SingTel to buy US firm to boost mobile ad business
Singapore Telecom said Monday that it will buy a US mobile advertising start-up for $321 million to expand group revenues from phone ads and marketing across Asia.
SingTel, Southeast Asia's biggest telecom firm by revenue, said its 100 percent buyout of Amobee would boost mobile ad sales in India, Thailand, the Philippines, Indonesia, Bangladesh and Pakistan, where it has large affiliates.
"A vast majority of our 400 million (clients) are in emerging markets," said Allen Lew, chief executive of the SingTel Group's newly formed "digital life" unit announced Monday as part of a top-level reorganisation.
Citing data from technology research firm Gartner, Lew said the global mobile ad market is likely to exceed $20 billion by 2015 from about $7.0 billion this year, with 35 percent of it generated in Asia-Pacific.
Amobee, founded in 2005 and based in Redwood City, California, has offices in Europe, Asia and Latin America.
Its management team will remain in control and Amobee and will "serve operators, publishers, advertisers and agencies with leading edge mobile advertising technology and services," SingTel said in a statement.
Despite Amobee having unaudited net assets worth only $600,000 as of November, Lew told a news conference SingTel was not overpaying for the firm with the all-cash acquisition.
"The way we value this company is not based on the net tangible assets. We value this company based on what we think is eventually going to be worth."
SingTel has been expanding its revenue base beyond its small domestic market, where the mobile phone penetration rate stood at nearly 150 percent as of December 11, according to Singapore government data.
SingTel has a wholly owned subsidiary in Australia called Optus.
It also owns strategic stakes in India's Bharti Airtel, Thailand's Advanced Info Service, Globe Telecom of the Philippines, Indonesia's Telkomsel, Pacific Bangladesh Telecom Limited and Warid Telecom in Pakistan.
The Singapore company in its latest group earnings report said net profit in the three months to December shrank an annual 9.6 percent to Sg$902 million ($717 million) on revenues of Sg$4.83 billion..
"SingTel is in a tight spot as it has reached saturation point in the local market, profits have been slipping and its foreign acquisitions haven't been the most successful," said Justin Harper, a Singapore-based strategist with IG Markets.
"But this is a bold move to make SingTel more cutting-edge in the mobile advertising industry, given Amobee's background in Silicon Valley," he told AFP.
Lew said it would take time for the buyout of Amobee to bear fruit.
"The company is currently a start-up so we are going to have to do a lot of things for it to achieve its potential," he said.
"We don't normally discuss how long it takes for these things to break even but you know it all depends on how good we are at delivering a solution, it all depends on how fast the market grows."
Technology research firm Ovum's senior telco analyst Nicole McCormick believes SingTel will face a tough battle trying to catch up with other industry players who entered the mobile ad market much earlier.
"We believe mobile advertising will be a slow game for SingTel," Brisbane-based McCormick told AFP.
"In 2009, there were a lot of telco-led mobile advertising initiatives on the innovation radar. In 2011, there were very few.
"During that period, the networks that deliver advertising to mobile apps on smartphones have entrenched themselves even further, making it tough for telcos to get a foothold in the mobile advertising market."