Countdown to IPO

“Today, the company is profitable and has grown to a significant size. We operate in four countries with three lines of business. We are in good shape,” he adds.

Since 2017, MyRepublic has been mulling an initial public offering (IPO) as early as late 2018 to fund its regional expansion. Back then, it started prepping for its IPO by raising funds from private equity players and existing strategic investors.

The company was eyeing a valuation of $650 million and a listing on the exchanges of either Singapore, Hong Kong or Australia. The listing has thus far not manifested, apparently due to a hold-up in investor funds, which caused a delay in its growth plans.

Rodrigues says that for some time, MyRepublic was already in a position for a small- to mid-sized listing. However, he is aiming for more and expects “massive capital accretion opportunities” which will let MyRepublic go public with a bigger bang.

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In preparation for its IPO and to drive the next growth stage, which is expected to happen within the next 24 months, MyRepublic has beefed up its C-suite with an experienced team.

Jeannie Ong, better known as the former chief strategic partnership officer of StarHub, joined last August as MyRepublic’s group chief investor relations officer. Ong, with more than two decades of experience in the local telco scene, is in charge of investor relations, communications as well as sustainability efforts.

On that note, Rodrigues himself, like Ong, was also previously from StarHub. He was vice-president of international, wholesale and carrier services then.

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Rakesh Malani joined as group chief financial officer (CFO) in May 2020, a position he had previously held at Carousell. Besides the finance functions, Malani oversees capital strategy, fundraising and M&A while gearing towards the IPO.

When Malani was at Carousell, he helped execute several M&A, expand into new markets and raise over US$420 million through fundraising exercises and M&As, while growing its enterprise value to US$900 million. Before Carousell, Malani was also responsible for turning around IT firm Kanbay, a US$70 million ($95.2 million) loss-making company, into a profitable business worth US$400 million and taking the company public on Nasdaq.

My green friend

Last September, StarHub announced a deal to take a majority stake in MyRepublic’s Singapore broadband business, essentially letting the two companies join forces and be the close runner-up in this market.

Apparently, MyRepublic had been trying to close this deal with StarHub since Tan Tong Hai was at the helm five years ago or as Rodrigues quips, “three StarHub CEOs ago”.

It was only after Malani came on board to lead the negotiations that an agreement palatable to both parties was reached.

Specifically, StarHub is investing a total of $162.8 million for a 50.1% stake in MyRepublic’s Singapore broadband business. Besides an initial consideration of $70.8 million, there is also a deferred consideration of up to $92 million, which will be paid if future financial performance matrices are met. StarHub has also agreed to refinance $74.2 million of debt for MyRepublic for a period of three years.

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Upon completion of the deal, MyRepublic will retain the remaining 49.9% stake of its local broadband business. As the local broadband business is housed in a specially created vehicle MyRepublic Broadband, StarHub’s investment does not translate to any ownership over the rest of MyRepublic. The new consolidated entity will also command a market share in Singapore’s broadband market of 40%, trailing slightly behind market leader Singtel at 43%.

Industry regulator, the Infocomm Media Development Agency (IMDA) gave the greenlight on March 9, saying that this consolidation “will not substantially lessen competition in any telecommunication market in Singapore, and will not harm public interest”. The deal was completed on March 21.

With this deal, both StarHub and MyRepublic say can give customers better value and drive long-term business growth for both parties in the form of cost synergies and cross-selling opportunities. “StarHub’s investment has put us on a better footing and brought new opportunities for value creation,” says Malani.

On its part, StarHub expects the deal to contribute positively to its service revenue within the current FY2022 ending December. Along with its other acquisitions made recently, StarHub is guiding for at least 10% y-o-y growth in service revenue for FY2022 and subsequently another 5% to 10% y-o-y growth in FY2023.

On the acquisition, Nikhil Eapen, StarHub’s CEO says in the media release: “We are delighted to partner MyRepublic to step up innovation and bring more value to more customers in Singapore. Covid-19 has shown just how important quality broadband services are to our society, and we intend to scale up and deliver better and faster services to our customers, while realising high-quality earnings accretion. We stand to mutually benefit from StarHub’s digital-first technology platforms, our challenger mindset in innovation and customer-centricity, and MyRepublic’s lean operating model and experiences in regional markets.”

Game changing consolidation

Industry analysts have called the StarHub-MyRepublic deal a “game changer” as what was once a highly competitive landscape is now moving towards more open collaborations.

“The deal marks the first consolidation of its kind in over a decade,” says RHB Group Research, who is overall positive on the deal given how revenue synergies can be extracted between the two companies in the form of extending connectivity services, cloud gaming, and over-the-top services to MyRepublic.

StarHub, on the other hand, can tap MyRepublic’s 6,000 enterprise customers. StarHub would also be able to offer broadband network services to MyRepublic as a wholesale provider via Nucleus Connect. StarHub is also not ruling out other collaborations or partnerships with MyRepublic, including for mobile. Similarly, CGS-CIMB analyst Foong Choong Chen calls this deal a “win-win situation”.

According to CFO Malani, consolidations within the industry, regardless of the market, are needed for telcos to grow, especially so for the smaller players such as MyRepublic trying to garner wider investors’ attention via an IPO. “It is hard for these businesses to scale beyond a certain point and create a path to liquidity. This will also cause a limit to what investors can expect from them in the future. So, I think all this factors naturally will result in a consolidation in the industry,” he says.

