SingTel – BT

Foreign currency gains help lift SingTel Q2 profit 3.3%

Regional associates continue to deliver double-digit earnings growth

SINGAPORE Telecommunications (SingTel) yesterday reported a 3.3 per cent rise in second-quarter net profit to $988 million, helped by foreign currency gains.

SingTel also declared an interim dividend of 5.6 cents, up 52 per cent from 3.69 cents a year earlier. The total dividend payout of $891 million represents 50 per cent of the group’s underlying net profit.

Underlying earnings per share for Q2 ended Sept 30 rose 17 per cent to 5.74 cents.

SingTel’s regional associates – especially Bharti and Telkomsel, the largest telcos in India and Indonesia – continued to deliver double-digit earnings growth, up 24 per cent to a pre-tax profit of $633 million.

For the first half, SingTel’s net profit was $1.9 billion, up 6.6 per cent on a 10.7 per cent gain in operating revenue to $7.3 billion.

The telco, which gets 74 per cent of its earnings from outside Singapore, benefited from the stronger Australian dollar and Indian rupee.

SingTel chief financial officer Francis Heng said the Australian dollar and Indian rupee strengthened 8 and 9 per cent respectively against the Sing dollar from a year earlier.

But there was some negative impact from the 6 per cent depreciation of the Indonesian rupiah, he said.

SingTel chief executive Chua Sock Koong said: ‘The group has a policy of hedging all its foreign currency commitments and does not take part in any trading activity . . . that should allay any concern the public may have on that front.’

For Q2, the stronger Australian dollar lifted operating revenue and net profit by $176 million and $11 million respectively.

At home, SingTel’s focus on gaining market share, especially in the mobile segment, helped it achieve double-digit revenue growth, but at the expense of margins.

Revenue rose 10 per cent to $1.2 billion but operating expenses increased a faster 17 per cent to $717 million.

Operational Ebitda (earnings before interest, tax, depreciation and amortisation) margin fell 4.1 percentage points to 42.2 per cent.

The lower margin reflected a change in revenue mix as the lower-margin IT business grew faster than the telecom business, SingTel said.

In addition, it incurred higher acquisition costs and spent more on various initiatives, though these are expected to contribute to revenue and earnings in subsequent years, it said.

SingTel launched mio TV in Q2 and has now signed up 10,000 customers.

Revenue from mobile phones rose 13 per cent to $322 million as the telco added a record 185,000 customers and grew market share 1.3 percentage points to 40.3 per cent.

Australian unit Optus recorded 3.7 per cent revenue growth to A$1.9 billion. Growth in Sing-dollar terms was 12 per cent to S$2.5 billion, as the Aussie dollar strengthened 8 per cent from a year earlier.

But SingTel’s efforts to maintain its position in the competitive market saw its margins fall, with operational Ebitda margin down 1.3 percentage points to 24.7 per cent. Net profit was 5.6 per cent lower at A$123 million.

Overall, SingTel’s pre-tax profit from associates was up 24 per cent to $633 million, driven mainly by Bharti which contributed $197 million.

On SingTel’s overseas acquisition strategy, Ms Chua declined to comment on a reported bid last month for a majority stake in state-owned Ghana Telecom, the West African country’s dominant operator.

‘Clearly we continue to look for investment opportunities, the focus remains in Asia where we think it’s a region we understand best,’ she said.

‘At the same time we are in the process where we are trying to learn new markets whether its in Central Asia or some of the Middle Eastern markets, and we’ve been shown various opportunities in Africa as well, but those markets are still in the stage where we’re learning them.’

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