Good morning, everyone. Thank you for joining StarHub's full year 25 results call. I'm Crystal, I take care of investor relations, and today, this morning, we have with us our senior management, led by our Chief Executive, Nikhil Eapen, CFO, Jacky Lo, Matt Williams, Chief of Consumer, and Tan Kit Yong, Chief of Enterprise Business Group. As usual, Nikhil and our senior management will bring us through a quick presentation. We'll open the, before we open the floor to Q&As. Nikhil, over to you, please.
Okay. Thank you, everyone. Good morning, everyone. Thank you for taking the time to spend with us. As we all know, this is a very interesting time, one of real dynamic flux in the sector, you know, bad and good. So thank you for listening to how we have been navigating really the past quarter, and the past year, and how we intend to drive the coming year. Now, all of what we do is with a view to positioning for superior outcomes into the end of this dynamic period, really 2027 and beyond, and to drive long-term total shareholder return. So just to recap, from prior calls, our view of dynamic flux across four areas is as follows: First, in consumer.
As we all know, there is sector consolidation underway, with the fourth operator acquiring the third operator. We have seen significant market downdraft, of course, driven by these smaller operators. And this has and will change, and not just because of consolidation. We can talk about that some more in the Q&A. Now, on the enterprise side, in Singapore, there is a very material spend environment, on the government and large enterprise side of things, driven by smart city, tech refresh, and cloud and AI transformation. There is a much narrower competitive set here, than consumer, and we are well positioned to drive, returns. Number three, cybersecurity, the issue of the day. We're all hearing about UNC3886, and it's something that's existential.
So all critical infrastructure providers, all critical infrastructure providers will have to invest, but not all are equally positioned. And last, cost and capital spend. All operators have a pressing imperative to reduce cost and free up capital . With cloud digitalization and AI, there is the opportunity to do so, but again, not are all, not all are equally positioned. So I'd like to take each of these, and stay on the same page, and align against our current actions and plans, if you would permit me.
So first, on consumer, you know, we really believe StarHub, to some degree, sets the tone for the market, because we are, in the Singapore market, the only operator that really has a real leadership position across each of and all of the premium segment, the digital segment, and the value segment, so a category leader across each and all of these segments. Now, as we stated for the past many quarters, our intent is to be aggressive and take market share ahead of and going into the consolidation. But really, over the last quarter and for the coming year, we intend to do this in a very nuanced way. So, for instance, in mobile, we intend to reduce, sub-erosion at the premium end of the market, to hold at the digital end, and to grow at the value end.
But to be very clear, we intend to do this not by price-leading strategies, but by growing quality and value differentiation, so improving sub monetization and hence moving the market up. So I welcome and encourage all of you to take a close look at these important trends, both for us and the rest of the market, now and going forward over the coming quarters. Now, interestingly, while obviously we were significantly down year-on-year, in mobile, when you actually look on a quarter-on-quarter basis in Q4, we were actually zero erosion on revenue, being flat on ARPU and up on subs. So we believe we grew revenue market share.
You know, as you know, we had a lead to the number three operator of about 600 basis points before they stopped reporting, and we now believe that lead is higher. We have also improved monetization at both the premium as well as the value end of the market. So we believe the market is slowly stabilizing, and we intend to set the basis for recovery, and we intend to do more of this over the coming year. Now, for broadband, similarly for Q4, on a quarter-on-quarter basis, we were also zero erosion, and we are holding quite well with our two brands. First of all, StarHub, at the premium end, and MyRepublic, which is our very successful digital savvy brand focused on geeks and gamers.
Overall, of course, in broadband, we are the number one player, and our lead holds in a market which is 85% controlled by us and the incumbent. So moving on to enterprise, which is really the second pillar of our, of our strategy and very important. We had growth over the past year, and in fact, if you look at Q4, our year-on-year growth accelerated. Now, Kit Yong will break this down, but overall, we did this with our modern digital infrastructure model, which is unique as a platform model among the service providers. So we continue to see strong traction with government and large enterprise regionally, but frankly, very much in Singapore.
The spend environment is strong, and with our model, we are winning an increasing number of large deals, which we define as over SGD 5 million and over SGD 10 million in what is an increasing order book. So going forward, you will see us continuing to scale our regional enterprise business and investing to do so in three ways. First, we will continue evolving our modern digital infrastructure platform with more tech, more tools, with partners, but really partners embedded, not a reseller or SI model. Number two, we will continue to scale our book of business with existing and new customers. And number three, we are growing our org through hiring and rolling up smaller players left by the wayside. So what you see in terms of investment is, in a degree, reflected in our outlook.... Now, the third pillar, cybersecurity.
So all of you have read about the existential threats we are facing at a national level, as articulated publicly by Minister Shanmugam last year and Minister Josephine just earlier this week. Of course, telcos, like in any country, are at the apex of this. Now, StarHub, as a major telco running critical infrastructure and also serving government and large enterprises, for us, cyber is also existential, and we have, and especially this year, we will continue to make significant investments this year in cyber. Now, also as a major telco, we believe we are early, and the smaller operators will also need to make significant investments. So this will, to some degree, break down any cost arbitrage, that has been enjoyed in the past. Now, in the medium and long term, these cyber investments, which add to the security of our platform, make sense.
They secure ourselves, and they secure the modern digital infrastructure platform we are serving our government and enterprise customers with. There is strong awareness in the customer universe of the need for this, which translates into further differentiation for us. Last but not least, on cyber, many of you have been waiting for the news really on the divestiture to our core shareholder of the 17% stake in Ensign associated with the assignment of rights. I would like to update, this is in quite advanced stages, and we should realize material proceeds in a significant gain, while at the same time retaining a significant stake for strong collaboration in cyber. We will update further on this in Q1. The fourth pillar, of course, is cost optimization.
And therefore, while we make investment to stabilize and grow our business, it is imperative that we continue to make cost reduction. Now, clearly, we have the opportunity to do so by virtue of building platforms as part of our DARE+ transformation. So this is really the next phase. So we have, as we updated in the last quarter or two, we have targeted four areas: legacy decommissioning, which is the small leftover piece from DARE+, which is unfinished business, to be finished soon. Systems rearchitecture on IT, where we are moving to a DevOps model, which generates significant savings but also improve business agility. Business simplification in consumer, and network optimization, which is really automation of the hybrid multi-cloud architecture that we built.
So, we are, of course, pleased to confirm our prior target of SGD 60 million, which we had posted with you, but we are actually also pleased to confirm that we are increasing this to SGD 70 million. Now, these are run rate cost savings targets, and you should expect us to execute this over 2026, with savings realized at the back end of 2026, but really 2027 and 2028. And then I'd like to conclude on this page by stating that, last but not least, all of our goals are supported by our strong balance sheet and capital structure, with our very significant cash war chest, our desire and ability to continue to do M&A to further our goals, and our ability to support our dividend commitments.
