Airtel losses and higher costs drag down Singtel's Q1 earnings

9 Aug 2019

Singtel’s latest quarterly financial report shows that the group’s profits slumped to a 16-year low for the fiscal first quarter ended 30 June 2019, a situation it blamed on losses at its Indian associate Bharti Airtel, as well as higher depreciation and amortisation costs in network and spectrum across the group. Singtel booked net profit of SGD541.1 million (USD391.5 million) for the three-month period under review, down 34.9% from SGD831.5 million in the year-ago period – its worst quarterly performance since 2003. Excluding its Indian associate, Singtel’s net income would have fallen 3.4% year-on-year, it said. Operating revenue dipped 0.5% to SGD4.113 billion, EBITDA fell 1.9% to SGD1.184 billion and underlying net profit slid 21.6% to SGD575.0 million from SGD832.0 million.

Bharti Airtel is experiencing strong competition in its domestic market – which has already accounted for a number of telecoms operators folding – prompting Singtel’s management to adopt a cautious approach going forward. ‘It depends on how each player will react. The industry continues to be very capital intensive, like most telco businesses around the world, so that’s something we also have to be mindful about,’ said Arthur Lang, head of international business for Singtel, at a morning briefing about the Indian telco’s outlook. ‘We are hoping for the best, but definitely we are prepared here for the next few quarters to be difficult as well, from a balance sheet standpoint,’ he added. Meanwhile group chief executive Chua Sock Koong echoed Lang’s concerns, noting: ‘I don’t think that it would be reasonable to expect us to be able to tell you exactly when Airtel will turn around’.

In its home market, Singtel reported that competition is also intense – exacerbated by the recent arrival of a raft of new MVNOs and the launch of all-digital brands by mobile operators. The Singapore consumer segment saw revenue fall 5.1% y-o-y to SGD518 million, as EBITDA and EBIT dropped 4.0% and 8.8% respectively. Total mobile revenue including equipment sales remained stable, however. Equipment sales grew 12% mainly on higher average prices of handsets, it said, although the growth was offset by 6.3% decline in mobile service revenue due to ‘larger drop in voice usage (local, IDD and roaming), data price erosion and flow through impact from amortisation of higher handset subsidies’. Fixed broadband revenue grew 2.1% it said, on ‘increased take-up of higher speed fibre plans and higher sales of WiFimesh equipment.

Operationally, Singtel’s domestic business closed out June 2019 with a total of 4.216 million mobile subscribers (up 3.3% y-o-y), of which 3.183 million are 4G subscribers (up 9.6%). Monthly average revenue per user (ARPU) was SGD40 for post-paid mobile customers, down from SGD46 for the year-ago quarter, after the launch of digital-only brand GOMO in March. Blended ARPU was down 10.5% at SGD31 per month. The telco also recorded 634,000 fixed broadband subscribers in Singapore, up 2.0%, and 382,000 residential pay-TV users (down 1.2%).

At the group level, meanwhile, Singtel Group had an aggregate mobile subscriber base of 700.074 million at end-June 2019, down from 735.418 million, while the proportionate share dropped to 255.064 million from 293.015 million.

India, Singapore, Bharti Airtel, Singtel, Singtel Group