SINGAPORE (NewsRise) -- Singapore Telecommunication's push into digital technologies has been marked by years of multi-million dollar losses. But the tide may be starting to turn, at least for Amobee, the largest of the digital subsidiaries.
The advertising technology firm, which Singtel bought in 2012, is "getting there," Samba Natarajan, the chief executive of Singtel's Group Digital Life, said in an interview with Nikkei NewsRise.
"We hope to see it breakeven soon," he added, referring to Amobee's outlook in terms of earnings before tax, interest, depreciation and depreciation.
Like many large telecommunication firms, Singtel has invested heavily in web-based technologies and content that can ride on, or complement, its existing mobile and broadband networks, as income from traditional sources such as international calls starts to shrink.
The company, which has a presence in other Asian countries, is also leveraging on its geographic reach to grow its newer digital offerings.
Singtel bought U.S.-based Amobee for $321 million with the goal of entering the fast-growing mobile advertising and marketing industry. Amobee's services include a platform that allows marketers to plan and carry out media campaigns on popular sites like Facebook, Twitter, Instagram and Snapchat.
Together with Amobee's acquisitions since, Singtel has invested nearly $1 billion in the subsidiary.
Besides Amobee, the digital arm also includes a video service called HOOQ, data analytics firm DataSpark, and Innov8, a venture capital fund.
According to Natarajan, a former McKinsey and Co consultant who was named head of the digital group in 2015, HOOQ will be the main drag on earnings this year as it needs to invest heavily in content and marketing.
A joint venture between Singtel, Sony Corp's AXN and Warner Bros, HOOQ competes with established names such as Netflix and with Asian startups like iflix.
Nevertheless, Natarajan sees potential in the Asian mass market, where the average customer is reluctant to pay the fee that the big names charge.
"Which is why you find the take-up of those large global category players has been modest, because it is a small category of users who will use those services for $10 a month," he said. "They may innovate in the future but at this point, we feel we have a window of opportunity of a few years," he added.
Amobee's competition is more diffuse, ranging from ad technology company AppNexus to the digital arms of major advertising groups like WPP as well as Facebook and Google, which provide advertisers with data analytics and advertising trends.
Amobee has performed better than expected in Asia this year, and is likely to report operating revenue growth "in the mid to high teens" for the financial year ending March 2017, surpassing Singtel's earlier guidance of a mid-single-digit percentage increase, Natarajan said.
For the nine months ended December, the digital group posted operating revenues of 478 million Singapore dollars ($337 million), a rise of 27% year-on-year due to increased contributions from Amobee.
The group's losses before EBITDA narrowed to S$86 million for the nine months from S$98 million in the same period a year ago.
An analysis provided by Singtel showed Amobee had negative EBITDA, or a loss of S$25 million, in the nine months ended December, down from S$33 million in the year-ago period. In the three months to December, the advertising technology firm lost S$1 million, down from S$5 million in the previous year.
By comparison, Singtel's group net profit for the nine months amounted to S$2.9 billion on operating revenues of S$12.4 billion, with EBITDA coming in at S$3.7 billion.
Natarajan declined to provide more specific forecasts for Amobee, citing company policy.
DBS Vickers, in a recent report, said investors are undervaluing Singtel's digital businesses, which the telecom company expects will become EBITDA-positive by financial year 2018-19.
According to Natarajan, the digital arm wants to invest in companies whose operations can be improved with access to Singtel's customer base, mobile networks and distribution points, as well as those whose business can support or enhance Singtel's existing services.
Amobee recently launched an app that lets Optus mobile users in Australia access more data in return for viewing ads streamed to Android phones. Optus, Australia's second largest telecom company, is a wholly owned unit of Singtel.
As for HOOQ, trails currently underway in the Philippines and Indonesia have been promising, with subscription levels that have exceeded initial expectations, Natarajan said. Most subscribers currently enjoy free trials as part of bundles provided by Singtel's associates in these countries and HOOQ is hoping to convert many of them into paying customers.
However, the response to HOOQ in India has been slower than expected due to fierce competition from other players.
Besides these three countries, HOOQ is also available in Thailand and Singapore.
Asked how HOOQ intends to compete with Netflix and Amazon Prime, Natarajan said the joint venture would differentiate itself in Asian markets by dubbing or subtitling Hollywood movies and providing more local content.
HOOQ also intends to target the mass market by charging users between $2 and $4 a month, in line with what the typical mobile user pays in emerging markets. This could involve selling individual movies rather than a monthly plan.
In this mass market category, Natarajan said HOOQ's main competitors include HKT parent PCCW's Viu and iflix, which earlier this week raised over $90 million from investors such as U.S. telecom and cable company Liberty Global and Kuwait-based mobile phone operator Zain.