Hence, as Jacky will confirm with you, we are reaffirming our SGD 0.06 per share for 2026 as we navigate this dynamic flux period in the telco sector here in Singapore. So just covering briefly our financial highlights on the next page. Profiling some of the numbers, our service revenue was down 1.3% for the year, down 5% for the second half. Our EBITDA was down to about SGD 400 million for the year, so 12%, and our net profit was down about 29% to SGD 100 million.
Now, these results were reflective essentially of a consumer telco market, primarily in mobile, that has been in a hypercompetitive vortex that continues to shift downwards from premium to value, which has been ongoing for the last couple of years, whereas the smaller operators, and particularly the fourth operator, has driven its low-cost model. We believe that will reverse, with consolidation, but more important, critical infrastructure service provision requirements, which necessitate significant investments in cybersecurity and resilience. Now, this downward shift in mobile, in particular of 8% in service revenue, when applied towards, you know, telco operating leverage, hence the telco fixed cost structure, then magnifies EBITDA reductions. And then when you apply them against fixed capital charges in the form of depreciation, really become quite large net profit reductions. So moderate percentage reductions get multiplied to very significant percentage reductions in net profit.
Now, as mentioned, the pending consolidation is a change and also a change in the critical infrastructure provider landscape, which is perhaps underappreciated but just as important. And we believe this will introduce greater cost parity across the operators, major and minor. Now, all of these negative trends are offset to some degree by growth on all metrics in our regional enterprise business, but not enough as we continue to invest in scaling the business and making investments upfront for future growth. And then last but not least, again, I'd like to re-stress, nevertheless, our balance sheet, cap structure, and cash remain very strong, allowing us to continue our commitment to shareholder return through this flux period for the telco shift in Singapore. So, Jacky, over to you.
All right. Thank you, Nikhil. Since Nikhil has already covered some of the financial highlights and strategic outcomes, I'll focus on a few key points. As a reminder, our 2024 numbers included 2 months of D'Crypt contribution prior to the, its divestment in February 2024. So there's a slight base effect comparing year-on-year. So turning to 2025 performance, total operating expenditure was up 3.2% year-on-year, mainly due to higher cost of sales and operating expenses. Cost control remains a priority for us, and we continue to scrutinize discretionary spend as part of our broader cost optimization program, and I'll provide more updates in the upcoming slides. Other income was higher for the year, primarily due to income grants. EBITDA for 2025 came in at SGD 403.6 million, reflecting lower gross profit from segments facing revenue pressure.
alongside the higher operating expenditures I just mentioned. Reported net profit attributable to shareholders was SGD 86.4 million, down year-on-year due to lower EBITDA and higher depreciation and amortization. This translates to earnings per share of SGD 0.0445. Free cash flow was -SGD 24.7 million for the full year, largely driven by the earlier spectrum payment in the first half of the year. Excluding this impact, underlying cash generation remains intact, and we are on track to return to positive free cash flow in 2026. On financing, we have proactively managed our maturity profile. We refinanced borrowings due in 2025 and raised SGD 300 million in bonds in November last year to refinance bonds maturing in June 2026. We also drew down the spectrum loan last June.
Net debt to EBITDA ratio stands at 2x, factoring in the spectrum loan. Interest coverage remains healthy at 9.4x. Overall, our liquidity position remains strong and well within covenant thresholds. Next slide. So in terms of our actual performance versus outlook previously provided for 2025, we have delivered across all key metrics. Service revenue performance was supported by continued growth in enterprise managed services, which helped offset pressure in other segments. EBITDA came in at 92.2% of 2024 adjusted EBITDA, ahead of our guidance range of 88%-92%. CapEx commitment was 6.7% of total revenue, better than our expectations, reflecting disciplined capital allocation. We are proposing a final dividend of SGD 0.03 per share, bringing total to 2025 dividend to SGD 0.06 per share.
While this exceeds our policy range in percentage terms, it reflects our confidence in the underlying cash flow file and balance sheet resilience. I'll now hand over to Matt for the consumer update.
Thank you, Jacky. Good morning, everybody. Great to be able to share with you a view of the consumer business. First of all, on the performance itself. So the market has remained highly competitive in this quarter. But in that very competitive market, we have had improving stability of the business. So stable from Q3 to Q4, as Nikhil mentioned. When we look at the two main lines of business, in mobile, we retain our strong number two market share position, and that is with stable ARPU, despite the levels of price competition in the market. And growth in subs, gaining 18,000 subscribers in the quarter.
And, some of the highlights there are the launch of our 5G Unlimited Plus plans under the StarHub brand, where we're seeing a very strong customer response, and continued growth of our Eight Mobile business. In broadband, we have retained our number one market share position, again, with stable ARPU, despite the intense price competition in the market, and also stable customers here. One thing to note in terms of revenue performance is we did see a shift in the treatment of our Netflix bundles, moving some revenue from broadband to entertainment. If we turn to some of the highlights from the quarter, again, in the market, we saw a lot of price competition.
In mobile, we continue to see value players orienting around the SGD 10 or 12 dollars, including with a number of offers for seniors at SGD 5 or 6 dollars, which, as Nikhil said, are very low prices by any measure. On broadband, we see increasing price competition with more and more players offering at the 30-dollar mark or even below, including for the 10 Gbps plan. In that context, we continue to lead the market with some of our initiatives, including around StarHub on mobile, the launch of the 5G Unlimited Plus plans, where we are really setting out to fully meet the needs of consumers with unlimited data, roaming included, other benefits like cybersecurity. And we're seeing a very strong consumer response to those plans.
We're seeing an uplift in the customers joining us, and also strong, positive movements of customers in the base. So that's tracking very well, and we'll continue to see that through the course of 2026. In entertainment, we have continued to build the partnership with Mediacorp that we announced previously. And this is really about two things. One is the monetization of our content by getting that to the Mediacorp subscribers through mewatch in particular, and also monetizing our media through the combined ad sales, of course, across the Mediacorp and StarHub properties. On broadband, in this very tough market, we remain fully competitive, and so we have been expanding our distribution reach, and we'll be aggressive in matching on prices wherever we need to.
We are the market leader, and we will continue to be that. Finally, on market reach, we have re-energized our StarHub brand with our Hub Troopers campaign launched in Q4. And also expanded our market reach with a new retail store in Suntec, which is doing very well. In our Eight business, we continue to grow subscribers very successfully and are now shifting to monetize those subscribers, particularly in mobile, seeing a strong shift of customers moving from the 4G SGD 8 and SGD 11.80 plans to the 5G SGD 14.80 plan. So clear signs that even the very price-sensitive Eight customers value quality and are prepared to step up their spend to get it... We also launched broadband, and we're seeing a very strong traction around that.
