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Singtel reports 14% drop in Q3 net profit on regional associate falls

14 Feb 2019

Singapore Telecommunications (Singtel) has released its financial results for its fiscal third quarter ended 31 December 2018, reporting a 14% drop in net profit to SGD823 million (USD605 million), compared with SGD959 million a year ago, attributed to intense competition in India, the impact of network investments by regional associates, margin erosion in traditional carriage services, and lower NBN migration revenue in Australia. Southeast Asia’s largest telecom operator by revenue and subscribers reported that operating revenue was broadly stable, up 4% in constant currency terms to SGD4.63 billion, while underlying net profit (i.e. excluding one-time items) fell 28% to SGD680 million, impacted by an accelerating shift from voice to data and margin erosion in traditional carriage services. Earnings derived from regional associates – Optus (Australia), Bharti Airtel (India/Africa), Telkomsel (Indonesia), AIS (Thailand), Globe Telecom (Philippines) – fell 35% year-on-year to SGD342 million from SGD523 million. Singtel confirmed that its regional associates drove data usage with continued network and spectrum investments. However, despite posting another strong quarter in revenue and profits in Africa, Bharti Airtel’s earnings in India remained under sustained pricing pressures although ARPU rose and mobile revenue stabilised on a sequential quarter basis. In a competitive trading climate, Airtel added a net eleven million new 4G customers, while in Indonesia, Telkomsel’s revenue was stable y-o-y but grew on a sequential quarter basis after the completion of the SIM card registration exercise. In Thailand, meanwhile, AIS’ revenue improved but profit fell on higher marketing costs and network investments while in the Philippines, Globe Telecom’s earnings rose due to strong data revenue growth in mobile and broadband as well as cost management.

In Australia, revenue rose 6% on an annualised basis fuelled by strong growth in post-paid handset customers (up 126,000) and higher equipment sales which offset lower NBN migration revenues. Singtel notes, however, that the temporary suspension of NBN connections has now been lifted and HFC connections have progressively resumed. Furthermore, in January Optus launched Australia’s first commercial 5G service in Sydney and Canberra, which is expected to cover 1,200 sites by March 2020 as it leverages unparalleled 5G spectrum holdings nationally. In Singtel’s home market, revenue was down 6% y-o-y as continued voice to data substitution dampened mobile service revenues while rising handset costs saw higher amortisation of handset subsidies. Singtel’s post-paid Singapore customer base rose by a net 36,000 in the three-month period under review while equipment sales were lower on weaker demand for key handset models. Finally, broadband revenue growth in Singapore was offset by declines in voice and TV, it said.

Singtel Group’s aggregate mobile customer base stood at 677.337 million at 31 December 2018, down by 40 million or 5.6% quarter-on-quarter, mainly on a decline in India. Compared to a year ago, the combined mobile customer base declined by approximately ten million. On a proportionate share basis, Singtel controlled 265.969 million mobile subscribers at end-2018, compared to 286.342 million three months earlier and 269.556 million at 31 December 2017.

Updating its full-year forecast for group EBITDA, Singtel says it now expects the metric to decline by a low single digit, versus its previous forecast for EBITDA to be stable. Consolidated results and cash flow may be impacted by material exchange rate movements in the Australian Dollar, United States Dollar and regional currencies, it said, forecasting operating revenue from the core business (comprising Group Consumer and Group Enterprise) to grow in the low single-digit range.

Commenting on the results Ms Chua Sock Koong, Singtel Group CEO, said: ‘We have stayed the course despite heightened competition and challenging market and economic conditions. We’ve continued to add post-paid mobile customers across our core business in both Singapore and Australia while making positive strides in the ICT and digital space. We remain focused on investing in networks and building our digital capabilities – areas that are important to our customers and our future success. We will also step up on managing costs, growing revenues and driving efficiencies through increased digitalisation efforts.’

Australia, India, Indonesia, Philippines, Singapore, Thailand, Advanced Info Service (AIS), Bharti Airtel, Globe Telecom (incl. Innove), Optus, Singtel, Singtel Group, Telkomsel (Telekomunikasi Selular)

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