Post-monopoly game plan
Shifting strategy should be second nature to Lee Hsien Yang. As a brigadier-general in the Singapore Armed Forces, the head of Singapore Telecommunications will have been aware that there must always be a fall-back option in case of the unexpected.
The unexpected has arrived - and the company finds itself facing early exposure on a flank which only a matter of weeks ago it had regarded as heavily defended until at least 2007.
As a Singapore soldier and the son of Lee Kuan Yew, the republic's senior minister and architect of its success, Mr Lee will also know that he must do his national service - for that is what is being required of Singapore Telecom through the premature removal of its protective monopoly.
The bombshell came on Saturday with the announcement that its monopoly on international direct dialling and basic telephone services would end in 2000.
When the company was privatised and floated off in 1993, the monopoly was to have lasted until 2007, although the Telecommunications Authority of Singapore (TAS) could have introduced apparently limited competition from 2002.
As part of its contribution to bogged-down World Trade Organisation negotiations on the opening of global telecommunications markets, the watchdog decided to do just that in late April. It announced that from 2002, other service providers could take on Singapore Telecom, as long as their new products were incidental to their principal services.
For Singapore Telecom, that meant preparing for full-scale competition five years early. On Saturday, the date was moved forward two years, with the TAS announcing no-holds-barred competition from 2000.
The move throws up a surprising difference between Hong Kong and Singapore, with the notoriously rigid regime deciding that one of its flagship companies may have to suffer to raise telecommunications standards. Meanwhile, the monopoly of Hongkong Telecom over international services is being resolutely defended.
Singapore is showing a willingness to face reality. Technology is no respecter of monopolies, and the changes sweeping through the industry are likely to ridicule the concept of exclusive services. If private networks do not find a way around closed shops, the Internet will.
Shareholders, the vast majority of who are domestic, might be less concerned about competitiveness and more upset that a prospectus commitment to a 14-year monopoly could so easily be struck out.
Like it or not, they and the board have had to fall into line with Singapore's ambitions of being a corporate headquarters - Southeast Asia's key financial marketplace and a communications hub. If telecoms is to play its role in those targets, then only competition will provide the necessary spur to raise standards and keep prices competitive, according to Singapore Government thinking.
The impact on Singapore Telecom's bottom line is difficult to predict. It still has four years to prepare itself for competition on its main services, although next year sees the entry of outsiders into its Mobile Link telephone and paging services.
Hongkong Telecom will be among the arrivals, as part of the MobilOne consortium, together with Singapore Press Holdings and Cable & Wireless.
The pain of the lost monopoly is to be eased with compensation of S$1.5 billion (about HK$8.25 billion). Neither analysts nor the company's directors company are able to ascertain whether this will be enough. The company yesterday said it had brought in Goldman Sachs to advise on whether the amount was fair.
International revenue is the major contributor to Singapore Telecom - it does not strip out its profit contributions. In the year to March 1995, $1.67 billion, or 47 per cent of its $3.5 billion turnover, came from overseas.
Despite the expected rapid growth of mobile services, that ratio is unlikely to change dramatically. ING-Barings forecast that by 1998, total revenue would have risen to $4.6 billion, and international services would still provide 45 per cent.
It has long been obvious that with a population of about three million, the scope for long-term growth in Singapore is capped.
The answer appears to lie with the rest of the world. This could be where Singapore Telecom makes up the ground expected to be lost from 2000, but results so far have not been conclusive, according to analysts.
Because the company has already committed to this strategy, it will still be facing an overall loss of incremental income.
The big question is how much overseas interest will be required to bolster losses in domestic revenue after 2000. Some Singapore analysts suggest that hotter competition will generate more revenue for all. Others worry that Singapore Telecom had been doing all it could to maximise penetration, so new entries will be entering a zero-sum game.
The company's big advantage is that it has a network in place. How it is allowed to charge for access will be the key to how well it does in the new millennium.