Very good initial customer uptake at the end of the quarter, with Eight customers wanting all of their connectivity needs met, which is, of course, what we're doing now by offering broadband to those customers as well. And then finally, on MyRepublic, we concluded the acquisition, have made strong progress on the integration, but also have built even better momentum in that business. And that's despite those very tough market conditions. And that really comes about because of the differentiation that is built into that business, with that we are now expanding further with things like our very unique Card Arena store, also at Suntec, where we're seeing an amazing level of uptake of selling things like Pokémon cards.
It's really going deep into the segment, but so far, proving to be a very strong competitive position for us. Maybe if we turn to the next page. I wanted to share with you a view of our strategy, particularly as we look to 2026. Probably the key thing here is that we have a very clear strategy that we are now very tightly executing around throughout the StarHub business, and that's really in two parts. The first is with StarHub, we are taking a lead as the quality provider in the market. Obviously offering a complete suite of mobile, broadband, entertainment products, but really offering complete packages. You know, high quality, complete value propositions, high-quality network and high-quality service, and then all of the other features, including those entertainment benefits.
And so we see growing momentum in this business, and we are really positioning very strongly for market recovery. In addition to that, we're also very clear in terms of our focus on serving all other segments with our challenger brands. And so there are three that we have here. There is Eight, which of course serves the value seekers in the market, where we've seen very strong growth, and we now have quite a sizable customer base in this business, which is really about continuing to take a lead on value, sustain that rapid growth, but more and more monetize that growth by offering those customers better and additional products, too. In giga!, we serve the digital-savvy segment. We're seeing this very stable.
These customers love the giga! brand, and so here we are really looking to see how we can get it to more customers across Singapore. And then finally, as mentioned, MyRepublic, this is really serving the geeks and gamers. But here we're building out a business with strong differentiation, and as a result of that, we're seeing sustained and even accelerating growth of that business. So very clear strategy overall, but also providing comprehensive coverage of the market, leaving us positioned very well, for the improving market structure and expected market recovery. So with that, I'll pass to Kit Yong to talk about enterprise.
Thank you, Matt. Now, when it comes to enterprise segment itself, you guys mentioned that the managed services, FY 35, we grew 5.3%, right? Overall regional enterprise business at 2.9%. You know that there is a second half. We have marginal year-on-year down, and it's due to project services recognition. So there's too much to think about. But more importantly, if you look at the regional enterprise business itself, our integration with the major entities is progressing very well for us. We are seeing joint wins, right? The most significant will be the RTS Link in Johor and Singapore line.
Because of capabilities both in Malaysia and Singapore, we won the business, and that is a good proof that our integration is working, and the market is actually recognizing it, that we have a robust, interesting conversation to have when it comes to cross-border capabilities. And also, not to forget, the terrestrial connectivity business we have between Singapore and Malaysia. We're also seeing early signs of attraction, and we're continuing to look at the Singapore and Malaysian business as an integrated business entity. And this year, we'll definitely be looking at building our regional delivery center there to build our ability to support Singapore business, to lower our cost for our enterprise customer. At the same time, building capabilities for Malaysia business, right?
These new capabilities will help them to expand their business into enterprise market where they operate, and they will have better synergy and better capabilities to serve the local market. So it bring a double synergy for both Singapore and Malaysia market, and everyone is very looking forward to grow this piece of business together as one team. Now, and also look at the enterprise growth on the cybersecurity services, right? It's growing year on year as well, and there's a strong, robust demand for cybersecurity, and we see that it will continue to grow as well. So overall, the enterprise segment is hitting the growth phase for us. Right, next. Now, if you look at the state of play that we have, there's a very strong demand from the government enterprise as they spend, it's around the cybersecurity.
Because the regulation complexity is coming in, the more attention is given to cybersecurity, and you can see the spend will grow significantly. And on top of that, all enterprise governments is moving into digital transformation as they continue cloud, AI, data. All these are very critical infrastructure they need to build for themselves, and we see that we are well positioned in this because in between the digital and the hard infrastructure they have is a platform. The platform gap is the real gap that StarHub today, we are plugging in through our modern digital infrastructure, so enable them to integrate between the hard infrastructure, traditional silos that they have and the digital things that they are doing, and we are able to integrate and make it work all together. And that is the advantage that we are shifting into.
Because we have this platform itself, we can apply the expertise that we've invested in it. And because connectivity is the common way for all clients, and we know them, they know us, and that's how we're going to grow together with them in their journey into intelligent enterprise or a smart nation. Now, as I mentioned about strong Singapore and Malaysia integration gaining momentum, and we're underway, and we're building the regional delivery center to power our growth and boost our profitability as well, and operational efficiency. Now, on the back of the strong demand from government enterprise demand, you can see that the things we do is actually not pure SI, not pure telco.
It's actually somewhere in between, where this is a space where it's very little competition, and that is where managed services will grow because you cannot have a subscription-based services that is highly robust, and it has to be managed. So managed services for us is a key team where it drives the whole platform business, and we're seeing good traction from the clients in adopting managed services as a way of engaging StarHub in a new way. And we see the continued growth in our business from that, in that sense, right? Next slide. So if you look at the evolution of our enterprise strategy, it's not born overnight.
What started since 2013, when we talked about modern digital infrastructure, where we have, Cloud Infinity, hybrid multi-cloud architecture, that sets the foundation for us to build a modern digital infrastructure, and we layer with our platform on top of it. Last year, we scale our business, we integrate Singapore, Malaysia business, and we have more than what Nikhil had mentioned. We have actually more multi-million-SGD recurring contracts, recurring revenue contract with our enterprise clients, and we look forward very much this year. And you can see that, last year, we also have a growing order book every year as we progress since 2023.
Coming to today, 2026, and next year, 2027, is a year of capital deployment, where with the sponsorship of Nikhil and Jacky, we're looking into selective M&A. To do what? To scale capabilities, to accelerate our ability to develop platform that suits the customer needs, and they just engage our platform without doing development, and it's a tested, proven, resilient infrastructure platform that we built for them, and accelerate their needs into increasing needs of cybersecurity resiliency, accelerate the use of a digital, accelerate the use of data, accelerate the use of IoT for the use cases. So that is where we want to accelerate together with our clients. And finally, the future shape, the goal for us is that we have to expand beyond, beyond the mature telco revenues, because the telco revenues are, is a, is a passive network.
As we build modern digital infrastructure, it become an active, intelligent platform that will be at par with the world-class, engaging new use cases, using 5G, data AI, analytics, and powered with automation observability that is super critical for us. With that, that will definitely improve our revenue quality and our margin quality as well. With that, I hand over to Jacky.
Thank you, Kit Yong. As Nikhil mentioned, we have expanded our cost optimization efforts into a structured, multi-year strategic program aimed at achieving minimum efficient scale. So the objective is very clear. We are resetting our foundational cost base in order to build a leaner and more agile startup that is structurally positioned for profitable growth. The program focus on four pillars: legacy decommissioning, network optimization, system rearchitecture, and business simplification. We previously shared that we expect to achieve total savings of SGD 60 million between 2026 and 2028. In the last quarter, we have continued to make progress and identify an additional SGD 10 million of savings under network optimization on top of what was communicated before. This increases the total expected savings to SGD 70 million across 2026 to 2028. This is not a one-off exercise. It's a disciplined and iterative process.
