SingTel – BT

SingTel snaps losing streak, bodes well for economy

Q1 net income up 7.7%; 1st quarterly rise in 12 months

Singapore Telecom has added weight to hopes of economic recovery by posting a rise in quarterly profit for the first time in 12 months.

‘If you look at the economic numbers that have been announced, I think we are probably quite comfortable that the worst is over,’ said SingTel Group CEO Chua Sock Koong.

‘However, the question of how quick the recovery will be and how sustainable it is, is something we are closely monitoring,’ she told reporters at the company’s first-quarter earnings briefing yesterday.

Strong performances in Singapore and Australia, coupled with higher contributions from key regional associates Bharti and Telkomsel, lifted SingTel’s Q1 net income to $945 million, up 7.7 per cent from $878 million a year earlier.

Earnings per share rose 7.6 per cent to 5.94 cents, while operating revenue edged up 1.9 per cent to $3.85 billion for the three months ended June 30.

SingTel, which derives 72 per cent of its Ebitda – earnings before interest, tax, depreciation and amortisation – from overseas, is finally seeing regional currency movements swing in its favour after battling adverse fluctuations for a year.

The Indian rupee narrowed its depreciation against the Sing dollar sequentially to a mere 0.3 per cent in Q1, boosting earnings from Bharti, SingTel’s most profitable regional unit.

Bharti’s contribution to SingTel’s pre-tax earnings climbed 16 per cent to $272 million.

The Indian operator is looking to boost its earnings further through geographic expansion. It has extended merger talks with South Africa’s MTN Group to Aug 31.

A successful union will create a telecom titan with more than 200 million subscribers and over US$20 billion in annual revenue. It could also slash SingTel’s 30.4 per cent stake in its Indian associate to around 19 per cent, but market watchers expect the operator to top up its Bharti stake if this occurs.

‘Discussions are ongoing,’ Ms Chua said, declining further comment on its unit’s merger plan.

SingTel’s Indonesian associate Telkomsel also turned in a strong Q1, with the Indonesian rupiah climbing 7.1 per cent against the Sing dollar during the quarter. As a result, Telkomsel’s share of SingTel’s pre-tax profit rose 11 per cent to $245 million.

After factoring in the scorecards of its four other associates – Thailand’s AIS, Globe in the Philippines, Pakistan’s Warid Telecom and PBTL in Bangladesh – pre-tax profit from SingTel’s six regional units rose 12 per cent to $624 million in Q1.

The group’s Singapore operations registered a 0.3 per cent increase in net income in Q1 to $338 million on a 10.3 per cent improvement in sales to $1.38 billion.

Revenue increased across most key businesses except international telephony, as mobile roaming and IDD income were hit by the economic downturn.

Sales from local IT and engineering spiked almost 50 per cent due to a maiden contribution from SingTel’s latest local acquisition, Singapore Computer Systems.

The operator also netted Q1 revenue of $14 million in Singapore from a fibre-optic rollout contract with OpenNet, a SingTel-linked consortium tasked with building the new broadband highway.

‘We expect that (revenue from installing fibre) to increase as the pace of the rollout starts to peak between 2010 and 2011,’ said SingTel Singapore CEO Allen Lew.

The new nationwide fibre-optic network is expected to be fully operational by end-2012. Besides installing the new fibre-optic links, SingTel will pocket additional income over the coming years by divesting some of its Internet assets to OpenNet.

SingTel’s Australian subsidiary Optus saw a 13.4 per cent jump in net profit in Q1 to A$139 million (S$166.5 million), but its earnings fell 0.8 per cent when converted to Sing-dollar terms due to currency depreciation.

SingTel shares closed unchanged at $3.18 yesterday.

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