With a bigger scale, it is easier to work with other industry partners too, or even make acquisitions so that they can be a part of a listed company. “We can give them the opportunity to get on to the IPO train that we have set in motion,” says Rodrigues.

From a broader perspective, Rodrigues believes that when companies consolidate, it opens up seams of opportunity for new players to come in and fill up the gaps with more innovative ideas and newer concepts. Somewhat like a cycle, consolidation is actually a process that helps keep innovation and competition going. “We love competition. If there wasn’t competition, we would not exist as a company,” he says.

However, even though it has its eyes on M&A, MyRepublic will not freely go about acquiring other smaller companies just for the sake of bulking up. While Rodrigues believes that “profitability is king” remains as a key criteria, Malani is also particular about the people behind the target company and wants to ensure that they have the right “entrepreneurial energy”.

For now, MyRepublic has some growth momentum behind it. In its latest FY2021 ended June 2021, the company achieved its first full-year profitability. “Our FY2021 revenue and ebitda exit run-rate are $160 million and more than $7 million, respectively. The company has been growing healthily with a CAGR of 25% over the past four years,” says Malani.

“This, combined with StarHub’s investment, means we are now in a much stronger financial position to accelerate growth,” he adds. The IPO, for sure, is one of the several but critical steps on this growth path. “You could say the stars are fairly aligned for us and we now have a good balance sheet and capitalisation table to do an IPO in the near future,” he adds.

According to Ong, MyRepublic has yet to finalise where to list. It is looking to list on a “reputable” exchange such as the Nasdaq, New York Stock Exchange, Singapore Exchange or Australian Securities Exchange. “Our most immediate priority in the near future is to continue building on our growth and financials so that we can fully seize the opportunity to IPO when the time comes,” she says. “We have identified 2022 as the year of growth and innovation. This year, our team is laser-focused on growing our business organically and inorganically.”

Two engines

To keep the growth momentum, MyRepublic is trying to fire up two engines that would power its next phase of growth both in Singapore and overseas.

Its first “service” engine comprises its consumer and enterprise connectivity business, including its broadband and mobile units. This “engine” has so far seen a CAGR of 26% in revenue over the past four years, with its broadband business in Singapore also enjoying consistent y-o-y growth despite the highly competitive market. Currently, MyRepublic has over 260,000 subscribers across Singapore, and Australia and New Zealand. The three markets are expected to deliver the same performance.

Rodrigues believes he wins over broadband customers not by being the cheapest but by being among the most expensive options. The way he sees it, the Internet has become a necessity in people’s lives. Hence, he believes that consumers are willing to pay a premium if they believe that they are getting something better. “And that is how we hold our position — through the product that we have built. We have engineered the experience that is the best in all the markets that we are in,” he adds.

To that end, MyRepublic targets the gaming community in Singapore — a niche but strong community — that is highly reliant on stable and fast network connection. And as the metaverse grows its presence within the market, Rodrigues believes that the demand for high-speed and low-latency internet will continue to grow and MyRepublic intends to be at the forefront of this boom.

The other growth engine is the “platform” engine where MyRepublic takes its proprietary operational model and shares it with other telcos to help them grow. This telco-to-telco business model leverages next-generation digital technologies to bring MyRepublic’s cloud-based proprietary software based on open standards to telcos around the region.

This model has thus far proven to help not just MyRepublic but other telco players in the region grow. In 2019, Datastream Digital, the incumbent mobile player in Brunei that holds about 70% market share, decided to carve out its mobile infrastructure including all its towers, mobile core and spectrum. It appointed MyRepublic to assist with the carve-out, which resulted in a 70%–80% improvement across headcount and capital, capital intensity as well as costs in 2020, according to a report by Jeffries.

This enterprise business segment has seen a y-o-y growth rate of 10% and MyRepublic believes that it is in a unique position to deliver on the promise of these digital solutions to any telco in the world.

“Our platform business is one of our biggest growth drivers, and is a global opportunity unlike any other in the industry,” says Rodrigues. “Our telco solutions, including our Business/ Operation Support Systems software offering, future-proof the digital experience of our telco partners, transforming their operations and enabling them to bring more value-added services to their respective customers.”

New growth, new markets

Further down the road, MyRepublic sees additional growth opportunities from conducive market conditions such as Singapore’s masterplan to work towards an intelligent nation by 2025. In the latest Budget 2022, Finance Minister Heng Swee Keat spoke about the country’s goal to increase broadband access speeds by about 10 times over the next few years.

Along with the metaverse boom, Rodrigues expects the market will continue to see a demand for faster and higher-quality connectivity. Although the company does not have any specific plans, it will remain innovative and wants to “lead the way” in achieving this national goal.

Singapore aside, MyRepublic plans to build a bigger presence in Australia and New Zealand, where it is eyeing their mobile markets. The company is targeting new geographies too, such as Malaysia, although Rodrigues says there are no solid plans for now, as previous border control measures have made it difficult for the group to survey the new market. With borders between Singapore and Malaysia opening up soon, perhaps MyRepublic might move forward in that direction soon.

“Our vision and ambition will fuel our growth to become the best-performing digital telco in Singapore and across the region. We have barely scratched the surface of the connectivity market in Asia Pacific,” says Rodrigues.

“Our twin engines of growth is an exciting evolution of our business and it gives us a distinct advantage over our competition, especially our unique platform solutions. We are confident that our new business strategy will drive us to boldly go where no other telco has gone before,” he adds.

Photo: The Edge Singapore/ Albert Chua