These are early savings opportunities identified and give us confidence that further opportunities will continue to emerge as we move deeper into execution and implementation. We'll continue to provide transparent updates on savings identified and realized in future quarters. The next page. Turning to 2026. So we see 2026 as a year of disciplined execution. In consumer, we'll continue to defend market share while focusing on service differentiation. In enterprise, we'll continue to invest to drive growth in managed services and modern digital infrastructure platform solutions. We expect EBITDA to be in the range of 75%-80% of 2025's EBITDA. This reflects sustained competitive intensity in consumer and our decision to retain commercial flexibility where needed. This will be partially offset by stronger performance in enterprise and early benefits from our cost optimization program.
CapEx commitment is expected to be 13%-15% of total revenue, including investment in IT, network, and most importantly, cybersecurity. These are disciplined investment aligned to long-term competitiveness and operational resilience. On dividends, for 2026, we are targeting to distribute SGD 0.06 per share or in line with our dividend policy, whichever is higher. It takes into account business conditions, cash flow generation, and ongoing investment requirements. Our balance sheet remains healthy. Cash balance stood at SGD 857 million as at the end of 2025, and we expect positive free cash flow in 2026. Net debt to EBITDA ratio stands at 2x, providing adequate headroom. Overall, 2026 is about absorbing near-term pressure while tightening structural costs and continuing to invest selectively. These actions are intended to position StarHub for improved operating leverage and earnings resilience beyond 2026.
With that, I'll hand the time back to Nikhil to close.
Thank you, Jacky. Yes, so to summarize and to conclude and summarize our priorities for 2026. So first, in consumer, if consolidation happens, this will be, roughly speaking, in revenue market share terms, a 50/25/25 market today in mobile. And in broadband, we are number one with over 40% revenue market share. We intend to continue organically accreting our market share upwards over the year, but with quality and differentiated value, not price. Hence, we intend to do this by increasing customer lifetime value and raising monetization across all our brands, from StarHub at premium to giga! and MyRepublic at digital, to Eight at value. Now, in enterprise, as you heard, we will continue to aggressively grow our modern digital infrastructure platform in our government and enterprise customer environments. The opportunity remains strong.
We have a unique infrastructure-based platform model that our customers prefer and continue to come back to, and we intend to invest to scale our platform to serve our existing customers more while growing our base of new customers, whom we have seen ramp up with us quite quickly. Number three, as we talked about, cybersecurity is an existential threat. We intend to invest in cyber defense materially in line with the national agenda, and over the mid to long term, this will add to our differentiation and our strategic positioning for ourselves as well as with our customers. And in essence, modern digital infrastructure is secure modern digital infrastructure. And last, cost optimization.
We have a very significant funnel of run rate savings that is granular and bottoms up, leveraging the DARE+ platforms that we have built, and we will execute methodically against this funnel, and hopefully also add to this funnel as we continue. So through this year, as we execute, we reaffirm our commitment to shareholders, dividends and otherwise, and look forward to keeping you posted on our progress quarter on quarter. Thank you very much.
Thanks, Nikhil. We'll now open the floor to Q&A. So as usual, to join the question queue, please click on the Raise Hand button. We'll call upon your name when it's your turn to speak, and then you can unmute yourself to commence directly. I think we already have a lineup. So first, maybe Hong Wei.
Oh, hello. Thanks for having me. I'm Hong Wei from OCBC. I just have three questions. Okay, so on the first, I noticed that EBITDA fell. Actually, it fell more than what revenue actually fell for mobile. So mobile, I think it fell by about SGD 40+ million, and service EBITDA fell by more than SGD 50 million. So my first question is that, are there some mobile customers that are not really EBITDA contributing, and or does it mean there are other segments seeing a margin compression, that means non-mobile sides also seeing margin compression? So that's my first question. Then my second question is that, you mentioned there's SGD 60 million-SGD 70 million cost savings per annum, but EBITDA is still guided to come down and is coming down quite fast next year.
I mean, granted, you mentioned about consumer business, competition, but how does that actually square against the cost savings you are seeing? And the other part is about lifetime value. How do we think about lifetime value when EBITDA is coming down very strongly next year, I mean, this in 2026? Does it mean the EBITDA after 2026 should be going up very strongly thereafter? And maybe my final question is on the sustainability of the cash flow. The dividends that's been declared is actually higher than the dividend policy. Do you think that this is sustainable, net debt to the EBITDA? I mean, trailing 12 months EBITDA is really much higher than where it was before. So is there any plans to push it down? And related to this is also CapEx.
CapEx of 13%-15% is higher than before. So, what, why, why has this climb up, and what's your view on this?
Okay. So let me cover all five questions very briefly, and then I'll hand off to my colleagues to take them piece by piece, you know, Jacky as well as Matt. So from your first question, EBITDA falling by more in dollar terms than the reduction in consumer revenue, it's not that we have non-EBITDA-contributing customers. We do. We have incurred costs on things like cyber and other things, but Jacky can elaborate. Second thing, in terms of our cost savings and our run rate and how they impact, you know, kind of 2026 and 2027, we will be executing on the SGD 70 million targeted run rate cost savings methodically through 2026.
A small portion of it will come through by the end of 2026, but really the vast bulk of it will come through in 2027 and 2028. And I'm very sensitive and applaud the question because, you know, with the prior DARE+ cost savings, we've realized the DARE+ cost savings, and then frankly, we gave those cost savings away to the consumer market. We do believe that will change. So our intent is for these cost savings to hopefully flow through into our run rate OpEx and frankly, our run rate EBITDA with a turnaround in that EBITDA trajectory. You talked, you asked a question around lifetime value, and I'll hand off to Matt on that. Yes, the market is coming down, but we expect the market to stabilize and recover.
To some degree, that process has already started. We expect to gather pace towards the end of the year and beyond. But frankly, it's more important is what we do. And over the last quarter, with our new plans, the 5G Unlimited Plus, as well as other measures that we are taking, actually we have grown our customer lifetime value in a way that is contrary into the market. So we hope to continue that. It's still early days. We hope to accelerate the momentum of that, and that flowing through to the rest of 2026, but more important, 2027. So we don't offset, you know, those cost savings that we generate. And frankly, you know, we actually generate more, you know, customer-driven value and revenue. But do be patient with us.
On the sustainability of cash flow and dividends, yes, you know, very much sustainable. You know, our balance sheet is very strong. Our cash balances are very strong. You know, free cash flow goes up and down in terms of working capital and one-off needs, like the 700 megahertz spectrum. But cash flow fundamentals are strong to add to an already strong balance sheet. Jacky can elaborate on that. And then number five, to your point on to your pick-up on the CapEx as a percentage of revenue moving up. As I mentioned, we are making significant investments in cyber. We have already made significant investments in cyber. We intend to do more. We are front-loading that because it's the right thing to do, and we want to build long-term differentiation.
