And then finally, our IT services arm, right, which is NCS. That's important because now a lot of companies, even medium-sized companies and governments are trying to digitalize, right, meaning that everything is on digital, really going digital. And this is not just having an app right? This is really having like if your customer data and all that is put -- is digitalized in the cloud, how you actually upload it and put all the data and your analysis and insights into the cloud and compute it. It involves like at the airports, you see that people now you can use your retina scan or just scanning of passports, no more individuals stamping of passports. It involves security personnel walking along with cameras, having AI to detect or facial recognition to detect potential threats and all that kind of thing. All this is part of what NCS can do. So a tremendous amount of opportunity, not just in Singapore, but around the region.

So it sounds like Singtel is no longer like a telco company. It's a digital company, put it that way, right?

Yes, absolutely. That's why I always think maybe we should change our name because we're not just Singapore, only 25% of our profits come from Singapore, and we're not just telco, right, because of all the new businesses. But having said all that, we also fundamentally -- jokes aside, the majority of our cash flows today still come from the Telco business, right, mobile and broadband. But we also need to accept reality, particularly for the mature markets like Singapore. It's a tough business because of overcompetition. And -- but at the same time, I think we do -- you just have to -- you have to fight the war that you're living, right? So you have to fight the competition. I think the point to make is really helping our investors and stakeholders understand we're more than just Singapore, we're more than just telco.

Yes. So just curious because I think you guys do the strategic resets as a group. So I believe because your owns the associates, I believe some of your Board members definitely sit on the associates or something. Do you also encourage the associates to do strategic resets?

Yes, we do. So we -- so if you look to your point is we actually do have senior management of Singtel sitting on the Boards as Board reps in many of our -- actually all -- not many, in all of our regional associates. More importantly as well, we have a lot of Singtel's people who are seconded there to take on senior management roles, whether it's the Deputy CEO role or the CMO, Chief Marketing Officer or the Chief Technology Officer. And what we have are doing is we are encouraging all our associates to also think about kind of resetting the business to reduce costs, to fight the new kind of battle, right, the new market where telcos today have a great advantage. What they do not have, if they stick to their old ways of doing business, it's a tremendous competition. You've got threats from the digital players, OTTs. But at the same time, many of them have customer -- very strong customer relationships. They have very strong cash flows. They have data centers. They have a lot of assets. They have towers business that they can monetize. So to answer your question, if you look at every single one of our telcos, they have embarked on their own version of the strategic reset.

All right. I think maybe now we can cover -- these are the things that I hear about Singapore. Yes, that's correct. I think it's also important to know what are some of the risks that could come with all these growth initiatives. For example, the data center is a growth area, but it's very capital intensive.

I agree.

So that doesn't work out. There's a lot of sunk cost -- so that's one thing I could maybe highlight. Is there anything that near term, maybe midterm risk that could derail your growth plans?

No, I think you are absolutely right that the data center business is very capital intensive. We need to always make sure that beyond any doubt that investors will believe that we will be able to fund our growth, right? And you don't fund the growth from debt because if it's just debt one day, we're going to cut dividends because how are you going to do it? It's not sustainable.

Is that what happened previously?

You see, in the past, I would say, in many ways, because the 5G CapEx was just very high. And number two, more importantly, the company only relied on one source of capital, which is operating cash flows, right? And when all the challenges came, the operating cash flows came down. So the only way to do is to cut dividend or really increase debt, right? So the debt increased a little, but not too much. So we had to cut dividend. What we are doing now is we're saying, okay, we still are funding all this growth, right? But it's coming from operational cash flows, which have improved for all the reasons I've given. But at the same time, there's this second part, right, what we call internally Part 2. Part 2 is from all our asset recycling. So we can rely on 2 parts. And actually, interestingly, that second part is not just from the sale of assets. It is what I call the second part of this part is through what I call capital partners, capital partnerships. This is where KKR comes in, right, where we have this growth profile that we want to invest in. We don't need to just sell assets to fund this growth, but we can bring in capital partners like KKR, whom I think we all know have massive amounts of capital, right? And they do believe in Asia's data center growth. So we are partnered with them, and then we are relying on their capital and then growing. So today, every single data center spend that we have from our data center business, KKR is funding every single dollar, up to $1.1 billion, right? So that's how we think about capital management, right, funding using capital partnerships as well.

So another interesting thing is you go and look at your [indiscernible] , it's still up right now. What's happening?

What's happening. Okay. Very soon, you'll start seeing it gets shorter and shorter because they are demolishing it. Now I was hoping, right, you can do those implosion, right? I just see it coming down, unfortunately, in Singapore, yes, I hopefully can get a drone up there and the whole thing. But unfortunately, I think because of some rules -- actually, I'm not even sure whether Singapore we can do it because we're a very dense place. So we can't do that. So they are doing demolition floor by floor. And then so you see it come down and then we are rebuilding. And the reason why we're doing that, and it's not just a refurbishment is because it's an old building. It's very old building. And as a result, it's very inefficient. Each floor plate is not efficient and it's not -- and as a result of that, it's not as green. So in this new building that we are building, it will be, if I'm not wrong, one of the greenest buildings -- office buildings in Singapore. So we're quite excited about it.

