12 Aug 2008
Southeast Asia’s largest telecoms group by revenues, Singapore Telecommunications (SingTel), said a strong Singapore dollar undermined its fiscal first-quarter performance in the three months to 30 June 2008, causing its share price to dip to a four-week low. The state-backed operator, which currently generates around 75% of its consolidated group sales from overseas operations, said the strong local currency had dented contributions from its Asian mobile affiliates, prompting it to cut its earnings contributions forecast for international businesses. Reuters reports that SingTel shares sank by up to 3.6% on Tuesday, while the broader market fell by just 0.3%. The Singapore dollar has climbed by an average 7% against the Indonesian rupiah, Philippine peso, Thai baht and Indian rupee in the June quarter from the March quarter, according to Reuters’ estimates.
In the April-June period SingTel posted underlying net profit (before goodwill and exceptional items) of SGD865 million (USD612 million) compared with SGD868 million in the same period of 2007, falling short of market expectations of underlying profit of SGD930.3 million. 1Q08 attributable net profit was SGD878 million, down 5.3% year-on-year, and free cashflow was SGD553 million for the quarter, flat from a year ago. Group operating revenue rose 5.9% year-on-year to SGD3.78 billion, it said.
In recent years SingTel has looked to expand overseas to counteract the effects of saturation in its home market, spending SGD18 billion acquiring stakes in mobile operators in high-growth countries such as India, Australia and Pakistan. It is currently watching the markets of Vietnam and China closely with a view to exploring expansion opportunities there, while elsewhere SingTel is mulling its options for moving into the Middle East and Central Asia. In Australia, SingTel Optus reported flat net income of USD108 million after depreciation costs. The operator, the second largest in Australia by subscribers, is facing tough competition and cut-throat pricing, causing a slowdown in subscriber growth. Moreover, although its operations in six emerging markets – the Philippines (Globe), India (Bharti), Indonesia (Telkomsel), Thailand (AIS), Pakistan (Warid) and Bangladesh (PBTL) – have experienced meteoric growth in recent years, growth is now slowing visibly. First quarter pre-tax profits from SingTel associates dropped 11% year-on-year to SGD582 million, impacted by the strong local dollar, lower earnings from Globe and Telkomsel, and losses at Warid Telecom. Going forward, pre-tax earnings contributions from regional mobile associates are expected to ‘grow at low double-digit level and at a pace slower than the past two years,’ said Chief Executive Chua Sock Koong in a media briefing.