And as I said, you know, others in particular, you know, the smaller operators will also have to make investments. So, you know, with our thesis, we think it's existential. We're doing this, it's the right thing to do. Long term, it will create benefit, and that's what's taking up our CapEx as a percentage of revenue. But, you know, maybe we'll just double-click on each of those quickly.
Sure.
Yeah.
On your first question, right? I think if you look at the for consumer side, there's also an increase in 5G costs.
Yeah.
So that continues to increase, and without the benefit of the revenue or from pricing. So that's number one. And number two, if you recall, in 2024, in our costs, that's actually a reversal of SGD 26-27 million for debt plus provision we make in prior years. So we actually utilize that and reduce our cost in 2024. So it's a one-off. So, if you normalize that year-on-year, then, yeah, you can see why this kind of increase in cost and like lower our EBITDA more than revenue decline. I hope that answers your questions on-
But to be clear, on the 5G, as you know, the typical structure, and it was the same with us in 4G, is that was CapEx, and it was depreciated. But effectively, with the antenna model, where we pay wholesale cost, that moves to OpEx.
Mm-hmm.
Yeah.
Okay.
Sorry, just to clarify.
Okay. Yeah, and in terms of, like, 2026, like, the way we look at it, so cost savings, obviously, it will gradually help reduce the run rate, but it's a 3-year program. And for 2026, most of the savings from that SGD 70 million will be coming from the legacy decommissioning and also from business simplification. But a majority of the SGD 70 million is on systems and on network. So these are structural changes, which will take time to scale up, and they will be, like, occurring in 2027 and 2028. So that's kind of like the cost savings, but we intend to, like, continue to reduce and find more opportunities. But in terms of EBITDA, if you look at 2026, so consumer remains very competitive. That's pressures on margin.
I think we want to retain some flexibilities, like, in terms of just maintaining and gaining market share. So I think that's very clear. And also, on the enterprise side, I think Kit Yong mentioned earlier, we actually want to build up the capabilities and scale up the business. So that will be a significant investment to actually drive that growth and build for the medium to long term. So that's the investment we're gonna make in 2026. So that, hopefully, answers your cost savings questions. And in terms of sustainability of cash flow, if you look at our cash balance at the end of the year, we have over SGD 850 million, and our leverage ratio is still low.
So we actually have room to increase the ratio. And also, like, even if we pay off the bullet bond maturing in June this year, we still have, like, sufficient cash flow. And as I mentioned, like, in 2026, we expect free cash flow will return to positive. So all these, like, we are in a very good, like, cash position. And like, so we'll be deploying the cash to drive, like, organic growth, inorganic growth, and also return capital to shareholders, just to drive total shareholder return. But definitely, we have the capacity to do that.
CapEx, I think Nikhil already explained, the majority of that increase is coming from the cybersecurity side, and a lesser portion will be coming in on the network as well. Yeah.
Jack, I might just-
Yeah.
Just to add on customer lifetime value. So if we break down customer lifetime value and link it back to the very clear, strong and fully refreshed strategy that we have for our consumer business, if you think about those three pieces of customer, lifetime, and value. On customer, we are very active and very competitive in market to continue to grow our customer base, which we have done successfully in the last quarter. And that's important because as the market recovers, there will be significant value in having a larger rather than a smaller number of customers. In terms of the value, we're also very deliberate in building out value by offering those better quality products, as I gave the example of monetizing 5G with our Eight customers.
So those mechanisms are well in place and are starting to show the green shoots of growth around the spend from customers. And then finally, on lifetime, we are also uplifting the experience and quality across all parts of the business to make sure there is never a reason to leave StarHub. And so those things together, as a core part of our strategy, will lead to that strong growth in customer lifetime value, particularly as we position for the market recovery.
... Okay. Thank you for the comprehensive answers.
Hopefully that overlapped with some others', questions. Sorry to take so long with the answers.
Yeah.
Maybe we have Arthur next.
Hi, Arthur.
Hi, good morning. Hi, thanks for the opportunity.
Morning.
Yeah, several questions, please.
Of course.
Firstly, if you can help us reconcile on the numbers. When DARE+ was launched in 2021, the target then was to grow profits by SGD 220 million. That was the stated target then. And when you look at the revenue erosion for consumer business over the same period, we've seen this decline by around SGD 50 million since that's happened, yet the earnings impact has been far more pronounced. What has happened to the planned benefits for DARE+? Was it eroded away with other segments, like enterprise, for instance? That's the first question.
Okay.
The second question is with regard to the EBITDA outlook for 2026. Does this include the removal of your cyber business, which could be sold, I understand, maybe in 1Q? I'm just trying to figure out how we're going to 20%-25% EBITDA decline when we're actually looking at cost savings as ramping up from SGD 60 million to SGD 70 million over the next 2-3 years. That's the second question. Third question is just with regard to revenue guidance for 2026. Where do you see the industry revenues as headed into 2026? Thank you.
Yeah, again, if you don't mind, maybe I'll do the short, brief answer on all three things, and then I'll leave it to, you know, Jacky and Matt, because I think you're really talking about consumer telco, right, on the industry side, Arthur?
That's correct.
Yeah. Okay. Yeah, so just to go back to DARE+, and maybe I'll start since since Jackie wasn't here, although I'm sure he's familiar with all the numbers. You know, we when we launched DARE+, we posted kind of an aggregate increased target of SGD 500 million. But that was, you know, kind of cumulative in dollar terms, which was about two hundred and 80 million in cost savings and two hundred and twenty million in revenue. And what we said at the time, if you recall, was that would translate actually not to two hundred million, but actually 80 million incremental net profit. 80 million incremental net profit.
But applying the same percentages, so therefore, that would be something like about 60% from cost reduction and about 40% from, you know, gross margin increase through increase in revenue. You know, just to taking each of those pieces, you know, on the revenue side of things, whilst we were able to grow the enterprise business, sadly, in terms of the consumer telco market, you know, that went the other way for reasons we're all acutely familiar with. Going back to the cost side, and the 60%, or 56% rather, of that SGD 80 million, we were able to generate most of that.
The piece of that that is continues to be delayed, which we hope to realize this year, are the decommissioning of the legacy systems , which weren't particularly significant and certainly not significant.
Mm
... relative to our current funnel. But the rest of those cost savings, frankly, were given away to the consumer, through the hypercompetitive vortex that we saw. So that's some quick clarity. You know, on the EBITDA, yes, the EBITDA reductions, I believe, include the deconsolidation of cyber with the 17 as we go down to a 40% stake. But I don't want to overstress that, because the contribution to EBITDA, you know, of the cyber, of Ensign, is, is not particularly significant, at all. And then, number three, in terms of, industry revenue, it's really hard to speculate, but as we said, we see early signs of stabilization in the market. We believe, that will, you know, continue, and perhaps, hopefully even accelerate in the back half of this year.