So are you going to rent out or are you just...

Yes, I think we're going to occupy maybe 1/3 of that building. And then the rest of the 2/3, we are leasing them out. So if you want to move in, please move be on the same -- I always can discuss.

When will the redevelopment be?

Okay. I think it's 2028. That is the plan.

So how much are you spending on this capital expenditure for this?

Okay. This development, right, we actually started owning 100% of the building, but we brought in a -- first of all, we don't know how to build a nice office building. So we brought in a partner, lend-lease after a very intense kind of beauty period, right, looking at all the top developers in the region. So we picked lend-lease. And lend-lease and us are partnered. So we sold 49% stake to them. So they take 49% stake in the project. We have 51%, and we'll kind of build it together and develop it. And then we will rely on lend-lease ability to rent up because they have built some nice properties here like, I think, [ 313 Somerset ], the PLQ, [indiscernible] and all that, yes.

Okay. So Singtel is doing a lot. I mean, it's like reinvesting capital in the commerce center, data centers and I mean, all your growth initiatives. Could you say what is the difference between in the past, the management putting all this capital and do their acquisitions in the past. What's the difference between that and now? And how you feel this one was going to be a success, is going to work out? Didn't work out ...

I know. I think we need to -- okay, hard to really -- looking back is always -- in hindsight 2020. But looking forward, I think we talked a lot about the risk and what we're concerned about. I think the key risk is also about we need to invest correctly, and we need to invest wisely, right, to make sure that we will be able to generate the required return, right? So we need to -- so we need -- every single acquisition we make, every single investment, I think we need to really think about it and really scrutinize it and be very clear that this is something that is, number one, aligned to our overall strategy and whether it can get us to the destination we want to get to in a few years' time. And number two, that we need to consistently stay focused on the business plan, right, and making sure we deliver.

And I guess you're diversifying, your exposure in a sense because you have KKR helping you with the data centers, land leases coming in...

And in some ways, I think what we also can do is partner -- you see, if you look at our Telco businesses that our overseas joint ventures, one of the reasons why I would argue we're very successful there. It is because we found the right partners. And many of this when we bought the Telco, it wasn't an existing #1 telco. It was literally from scratch, bid for the license together and build it up to where it is today. And it's really because we found the right partner with the right value system, with the right mindset and very aligned. And you learn how to work with them, right? And today, I would say we are actually probably the only Singapore company that has such strong partnerships outside Singapore. right, which -- and strong businesses who can say that they are #1, #2 in very large markets like India and Indonesia, right? So any bank cannot say that, any utility company or any -- very few companies can say that. So actually, we are very appreciative of the foresight that many of our leaders before us went abroad, and we want to continue that. But now it's no longer about going to telcos because actually, to be frank, no more telcos -- no more greenfield telcos to go for already. We need to think of the new one, which is digital, right, which is Data Centers, IT services, our Digital Bank and finding all the different partnerships and really growing them together. That's the key.

So maybe you also can talk more about your partnership with GXS, the bank. How is it progressing? Is it profitable? Or when is it going to be profitable?

It is not profitable yet, but we are targeting for 2026 to breakeven. Actually, if you look at our Digital Bank, right, it's Singapore, Indonesia and Malaysia. Indonesia and Malaysia started off very well. Actually, we've got over 1 million customers for each country. And actually, we just launched within a year, right? And it's progressing very well. In fact, the markets there are so big and it's just -- especially in Malaysia, we are -- I would say, at this point in time, we are way ahead than a lot of the digital bank competitors. And we need to -- we cannot rest on our laurels. We just have to keep going. Singapore is a bit more difficult. Probably the reason is that we've got very fierce competition here. That has really made us relook at our Singapore business and really see what we can do better. So together with Grab and the management team of GXS, we are looking at how we can position ourselves better and be able to address the competition. But fundamentally, the most important thing is how we serve our customers, our bank customers and really taking care of the underserved, right, which is the core purpose of this bank, right? But -- and how we do it is really leveraging on our customer base, Grab customer base and Singtel. I think combined, we will probably cover every adult Singapore or every teenage Singaporean and above, right, whether either a Singtel customer or Grab customer or both.

Yes. So I guess this is another example of just working with the right partner new growth area.

Exactly, correct. When we were -- when Singtel was going through the thought process about whether we should go for the digital bank, we spent a very intense few weeks doing like speed dating. Grab was the same thing, right? And we were like finding all the potential partners. There were a lot of partners surprisingly who actually approached us as well, some very strong digital competitors, both local and abroad. But finally, it was interesting that both Grab and us kind of figure out that the right party to partner was the other party. So it was, in some ways, quite a match made in heaven, right? So it was good. But it's a tough business. It is difficult because competition is intense. But we are in this, and we need to fight the competition.

Do you foresee like this particular industry, this digital bank industry consolidating like some years down the road, like what happened?

