SingTel 3Q profit falls short of market expectations, Optus blamed

8 Feb 2007

Singapore Telecommunications (SingTel’s) third-quarter financial results for the three months to 31 December 2006 have failed to excite the market, falling short of analyst expectations as competition in Australia hurt earnings at its Optus unit. The pan-Asian operator posted net income of SGD994 million (USD649 million), up from SGD882 million in Q3 2005, but below the consensus estimate of SGD1.05 billion in a poll of seven analysts conducted by Bloomberg. SingTel’s shares dipped 1.7% in the wake of the press release.

SingTel said its Australian mobile unit Optus has been forced to up its investment on its 3G networks to around USD757 million to combat competition from market leader Telstra. Optus net income dropped for the seventh quarter in succession, down to AUD135 million, on sales of AUD1.93 billion (USD1.5 billion, +3.1%), while its EBITDA margin narrowed from 27.9% in Q3 2005 to 26%. ‘Competition has been very intense. We intend to maintain profitability while driving sales,’ said Optus CEO Paul O’Sullivan, adding: ‘We’re prepared to acquire if it adds shareholder value.’ He stopped short of naming any targets. On a more positive note SingTel chief executive Lee Hsien Yang said that investments in phone operators in India and Indonesia, with a combined population of more than 1.3 billion people, had boosted group earnings.

Net profit attributable to affiliates Bharti Airtel in India and PT Telekomunikasi Selular (Telkomsel) in Indonesia, climbed by 17% to SGD368 million. Bharti, which is 30.5% owned by SingTel, doubled its profit in the third quarter to USD275 million, as the company added 4.9 million new users.