As we said, that's partially dependent on consolidation, but partially, you know, also, frankly, from the fact that, you know, I think let's call it the cost-free ride, you know, goes away because everyone is now gonna be this. If you haven't already been, they're gonna be dedicated to their critical infrastructure provider, so much more cost to come. And yes, I think 2027 and beyond, industry revenues, you know, should rise, if everyone does the right thing, which is the logical thing to do, because pricing increases, as we've seen from other markets, you know, drops straight down to the bottom line. Unfortunately, so far, we've been the other way, right? The operating leverage has not been positive, it's been negative.
With that, perhaps I'll hand off to Jacky to take the first two.
Sure. Yeah, so I don't have much more to add to the DARE+. I think Nikhil touched on that. But in terms of, like, the 2026 EBITDA decline, so Arthur, let me try to reconcile for you. So first of all, Ensign's impact is very insignificant, so that's not the reason. As I mentioned earlier, the major impact is coming from, like, first of all, consumer side. So we see the industry continue to be very competitive. There's pressure on profitability on the margin. And also, we talk about, like, we want to defend and gain market share, so we'll be focusing on that and preserve, like, yeah, to actually fight in that area. So that, that's number one.
Number two, we talk about, like, the significant investment in the enterprise side to help Kit Yong build, like, the scale and the capabilities. So there will be significant investment in that, in the enterprise side. On top of that, there's a OpEx impact for our investment in cybersecurity. And last but not least, there will be, like, higher year-on-year in terms of depreciation interest because of the spectrum rights, like, we obtained in 2025. So there will be a full year impact in 2026. So all these costs, like, EBITDA, like, to decline year-on-year. That will be offset obviously by the cost optimization exercise, but also, like, for the enterprise growth.
But that would not be enough to offset some of these investments and also the pressure on short-term OpEx. We are doing the right things to actually build, like, profitability resilience for the medium to long term.
Sorry, go ahead, please.
No, go ahead.
Can I just clarify with regard to the spending for the enterprise and all, is that coming in as CapEx or OpEx? If it is OpEx, is it just front-loaded and we should expect things to decline from the next year onwards? Is that how we should look at this?
Yeah, let me take that, and Kit Yong, if you want to add details, please. But yeah, there's a bit of CapEx, and there's some OpEx. The OpEx that is being spent is to scale the organization. You know, is it front-loaded? Let me just be very specific. It increases the run rate, but there is a lead time that we have observed in the past, where we will have a return through increased contracts, increased revenue, improved margins on the business that we do, because we're controlling our own resources. And you know, we've seen that coming through quite well in the past.
So we're essentially continuing, you know, that kind of cycle of growing the business, invest in more resources and capabilities, generate the return on those resources and capabilities, and then continue growing our returns in the business. Anything to add?
No, I think you have addressed that. Definitely a mixture of both, CapEx and OpEx.
Yeah.
Where we invest CapEx to build our infrastructure, which is network-based. Because today, our network is built currently for consumer use, and as we move to enterprise business, we build modern digital infrastructure. We need to retool our infrastructure to be more dedicated, to be more secure, for enterprise use case, especially for government use case. So that is where we deploy CapEx into our own network infrastructure and into the cybersecurity, which is critical for our clients. That is a requirement. It's not. It's an if, it's a must-have, right? Now, and then when it comes to OpEx itself, like what Nikhil said too, right? We're also looking at definitely have the capabilities in terms of people, OpEx on technology services. We're increasing a lot of technologies, also OpEx-based.
So with a mixture of both coming together to deliver many services, because it's recurring revenue, you need to have a consistent cost as well from our partners, and the right appropriate investment is our CapEx, so that we can operate this for multi years, over a year, so we can amortize away. Yeah, so there's a mixture of how we are looking at enterprise business.
Yeah, Arthur, I just wanted to, you know, maybe just share a little bit of a flavor. It's not because it may not be sort of easily apparent. You know, on the enterprise side, you know, we're not, we're not in the business of selling like leased lines and all that, like short cycle, right? So the business is, with large deals with government and enterprise, and it's long sales cycle. So with the long sales cycle, either these deals are already in the order book that we've built, so that means signed contracts, or they are in advanced stages of pipeline and about to make it to the order book. So these are contracts that are SGD 1 million, SGD 5 million, over SGD 10 million.
So when we invest against that, whether it's CapEx or OpEx, we actually have a very, very high degree of visibility on the return that we're going to make, you know, either for deals that are already in the order book or through long sales cycle and very advanced stages. And the return comes from, you know, number one, fulfilling that revenue and moving into billings and bookings. You know, number two, through co-creating use, new use cases with existing contracted customers of ours to add more modules and more revenue. And then number three, in order of, in, in, in terms of delivering these against these contracts at higher margin, because we're doing it more with, you know, kind of our own resources. The ratio that we're doing it more with our own resources keeps increasing and increasing.
So just to give you a little bit of a flavor, this is, you know, high visibility against the investments we make.
Arthur, if that answers that question, I might just add a comment on the market recovery, market structure-
Mm.
And maybe bring it back to customers, from their point of view. We all live our lives now through the connections that we have, through our phones. And what we see very clearly is, consumers do value the quality of that experience, the complete inclusions, the quality of the network, the quality of the service. And so we see very clear evidence that as we put together better and better packages and offerings for our customers, they do step up their spend, as per the example I gave of Eight and the shift to 5G. What we are seeing with the StarHub 5G Unlimited Plus plans, what we're seeing with the MyRepublic broadband offerings. And so we can see that that is how consumers are responding to the offerings.
But the other thing about these businesses, of course, is that these have high operating leverage. And so we have a laser focus on this because as we rebuild that spend by offering those better services and packages to consumers, they increase their spend with us, which then has a very sort of powerful effect in uplifting the profitability of the business. So that's clearly where we are focused.
So, Arthur, we do believe that will translate to the industry as a whole. I think with the incumbent, clearly, they, you know, I mean, I think they see life in, similar ways to the ways we do. There were clearly, you know, smaller operators that kind of led the charge towards like no frills and low price. But I think to some degree, those days may be over as the cost structures equalize, with the critical infrastructure provider landscape. And plus, you know, just sheer economic logic. You know, there's a consolidation happening. You have to defend, not just attack. And then, number two, you know, operating leverage, has the opportunity to work the right way. That's not lost on anyone.
Understood. Thank you very much.
... next, maybe Hussaini?
Yeah, sure. Thanks for the opportunity.
Thank you, Hussaini.
A few questions. Thanks, Nikhil. A few questions from me. First is on CapEx, the range, which is 12%-15%. Frankly, if I look at your, you know, revenue structure, a fair bit of the revenues comes from enterprise, which I understand is a relatively low CapEx model. It is more of an OpEx model. That's my understanding. Then, at the same time, broadband is, you know, the infrastructure is provided by NetLink Trust. So just trying to understand that if we take out those segments, then isn't it the CapEx to sales for the normalized business, which needs infrastructure, is, appears to be very high? So that's my question, if you can help us to understand.
