SingTel – BT

SingTel profit hit by currency, shares drop

SINGAPORE – SingTel, Southeast Asia’s largest phone firm, missed forecasts with flat quarterly earnings as a strong Singapore dollar crimped contributions from its Asian mobile businesses, sending its shares to a four-week low.

Singapore Telecommunications Ltd, which generates about three-quarters of its sales abroad, cut its guidance for earnings contributions from foreign operations and warned that a strong Singapore dollar would hurt its performance.

The currency has risen more than 7 per cent against the US dollar over the last 12 months.

‘The major disappointment came from regional associates’ contribution,’ said Morgan Stanley analyst Navin Killa. ‘While Singapore and (Australian unit) Optus have shown steady growth in revenues, both businesses face margin pressure due to rising competition.’

SingTel shares fell more than 3 per cent on Tuesday and were down 2.5 per cent at S$3.49 by 9.28am, while the broader market fell 0.3 per cent.

Mr Killa, who rates SingTel ‘equal-weight’, recommends investors switch to rival StarHub for exposure to Singapore, and invest directly in SingTel’s affiliates, India’s Bharti Airtel, Indonesia’s Telkomsel and Advanced Info Service in Thailand for exposure to the region.

‘The pretax earnings contributions from the regional mobile associates are expected to grow at low double-digit level and at a pace slower than the past two years,’ the company said.

Pressure at home

SingTel, Singapore’s largest listed firm valued at over US$40 billion, made April-June underlying net profit, before goodwill and exceptionals, of S$865 million (US$612 million), versus S$868 million a year ago, and missing an average forecast of S$930.3 million.

First-quarter attributable net profit was S$878 million, down 5.3 per cent from last year’s S$927 million.

Facing a domestic market of just 4.6 million people where virtually everyone has a mobile phone, the firm has spent S$18 billion in recent years buying stakes in operators in high-growth Asian countries such as India and in Australia.

Speaking to reporters after the results, SingTel CEO Chua Sock Koong said the group was still looking for acquisitions.

‘Our investment focus remains in Asia, but we are trying to learn about new markets in the Middle East and Central Asia. That is in the early stages.’

iPhone launch Aug 22

SingTel, which confirmed it will launch Apple’s third-generation iPhone in Singapore on Aug 22, reported group operating revenue rose 5.9 per cent to S$3.78 billion.

Optus, SingTel’s single-biggest revenue and profit generator, posted flat net profit of A$122 million (US$108 million) after depreciation charges.

Australia’s second-largest mobile operator, which holds a third of the mobile market, faces cut-throat price competition, slowing subscriber growth and regulatory changes in a saturated market.

SingTel also owns big stakes in six emerging market mobile operators, including Globe Telecom in the Philippines, India’s Bharti Airtel and Telkomsel. Most have shown phenomenal growth in wireless subscribers in recent years.

But growth has slowed visibly. Pretax profit from mobile associates in the quarter fell 11 per cent to S$582 million, hit by the strong Singapore currency, lower earnings from Telkomsel and Globe, and losses from Pakistan’s Warid Telecom. — REUTERS

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