I think it's too early to say because at the end of the day, many of them have just started, right? So telcos have been around for quite a while. So still early to say.

Okay. Correct. And a partnership like this with Grab, for example, who drives that business? Is it a 50-50?

It's okay. It's 60-40, right? So they own 60%, we own 40%, but we have Board representation. And because it's a bank that is regulated by the MES, it has to be a stand-alone bank with a stand-alone management and Board. So we need to think of what is right for the bank, right? Of course, we need to -- as shareholders, we also sometimes would also make sure that the bank and the shareholders will align. But fundamentally, first and foremost, we need to think what's best for the bank. And then after that, how it aligns with the 2 shareholders. So that's how we look at it, how we manage it, yes.

Okay. So I think when it comes to AGM, a lot -- you get a lot of shareholders asking, yes, are you going to increase the dividend? So are you?

Okay. That's a tough one. Okay. We did say EBIT will grow by high single digits to low double digits. So assuming what we said can actually happen, that will mean your underlying net profit, also hopefully can grow if the associates continue to perform a certain way. And if underlying profit grows, if we keep our payout the same, it will naturally grow. Then you look at the VRD. VRD is $0.03 to $0.06. So you think of it as add-on, right? So the $0.15 we paid out or announced last year, I think about $0.039 was the VRD, right? Yes, I think it was $0.038. So the remaining $0.112 -- no, about sorry, my math today. Okay, $0.112 was for underlying profit. So if the thinking is underlying profit can grow, that $0.112 will become another number, higher number. And then if we stick to $0.038, $0.039 VRD, we'll continue to grow. I think the key is investors need to ask, number one, is the core business able to grow. If the core business is able to grow, underlying profits will grow. And then that will help our dividend. Number two, is Singtel's capital recycling model, something that they are convinced by. I would say it's safe to be convinced short of like a big Armadeddon event in the markets because in the last 3 years, we said when we launched this strategic reset that we were going to recycle $2 billion to $3 billion, we ended up doing $8 billion, right? So I think based on track record, based on this, I think I'll let investors make that call. As you all said, everyone, every Mr. and Mrs. Stan, Mr. and Mrs. Wong would own Singtel shares, right? And we know that we have a real duty, right, for Singaporeans. I don't want to sound like a National Day song, right? But we do have a duty to Singaporeans to make money for them, right? And to -- okay, I'll not make big money, but at least maintain, especially for the retirees like our parents, who probably are retired already, and they want to see their net asset growing. So we have that fundamental duty. Of course, I can't guarantee things. But I think what we'll say is management and the Board are very focused on creating value for shareholders.

I think that's a great answer because I know that management cannot say, yes, we're going to grow our dividends, In such a direct way, but posed very good questions. Are you convinced by our plan? Correct. Do you believe that our business is going to grow? Of course, and then sticking with our dividend policy.

Correct. That should grow.

So I think anyone who's watching this and they're listening to all this, I think you've shared a tremendous amount of information about Singtel, what's been happening in the last 3 years, what's going to happen for the next 3,4 years as well. And I hope they can make their own decisions about this. Again, we should buy or sell anything. We're just going to share about what Singtel is all about. But thank you so much for...

Thank you.

A lot of -- Because we looked at Singtel ourselves and Investors. And we were wondering all these things. And this came at the right time, basically.

No, I'm happy to -- and thank you to The Fifth Person. As I mentioned earlier to your offline, I've heard of Fifth Person many years ago in my previous life. Fifth Person has evolved and grown to this stage. So well done. I mean I think a lot of your investors or your subscribers would we rely a lot on this to, find it very helpful to make investment decisions. So thank you. Thank you for inviting me.

If our viewers have any questions about Singtel and beyond, who do they go to?

Okay. I think we have in the website quite clearly Investor Relations, right? And then we have an e-mail address, and I think we have a phone number there to -- just investors should ask us, right? We may not respond within an hour, but we will respond. And I would strongly encourage investors in addition to kind of listening to your channels to also -- every now and then, we have CRS events, we have Retail Engagement Events. This particular year, we are extra -- we're going to shift a lot more emphasis on retail engagement, our retail investors. So we want to -- as you said earlier, people may all like suddenly wake up to Singtel, but I think there's still a lot more who still need to understand more about our story. So we intend to reach out to them.

Okay. Yes, we'll be watching Singtel ourselves.

Okay. Thank you.

So I think that's pretty much it, right, guys. Yes. All right. So, Adam, this is Victor and this is the Group CFO of Singtel, Arthur Lang. Thank you so much for being here and sharing all you know about Singtel. I think you -- I mean, you've got a big job to do in Singtel, and we learned a lot.

Okay. No, thank you very much. Yes, I really enjoyed myself. So really thank you for listening too.

All right. So any questions about Singtel, feel free to put them in the comment section. Of course, you can go to Investor Relations as well. And if you like this roundtable, please hit the button. And I think it was a great session for us personally as well. And of course, subscribe to our channel, many more coming up.