Mm-hmm.
The second question is on the balance sheet, which is already 2 times net debt to EBITDA. So trying to understand, like, where is your comfort level in terms of leverage? And as Jacky said, that you are still open to M&A opportunities, you know, organic opportunities. And finally, on the guidance, again, going back to Arthur's question, if we look at 75%-80% of 2025 EBITDA as a guidance, then it appears like a decline of almost SGD 80 million-SGD 100 million. So just trying to understand, like, is there a change in business model on the enterprise side where you are incurring more OpEx? I mean, why such a big, you know, increase in OpEx linked to development of new services? Thank you.
Jacky, you want to clarify again the CapEx point and, take it from there?
Yeah. So I think, Hussaini, if you look at, like, our BAU CapEx, I think I mentioned before, like, after we finish that plus, all that transformation, it will come down, like, for our BAU CapEx. So I think it's reflected in our 2025 CapEx as a percentage of revenue. But I think for 2026, we talk about, like, there will be significant investment in terms of cyber, and also there will be investment in network as well. So we are actually enhancing our network quality. And so it's kind of investment to actually achieve some of the savings for network optimization in the program. But overall, BAU CapEx will be coming down.
But for enterprise, it's actually in CapEx, in our guidance, that's investment on the enterprise side, and I think Kit Yong mentioned earlier. So that's kind of like what drove like up the guidance as a percentage of revenue for 2026.
But, Hussaini, I just want to repeat the point that I made, that the increase in investment, which is reflected in the uptick in the CapEx as a percentage of revenue, is cyber. It is cyber, the major, the vast majority of it. Okay, go ahead. Sorry, Jacky.
Oh, no. Yeah. Yes.
And then the balance sheet and, Hussaini asked about the balance sheet, and 2x net debt to EBITDA and, comfort level with that. And then also, I believe it was a dividend, right?
Yeah. So, I think I mentioned earlier, like, we are very confident in terms of our balance sheet. So in terms of cash balance, the leverage ratio at 2 times is still, like, below our covenant ratio. So we have sufficient headroom. So, that will actually help us to support any, like, M&As that we talk about for enterprise. Yeah, so I think we are in a very comfortable position in terms of our balance sheet.
Yeah.
Right.
Hussaini, any... Does that, does that answer your questions adequately?
Maybe a bit on guidance, like, why such a
Yeah
... such a big increase in OpEx? Is there a change in some business structure in terms of operations? And then, maybe, Nikhil, on the CapEx, sorry, on the cyber-related investments as well. So, and maybe you must definitely be discussing with the regulators. So is it more of an industry-wide initiative, or is it that StarHub is taking on its own, and that in time will help you to differentiate in terms of your services or things like that? Thank you.
Yeah. So maybe I'll take that and then hand off to Jacky for the prior question. So, you know, it's clear that what is needed to be done as a critical infrastructure provider in terms of cyber and the capabilities and the platforms, et cetera, et cetera, for cyber defense that is being upleveled because the threat landscape has been upleveled, right? As we've all heard ad nauseam. So in line with that, we are making those investments. We feel they are extremely necessary, you know, to be who we are and to do what we do and in line with the national interest, but also for us. Now, is it an us issue or an industry issue? It is absolutely an industry issue. You know, I think we are, you know, we are early.
I think, you know, a lot of the spend and the things that we're doing in terms of the outcomes that we achieve, you know, are not absent from, they actually leverage some of the platforms that we built in DARE+, which give us the ability to do a lot of interesting things around, data, observability, and otherwise. But we are making incremental investments that are quite significant. And those are, you know, an upleveling of cyber posture. It's not just a StarHub issue, it's an, it's an industry issue. But we believe we are early, and, we believe others, including the smaller operators, will have to make those investments. And that will be, I think, an interesting dynamic, as we look, at, the propensity for market, market stabilization and recovery.
Because, you know, I think unit cost is going forward is not gonna be the same as it was in the past for those who might have enjoyed, you know, kind of some unit cost arbitrage. So yeah, I hope that answers your question, and then I'll hand off to Jacky for the first question.
Yeah. I think on the, on the EBITDA, yeah, so to answer, in short, there's no, like, structural changes to the business. It's more about the investment. I, I think we talk about, like, the investment, we are front-loading the investment in the enterprise side to scale the business, like, to build up the capabilities in-house. So all this is actually for the, for 2027. So if you look at the timeline that Kit Yong walked through, so this, this is the year that we, we will make that investment. So that requires a significant CapEx, OpEx investment. And also on the cyber front, that's also investment. So I think that's, like, kind of what impact the EBITDA year-over-year.
Thanks a lot. Thank you.
Michael, right?
Uh, yeah.
And then maybe-
Sorry. I just have three questions. So I think the first of which, it's been asked a lot, but I'm still trying to better understand the dividend policy. Because given your guidance, we're seeing, gonna see a drop here of EBITDA, and we're going through a higher CapEx cycle, especially going towards cyber and all of that. And last of which, we're still gonna expect to see the cost savings from the legacy decommissioning coming in, not even in the upcoming year, but after that, the next two years, hopefully. So I'm trying to understand the maintenance and sustainability of the dividends being about the dividend policy. So, so maybe a bit more on that. So that's the first. And the second of which is more in the strategy, perhaps more on Matt.
For mobile, now we're seeing in this three segments of budget, value, and premium, but with the focus in terms of this offering and quality, how are we avoiding more or less the cannibalization between, especially the budget and value, where we're going to see erosion in the value that is seen in the value segment? And finally, maybe more on Kit Yong is, for the enterprise, I think a key crux in the recurring, managed services is the hybrid multi-cloud. And the last time, in one of your investor days, you did say that you had a competitive gain and advantage, but with a lot of investment going to AI and data centers and more players coming into towards that segment. Can I just check, where do you still see that advantage?
How long more do you think your competitors have to be able to catch up to it in terms of the advantage? And perhaps one last other question is, could you also remind us for your managed services, what's your average contract life?
Sure. Okay. Jacky, Matt?
Um, sure.
Mm-hmm. Yeah.
I think on the dividend policy, Michael, so I think, first of all, our priority is total shareholders' return. So that's including organic growth, inorganic growth, and also dividend, right? So that's number one. And the cost savings, I just want to clarify, it's a three-year program, but we do expect there will be savings in 2026 as well. But in terms of, like, sustainability of making the dividend payment, I mentioned earlier, like, we have sufficient cash balance, so we have, like, over SGD 850 million cash. Our leverage ratio is low. We expect to return to positive free cash flow in 2026. And also, I think, Nikhil mentioned in his prepared remarks, we expect there will be cash proceeds from the Ensign divestment as well. So it's...
All this actually gives us a, like, a very healthy cash balance and also, like, a financial position to continue with the sustainable dividends in 2026.
