Listed in 2017, NetLink NBN Trust owns the only nationwide fibre network supporting Singapore’s Nationwide Broadband Network (NBN), over which ultra-high-speed internet access is delivered throughout mainland Singapore and its connected islands.
NetLink Group designs, builds, owns and operates the passive fibre network infrastructure of Singapore’s NBN. NetLink Group’s extensive network provides nationwide coverage to residential homes and non-residential premises in mainland Singapore and its connected islands.
1. How does NetLink NBN Trust manage its operational costs and ensure efficiency in network service delivery?
NetLink NBN Trust and our subsidiary NetLink Trust (referred together as NetLink) are an essential service provider focused on delivering quality service and keeping costs down for end users.
This is achieved primarily through (i) running robust tender processes to ensure that we select vendors capable of providing the most optimal solutions at competitive prices and for key components of the network, we negotiate multi-year term contracts to mitigate the risk of cost fluctuations; (ii) constantly reviewing our internal processes and workflows to optimise efficiency; (iii) continuously investing in both maintenance and growth capex to maintain our quality of services (QoS) targets and minimise costly downtime; and (iv) maximising asset utilisation by growing the number of connections with the existing asset base.
2. Could you provide insights into NetLink’s RAB vs non-RAB revenue?
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NetLink holds a Facilities-Based Operations (FBO) licence granted by the Infocomm Media Development Authority (IMDA), which allows NetLink to design, build, own and operate the fibre network infrastructure required for telecommunications (telco) services via the NBN. This fibre network infrastructure largely forms our Regulated Asset Base (RAB). RAB revenue streams are regulated by IMDA, and these include revenues generated from 1.5 million residential connections, 53,000 non-residential connections, 2,900 Non-Building Address Points (NBAP) and 3,500 Segment connections, ducts and manholes services and co-location services. These form 85% of NetLink’s total revenue in FY2024.
Non-RAB revenue (15% of FY2024’s revenue) is generally project-based and construction-related and many are unregulated. Examples of non-RAB revenue would include revenues generated from leasing space at our central offices (non-regulated), provision of installation-related type service (regulated) and ancillary projects such as diversion arising from building or construction works (non-regulated).
3. How does NetLink manage its debt levels and what is its debt repayment and refinancing strategy?
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NetLink’s current debt levels are relatively low, as evidenced by a healthy net debt to ebitda ratio of 2 times and a net gearing ratio of 23% (as of March 31). The weighted average debt maturity is approximately 2.4 years and given our strong liquidity position, there is limited or no debt service risk.
We aim to optimise the group’s balance sheet using funds from operations or borrowings to deliver an improved total return to unitholders. The group’s financing strategy is centred around four pillars:
- Maintaining a manageable leverage ratio with headroom to undertake ongoing and future capex.
- Hedging via interest rate swaps to mitigate interest rate exposure and stabilise borrowing costs.
- Diversifying funding sources, including taking loans, revolving credit facilities from various banks and having a multicurrency debt issuance programme to provide financing options when required.
- Spreading debt maturities over an extended period.
4. What are the key factors driving NetLink’s revenue growth, and how can this be sustained?
The residential segment (60% of FY2024’s revenue) primarily drove NetLink’s revenue growth. With the penetration rate now over 90%, growth in this segment will slow down. This allows NetLink to shift its focus to the Enterprise and NBAP segments, which have scope for further growth.
NetLink collaborates with telco partners to deploy Internet of Things (IoT) devices and sensors on street furniture like traffic lights, lamp posts and bus stops. This involves expanding network coverage to ensure outdoor locations are fibre-ready or near the nearest fibre node. Additional project opportunities arise from Singapore’s ongoing building and island-wide infrastructure development. NetLink also explores investments in digital infrastructure.
5. How is NetLink gearing up for the impact of emerging technologies like IoT and smart cities?
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IMDA announced on Feb 21 that it would invest up to $100 million to upgrade the NBN, enabling Singapore to remain future-ready. More than half a million households are expected to sign up and benefit from higher speeds of up to 10Gbps by 2028. IMDA also notes that digital technologies are developing rapidly and a higher-capacity broadband network will provide the foundation for future innovations and opportunities.
