SingTel – BT

SingTel may cut spending, rates amid market turmoil

SINGAPORE Telecommunications Ltd (SingTel), South-east Asia’s largest telecommunication services company, may spend less than planned in its domestic market and cut rates as slowing economic growth and financial-market turmoil curb customer spending.

‘The tea leaves are indicating that things are going to be very uncertain,’ Allen Lew, chief executive officer of SingTel’s operations in the city-state, said in a Bloomberg Television interview broadcast yesterday. The company will ‘start to curtail some of our unnecessary spending and be a bit more cautious’, he said.

SingTel, whose operating expenses in Singapore rose 14 per cent in the quarter ended June, said it plans to cut costs and reduce some fees on concern that clients will delay orders.

The US government bailed out American International Group Inc for US$85 billion and Lehman Brothers Holdings Inc filed for bankruptcy this week, following the collapse of Bear Stearns Cos in March.

‘SingTel will have to be very aggressive in trying to cut costs and minimise the impact on margins as everyone else looks to delay orders now,’ said Voon San Lai, an analyst at Cazenove Asia Ltd in Singapore who rates the company ‘underperform’.

The phone operator ‘could also cut handset subsidies and staffing might be reduced’, he said.

Mr Lew, 53, declined to elaborate on the cost cuts. Operating expenses in Singapore rose to S$743 million in the three months to June 30, from S$652 million a year earlier.

SingTel on May 14 projected that capital spending in Singapore will rise to a ‘mid-teens’ percentage of revenue, as the company adds mobile capacity and upgrades its fixed-line network. It spent 8.8 per cent of sales for the 12 months ended March 31, compared with 8.5 per cent a year earlier.

The company had 10,651 employees in the city-state at the end of June, or about half of its total workforce. ‘We’ve a lot of corporate banking customers and you know these are the areas where there’re a lot of challenges right now,’ Mr Lew said.

SingTel is seeing some companies ‘being more cautious in terms of their capital expenditure and their expansion plans’, he said. The operator will consider cutting charges for business clients on a case-by-case basis, Mr Lew said.

Global economic growth will slow to 4.1 per cent this year and 3.9 per cent in 2009 from 5 per cent last year, the International Monetary Fund predicted in July.

SingTel joins Tata Consultancy Services Ltd and Infosys Technologies Ltd, India’s largest software-services companies, in expecting financial firms to delay orders.

Nortel Networks Corp, North America’s biggest phone-equipment maker, on Wednesday said sales will fall this year as companies hold back investments. Bloomberg

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