Matt, cannibalization-
Yeah.
-segment.
So, cannibalization. So, the thing we've done is, as we have refreshed and strengthened our strategy, we've also got very clear in terms of those areas of focus in the market, but also how we operationalize those, how we go to market. And as a result of that, we are now very deliberate in making sure that we are targeting the right customers. But I guess one way to think about it is, if you think of, for example, car manufacturers, you have Toyota offering both Lexus as well as the Toyota brand, and it's a very deliberate strategy to meet the needs of different consumers, and that's what we're doing.
So there is, of course, the free choice for consumers to take any of the offerings that we have, but we are very deliberate now in targeting those. We make sure that we're meeting the needs of each consumer group directly. And as a result of that, we don't see significant levels of cannibalization now, and we feel like we're getting to a very healthy balance in the business. So as we go forward, I feel very comfortable that we can make sure we balance all of those together, meeting the different parts of the market. But also consistently across all of those, there is this very clear theme now of offering better quality experiences to truly meet the needs of each of those segments.
In return, we see clear signs of consumers willing to pay a bit more relative to what they have been paying to get those experiences. So the whole sort of mechanism is starting to work quite well, and I can see will really help us as the market recovers.
Kit Yong?
Right. So first question first is the managed, recurring managed services... with people spending on AI and cloud, and where is our competitive advantage? When can competition catch up with us? Now, I would say that we, we operate in a very unique space in our where we are heading to a modern digital infrastructure. It's a space... it's a, it's more or less a no-man's land, where it's either occupied by SI or carrier to sell capacity. SI will build, and as we build a platform and become a unique value proposition based on hybrid market architecture. And actually, I see it as a advantage, a increased advantage, given the cybersecurity threats that we are seeing. And our enterprise client, government, always have a dual strategy, a dual carrier strategy.
And the incumbent is definitely the longest standing, who has been there, and they've been dying to waiting for us to come out with a point of view that how can we be different and differentiated? And today, we are able to see some signs that they see on their differentiation with our platform. And because we are nimble and we have less legacy technologies, we are able to build a digital core, digital core upfront now from 2020 to 2023 until today, and now we are developing the platform proposition through co-creation with them. So I see that, if you ask about competition-wise, I don't have traditional SI. In fact, I'll replace the traditional SI that try to work on telco, and integrated projects.
I will see that, the telco continue to sell capacity, while the rest is more consumer telco, so they are really not in the space that we are operating. So I see a very positive outlook for ourself, given that, that you need dual strategy, you need to have the latest digital core to enable APT-resistant architecture. So I think we are well positioned with our modern digital infrastructure for our managed services. And to the question of the average contract duration, if today we sell a typical, commoditized, core telco services, it's about 1-year contract, maximum stretch to 2. When I move to managed services contract with adding a bit of ICT inside, my contract goes to 3-5 years. And once I look at the modern digital infrastructure, I'll expect a contract minimally with 5-10 years. Why?
Because there is a heavy CapEx involvement, and the deployment is not at the enterprise environment. It's going to be island-wide deployment. So that is where we see that the contract needs to be longer for our modern digital infrastructure, especially for those large engagement that we're dealing with. It will be of that scale, and that's why capabilities, investments are upfront, and we need to be able to deploy capital to make it a long-term contract and beyond for our clients, our enterprise and government. That's how I see it. I hope I answered your question.
Yeah, just one bit is more on how far ahead do you think you are before any of your competitors could even attempt to catch up?
Well, if you asked me last year, I would say probably 5. You ask me now, probably it will go up to 7 years before competitors can catch up with us, because the ever-increasing complexity of the technology stack we need to put in and the know-how integrating all these things together as a platform is going to be more difficult, and you need a lot of subject matter capabilities to put this in place and to co-creation with the clients with the use case. So it will be quite difficult for them to replicate so easily. So that's how I see that, that's advantage for the Modern Digital for the time being.
Yeah, you know, maybe I can add to that. As Kit Yong said, the two competitor universes are, number one, SIs, and number two, you know, big carrier, right? The smaller operators are not relevant at all in this segment. So with the SIs, it's an aggregator model. They don't have their own infrastructure. They don't drive the contracts off a platform. They bring together, you know, little bits and pieces of technology from different providers, put them together, maybe put an orchestration engine on top, which is really not kind of app development. That's a very different model. It's really not suited for the sort of modern digital infrastructure type use cases that we do.
It can't compete in terms of speed, it can't compete in terms of value creation for the client, and it can't compete in terms of, you know, even things like price, right? Because you're just aggregating margin. In terms of, you know, the big legacy carriers, it's hard to do because you need to re-architect your core quite a lot, and the bigger, and the older and prouder you are, you know, makes it more difficult. Now, clearly, there's a degree of capability there. We're very respectful of our competition, not to say it can't be done, but there's some real hurdles.
Those hurdles, as Kit Yong talked about, have actually been made more complex for over the last year or two by all that we've been talking about in terms of cybersecurity and otherwise. So that's what we'd like to say.
Yeah. And not to worry with the, there's always a dual carrier strategy.
Yeah.
Right. Each one will have to show their own unique differentiation. So to me, it is, something that we need to work together with the client.
Yeah.
As we're creating not just a modern digital infrastructure, I think the plus point is that it is a CII managed services.
Yeah.
That makes it even more complex, and every CII is different. The earlier we co-create with the client, now we have industry knowledge, process know-how, joint respond in cybersecurity incident for different industry solutions. For different, it will be super powerful for us and be able to increasing differentiation for us and help us to grow our future revenue in digital services, where we will be able to have digital services industry solution with very, very strategic clients that we have. So that will be our strategic advantage moving forward that we hope to capture through our journey with our clients.
Yeah, I'd just like to highlight, with one good young. You know, this is not consumer, right? It's not a fast, competitive set, which, by the way, itself has changed, right? With kind of a dogfight on the street every day. There's a much narrower, competitive set, and a buyer set that has, a complex set of needs. And the spend environment is very strong,
Yes.
Because transformation everywhere is underway. There was cloud transformation. You know, first it was tech refresh, then it's cloud transformation, and now there's all the stuff you need to do with AI, and you need a core digital, core at the, in the middle. So, I think there's, I think there's a lot of spend. You know, there's a lot of room. Customers on the enterprise and government side make that choice. There's, there's plenty of room, and they make that choice according to what suits them best. You know, the good thing for us is we do it off a platform. It's incredibly value-added and accretive, not just for the customer, but also for us. And we will have our natural customer base who loves what we do. But the good news is that customer base is growing.
I think, it's heading in our direction, but there's room for everyone.
Okay. Thank you.
Okay, given that we've already gone up over time, if there's any follow-up questions, do feel free to reach out. Otherwise, we'll end the call here today. Wishing everyone who's here a happy Lunar New Year, and we'll speak again sometime soon. Thank you.
Thanks, all. Thanks for taking the time.
Thank you.
Thank you.