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What we heard at TMT Finance Asia 2019

TMT Finance Asia brought together the region’s top 350 TMT dealmakers to assess the next wave of investments, mergers, acquisitions, and growth strategies.

TMT Finance Asia brought together the region’s top 350 TMT dealmakers to assess the next wave of investments, mergers, acquisitions, and growth strategies.

Returning to Singapore for its 5th consecutive year, with Linklaters as a sponsor once again, this two day event combined full day programmes dedicated to both communications and technology finance. As well as moderating several panels throughout the event, Linklaters very own tech experts attended in full force, eager to hear from Asia’s most influential financial and strategic decision-makers and leaders, exploring the latest innovations paving the way for the TMT sector.

Key themes this year included, Tech M&As, the launch of 5G, the enterprise cloud, fibre and TMT infrastructure, edge computing and esports.

Find out more about our solutions-driven Fintech advice or explore our key takeaways from TMT Asia Finance 2019, below.

Our key takeaways from TMT Finance Asia 2019

Asia Market Outlook

  • The scale and diversity of the South-East Asia market is driving TMT innovation
  • There is a strong belief that the next decade in tech belongs to India and South East Asia
  • Current trending sub-sectors for investment in Asia are; internet companies, fintech, eCommerce, IT service and software, and new tech such as AI, drones, consumer hard tech, cybersecurity, and e-healthcare
  • With the added pressure of new entrants, the biggest risk across the region for 2019 is competition
  • Revenue growth will moderate in 2019, with an expected aggregate growth of around 2% compared to the average GDP growth of approx. 4.5%.
  • This growth slowdown is more pronounced in emerging markets
  • Aptly name “co-petition”, companies are increasingly partnering and working together in digital ecosystems while maintaining competition
  • Telecommunications providers need to play in a multi-local way while embracing the idea of taking their business to a regional level, in order to credibly compete with wider digital competitors

TMT M&A

  • The telco model is now challenged by a mismatch between demand for certain services and the capital available to meet the level of risk and reward required to provide them, therefore investment and deal targets need to be chosen precisely
  • Key investment themes are; enterprise tech, fibre opportunities that will link data centres and infrastructure together, and telco cost reductions, such as digitising processes
  • Mobile and broadband infrastructure investment will drive a host of upcoming deals, especially in countries such as Indonesia where telecommunications companies have strong organic growth driving new business and demand that is far exceeding infrastructure supply
  • Financing and operational requirements remain key challenges for TMT initiatives

Tech M&A

  • Consumer trust will drive tech M&A; it is hard to develop a consumer base but once this is done successfully, companies can rapidly stack up and cross-sell many services
  • The global tone will follow activity in the US with companies such as Uber and Airbnb
  • Private companies are now leaning a lot more about their existing investors and are finding sufficient capital, so they are not incentivised to pursue an IPO
  • Financial services and consumer-led investments remain key themes in Asia
  • Valuations remain straight from an investor standpoint with mixed optimism

5G is Coming

  • 5G is evolutionary, with the potential to be revolutionary, and will elevate 4G in terms of ultra-reliability, speed and latency requirements
  • The 5G economy will add $12.3 trillion of revenue, drive $3.0 trillion in global GDP growth and support 22 million jobs by 2035
  • Key services to benefit: autonomous driving, IoTs ecosystems for smart cities and connected living, augmented and virtual reality and remote robotics
  • Telcos have a unique role to play with 5G and if they succeed in adapting and developing this network they will be in a position of power, with significant revenue streams
  • Challenges for 5G include; making the transition to 5G profitable and meeting 5Gs requirements to be ultra-reliable for its target devices at 10-100x the current volume, which requiring 10x more base stations all operating at a higher spectrum
  • Countries currently investing strongly in 5G in Asia include Singapore, Hong Kong, China, Korea and the Philippines - so we can expect it to first emerge in these countries  

Enterprise Cloud

  • Asia Pacific is the fastest-growing region for ‘cloud’ with about 32-33% growth; with the experience economy a hot-spot right now
  • Cloudification is a key market opportunity, offering support to medium and large size companies moving on to the cloud while making it operational, cost-effective and secure
  • Tech is becoming embedded in business and there are bullish prospects for cloud growth
  • Regulation is a key consideration, requiring navigation of factors including, data sovereignty issues and Singapore’s Personal Data Protection Act and Info-communications Media Development Authority
 

Edge Computing

  • Edge computing is emerging at the intersection of AI and 5G
  • It is a natural progression beyond cloud computing which seeks to complement the cloud rather than replace it
  • More than five billion devices could be connected to edge computing in 2020, benefiting from lower costs, faster response times and dependable operation
  • There are mixed opinions as to the security implications arising from the proliferation of IoTs ecosystems driven by edge computing

eSports

  • eSports is an $800 million industry which is rapidly expanding in Asia
  • The industry is disrupting the future of sports, television and advertising concerning competitions, streaming rights, content creation and scaling, as well as the rise of digital stars
  • Revenue is driven by sponsorship and advertising is driven by strong online viewership. For example, Twitch had more than 434 billion minutes in viewership in 2018
  • Key challenges: unlike traditional sports, developers have ownership rights over individual games, and social acceptance of eSports is slow to extend to older generations
  • Many companies can take part. SingTel recently had huge success when it ventured into eSports in 2018, partly because 73% of its customer base is under 35 years old

Technology Convergence

Industry and sector convergence has been one of the major themes in M&A over recent years. This short video outlines some of the trends and themes we're seeing in the market.