Tough questions for breakfast

by Siow Li Sen, Mar 8 2006 Chua Sock Koong's journey at SingTel almost parallels the development of corporate Singapore. Siow Li Sen explains if one needed to illustrate a particularly Singaporean trait, which is that we are usually the last to recognise the leaders among us, the Chief Financial Officer (CFO) award that went to Chua Sock Koong would be an apt example. After all, Ms Chua has already been named best CFO for four consecutive years since 2001 by Finance Asia in its Asia's Best Companies poll.

CFO at Singapore Telecommunications since 1999 and chief executive for international business since last month, Ms Chua was also one of three Singapore women on Fortune magazine's list of top 50 businesswomen outside the US. Ms Chua's journey at SingTel - which began 17 years ago where she started out as treasurer - almost parallels the development of corporate Singapore. She was the project director of SingTel's initial public offering in 1993 - the biggest IPO in Singapore's history, which put the shares in the hands of many who had never owned stock before.

Painful transformation
While newly minted shareholders grappled with the intricacies of being shareholders, SingTel was undergoing its own painful transformation from public utility to listed company. And one that was to lose its monopoly status in April 2000.

SingTel employees had always felt that the organisation was efficient even while it was a government corporation, she said. But when the market was open to competition, that was a very different reality. There were other major challenges such as getting employees who thought of their jobs as iron rice bowls to adjust to performance benchmarks. "In the past you could afford to give everybody the same salary and bonuses determined by Singapore's GDP," she said. "Now you've got to compete for the best talent, you've got to have a remuneration system that allows you to attract the best," said Ms Chua. "As CFO, I got very involved and I played a key role in how the company did things." To boost its earnings, SingTel began to look overseas.

Although it had earlier invested in European telcos, by the mid-1990s SingTel realised the better strategy would be to focus on Asia. It was also the time of the Asian financial crisis. With that as the backdrop, SingTel's search for like-minded partners in the region in which to invest required clear heads and delicate handling. Said Ms Chua: "When we do due diligence, and look at what people pay for fixed assets - generally the prices we paid would be at least 20-30 per cent lower than what we see in some of the other operators' books." I suppose this is the hallmark of Singapore, you never have any corruption. "That's why when we get into the associates, we watch the technology, we watch the procurement very closely," she said.

SingTel's associates are Advanced Info Service in Thailand, Bharti in India, Globe in the Philippines and Telkomsel in Indonesia. Another painful episode was SingTel's A$13 billion acquisition of Australia's Optus in 2001 followed by the S$1.9 billion purchase of a 35 per cent stake in Telkomsel. SingTel was criticised for overpaying for Optus, Australia's second largest phone company. Ratings agencies such as Moody's downgraded its credit rating outlook to negative from stable, concerned with SingTel's ballooning debt. The share price sank to a low of $1.29 in June 2002 as investors fretted over the group's $10 billion debt. But the net debt level was actually not excessive for a company of SingTel's size, said Ms Chua. "We also were very confident that the Singapore business was a very reliable generator of cash." As for Optus, SingTel turned it around. When SingTel bought Optus, it had negative cash of A$600 million; this turned around to over A$1 billion last year, she said. People also thought that SingTel would have to fund the associates which were experiencing rapid growth. Instead, they started to pay dividends.

In the first nine months of its 2005/06 financial year, SingTel received dividends in excess of $500 million from its associates. As CFO of a $12.6 billion company employing more than 19,000 people, it goes without saying that tough questions are what Ms Chua eats for breakfast. For instance, she doesn't miss a beat when asked about SingTel's total shareholder return (TSR).

SingTel's annual average TSR was a negative 4 percent for the five years to 2004, though this was better than other regional telcos, according to a study by Marakon Associates last year. "The period is very much influenced by the start point and the end point," she said. "The start point was during the Internet bubble ... it was very high, then the whole market corrected, then collapsed, though our decline was less than other companies." In fact, she's a firm believer in the TSR as a yardstick, and SingTel uses it as a criteria in awarding performance shares to its senior managers. Important measurement TSR measurement is important because you look at both capital appreciation and dividends, she said. "I think if you have a measurement that looks only at share price performance, management is not incentivised to pay a high level of dividend." So does anything faze her?

SingTel's stock market performance does, for one. Especially when shareholders voted with their feet after the Optus and Telkomsel deals. "It was extremely stressful because the market didn't like it," said Ms Chua. "We were thoroughly criticised by the press, SingTel's price dropped to an all-time low (then) of $1.29 and as part of the management team we were, needless to say, very stressed."

Chief Financial Officer of the Year Award
Market capitalisation of $500 million or more
GOLD: Chua Sock Koong, CFO, SingTel

Market capitalisation of less than $500 million
GOLD: Soh Gim Teik, CFO, Sincere Watch