SingTel – BT

SingTel’s Q3 net profit slides 16% to $799m

It is feeling the impact of the global downturn; affirms FY09 guidance

by weaker regional currencies, Singapore Telecommunications posted a 16 per cent fall in net profit from a year ago to $799 million for the third quarter ended Dec 31, 2008.

It is starting to feel the pinch of the global downturn and affirmed its outlook for the fiscal year ending March 31, 2009 – that overall pre-tax earnings contributions of the regional mobile associates will be lower than the previous year.

Still, SingTel noted that Q3 was ‘one of its best quarterly performances’, with double-digit revenue growth in Singapore and Australia despite the difficult environment.

The group’s Q3 net profit – which took into consideration the group’s share of a $44 million exceptional loss on the non-cash impairment charge of a unit of Thai associate Advanced Info Service PCL – was also higher than the average $770 million forecast by four analysts polled by Reuters.

SingTel’s group operating revenue dipped 3.2 per cent to $3.7 billion, hurt by the Singapore dollar’s strength against the currencies of overseas markets in which its associates operate.

In particular, the Australian dollar suffered a steep 23 per cent decline against the Sing dollar from a year ago. Had the Aussie dollar remained stable, the group operational revenue could have grown 14 per cent, SingTel said.

Its group operational Ebitda (earnings before interest, taxes, depreciation, and amortisation) for Q3 fell 6.9 per cent to $1.06 billion while underlying net profit slipped 10.1 per cent to $838 million.

Operating revenue from its Singapore business grew 21 per cent to a record $1.51 billion in Q3, bolstered by first-time inclusion from newly acquired Singapore Computer Systems while fully owned Australian subsidiary Optus delivered a 10 per cent growth in operating revenue to A$2.2 billion (S$2.21 billion).

Pre-tax profit contributions from associates in Q3 fell 24 per cent to $486 million, hit by the depreciation in regional currencies.

‘The economic slowdown has started to impact the group,’ said group CEO Chua Sock Koong.

But she noted that SingTel is no novice in managing downturns. It is in a strong financial position to strengthen its market presence through customer-focused products and greater cost efficiencies.

It will soon be rolling out the Google phone known as HTC Dream in an exclusive tie-up, almost six months after its launch of Apple’s 3G iPhone, to target a different audience.

‘We will come up with significant differentiators when we launch the product,’ said Allen Lew, CEO Singapore.

Telkomsel will soon be launching the iPhone after winning the licence from Apple to distribute the handset in Indonesia.

As it will not be offering subsidies for the handsets unlike SingTel and Optus, there will not be an upfront margin erosion or earnings dilution, said Lim Chuan Poh, CEO SingTel International.

SingTel had incurred hefty upfront subsidy costs in its fiscal Q2 in a bid to boost take-up of the iPhone in Singapore by reducing the handset retail price.

With an eye on managing costs, Ms Chua said the group has reduced discretionary spending, sought to improve staff productivity, and undertaken offshoring of call centre services in Australia. Job cuts remain a last resort and the group would first decide to trim variable pay if necessary.

For the nine months ended Dec 31, the group’s operating revenue grew 2.5 per cent to $11.37 billion and net profit slipped 11.2 per cent to $2.55 billion. The group generated free cash flow of $2.27 billion and net debt gearing ratio as at Dec 31 was 25.5 per cent.

Yesterday, SingTel’s share price put on 2.1 per cent or five cents to $2.48.

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