MARCH 10, 2000 VOL. 26 NO. 9

Singapore's Wake-Up Call
Losing HKT jolts the city's corporate world
By ASSIF SHAMEEN Singapore

ALSO IN ASIAWEEK Cover: Internet money goes shopping in Hong Kong and what PCCW-HKT means for old-economy firms in Asia • Players: The deal, the winners and the losers • Interview: Richard Li on bagging the region's biggest buy • SingTel: What now for Singapore Telecom? • Chart: Comparing PCCW and Cable & Wireless HKT • No. 1: The Lis are definitely Asia's top business family Editorial: Taiwan should respond to China's peace feeler - hidden in a war threat Editorial: India's RSS must curb its chauvinism Philippines: Amid terrorist attacks in Mindanao, President Joseph Estrada plays tough with MILF insurgents Brunei: The sultanate sues Prince Jefri Singapore: Behind Ong Teng Cheong's maverick presidency • Extended Interview: Ong does not regret riling his former colleagues Nepal: Why the Maoists are resurgent Green Stakes: Why Asia has to clean up - fast • Snapshots: Where countries stand on the environment • Eco-warriors: Fighting to save the planet • By Design: Ideas that can make a difference Exhibitions: The art world - a proxy cross-straits battlefield Newsmakers: India's pointman for defense Real Estate: Building up Indonesia's multimedia dreams MyWeb: As this Malaysian Internet company proves, a U.S. listing is not an automatic road to riches Investing: Don't use yesterday's rules to value tomorrow's hottest telecommunications companies Business Buzz: CLOB gets resolved Viewpoint: Political reform is inevitable in China

Just six weeks ago, the city-state buzzed in anticipation. Its largest listed company, Singapore Telecom, was seeking to merge with Hong Kong's Cable & Wireless HKT to create an Asian telecommunications powerhouse and the world's sixth-largest phone company in terms of international calls. Corporate leaders and bankers talked about the emergence of the New Singapore in which companies like SingTel, DBS Bank, shipping company NOL and Singapore Airlines would buy overseas rivals and become global players.

Munshi Ahmed for Asiaweek Lee Hsien Yang must decide how SingTel should go forward

Today, in the wake of a humbling show of strength and speed by upstart Pacific Century CyberWorks, SingTel is back to merely dreaming about its future. "It's a wake-up call for Singapore government-linked companies and SingTel," says Thio Boon Kiat who runs a global telecom fund in the city-state.

The defeat at the hands of young Richard Li Tzar-kai shocked Singaporeans. They believed that their cash-rich telco - the city-state's ninth-largest company by sales - could not lose a bidding war to someone wet behind the ears like the 33-year-old PCCW CEO. And even after HKT was lost, there was an element of denial: Singapore focused on the possibility that a merger with Rupert Murdoch could still make SingTel a big-time player. No one talked about the fact that Murdoch has been criticized even more sharply than SingTel for refusing to acknowledge how the world is changing and develop an aggressive Internet strategy.

This is not to say SingTel has ignored the online world. The company has tried to be aggressive in expansion, but it has been only sporadically successful. According to Peter Milliken, a telecom analyst at Lehman Brothers in Hong Kong: "To say that SingTel could have been a little more aggressive and adventurous would be an understatement." Investors also seem to think it is not being bold enough. After word emerged that the company had begun talking about its Internet strategy, the stock price fell. Even in staid Singapore, announcement of something like an Internet strategy usually pushes stock prices up. But in this case, the market apparently felt SingTel was moving too slowly. The company said it would spin off at least five of its Internet subsidiaries or affiliates - in one or two years. That's eons in cyber-time.

So where does SingTel go from here? Analysts say the company has to decide whether it wants to remain an old-line telco or reinvent itself as a communications and Internet company. Some argue that SingTel needs to break itself into two or three companies and begin the process of unlocking some value in the pieces of the company. At the very least it may need to let go of some of its traditional businesses and invest aggressively in global or regional broadband infrastructure, in e-commerce and other online companies. This all sounds pretty bold and brash. Will it be the New Singaporean Way to a New Singapore?