NetLink is working closely with telco operators to upgrade the NBN until 2026, laying the foundation for future applications and innovations with speeds up to 10 times faster than current capabilities. Alongside the deployment of 5G and enhanced Wi-Fi networks, the 10Gbps NBN will offer symmetric 10Gbps connectivity, bolstering Singapore’s global competitiveness and fostering economic growth.
6. What are some key trends seen in this industry?
We have observed the following key trends that have a more direct but mixed impact on NetLink’s business:
- Fibre take-up will likely increase with (i) Digital Transformation across artificial intelligence (AI), IoT and big data analytics, which are used to improve network management, customer service and operational efficiency and (ii) Singapore’s Smart Nation Initiative to enhance digital infrastructure to support smart city applications, including smart homes, smart transportation and smart healthcare.
- However, these positive developments may be offset by consolidation and competition. For example, we have seen Nucleus Connect and MyRepublic being merged into StarHub
7. Sustainability and ESG (environmental, social and governance) have become key focuses. How is NetLink committed to sustainability?
NetLink has established a sustainability governance structure to oversee our sustainability efforts. Our board oversees and sets the direction for our sustainability strategies and goals, including climate-related risks and opportunities. The board’s Risk and Sustainability Committee (RSC) supports the board in these areas:
- A Sustainability Framework focusing on three key areas, which comprise 10 material topics with set targets, adopting the latest Global Reporting Initiative (GRI) 2021 Guidance.
- Conduct a quantitative scenario analysis to estimate the impact of climate change on our business and disclose our climate-related risks and opportunities according to the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations.
- Support the United Nations Sustainable Development Goals (SDGs) and align our sustainability commitments with seven SDGs through our material topics.
These initiatives ensure transparency and a comprehensive view of our ESG impact. We closely monitor performance against targets, regularly report to the RSC and engage sustainability experts for guidanc
8. What are some ESG goals and how does NetLink measure its progress?
A full disclosure of our commitment, goals and performance can be found in our FY2024 Sustainability Report. Highlights of our key achievements in FY2024 are as follows:
- We focus on our commitment to responsible and ethical business practices supported by sound governance. We maintained zero incidents of significant non-compliance with laws and regulations and zero incidents of personal data breaches, even though a cybersecurity incident in FY2024 had affected our internal operations. There were no disruptions to fibre broadband connectivity.
- On the environment, we focus on reducing our environmental footprint, improving resource efficiency and ensuring our operations remain resilient to climate change risks. We aim to reduce our Scopes 1 and 2 emissions by 50% by FY2030 (using FY2022 as a baseline) and achieve net zero by 2050. In FY2024, we recorded Scopes 1 and 2 emissions reduction of 61.8% relative to the base year. We also continue implementing decarbonisation initiatives such as (i) enhancing energy efficiency at our central offices and (ii) reducing and recycling fibre cable waste.
- We prioritise expanding and enhancing our network’s reliability to support communities and foster innovation in Singapore. Our commitment extends to maintaining 100% island-wide fibre coverage and achieving 99.99% network reliability. Internally, we aim to create a safe, inclusive and equal-opportunity workplace for our employees.
9. What is NetLink’s value proposition to its unitholders and potential investors?
NetLink has strong liquidity and has consistently increased distributions to unitholders. Since our IPO in 2017, we’ve grown distribution per unit (DPU) for seven consecutive years, returning $1.3 billion to investors. With a unit price of $0.86 as of March 28, our 6.2% unit price yield surpasses yields from the 10-year Singapore Government Bond, Straits Times Index and FTSE ST REIT during the same period.
The accelerating trends in AI, data centres and Big Tech present growth opportunities. NetLink is well-positioned to benefit from increased connectivity demands in these sectors.
10. Why should investors take a closer look at NetLink?
NetLink is the sole nationwide provider of fibre connections to residential properties, establishing its dominance in this sector. Entry barriers for new players are substantial, both operationally and financially.
NetLink also has a resilient business model well-supported by predictable revenue streams. Since 85% of our FY2024 revenues are derived from RAB sources, mostly recurring and secured under long-term contracts, management believes we are well-positioned to offer stable returns to investors.
Emelia Tan is director of research and FinLit at SGX Group
