SingTel – BT

SingTel Q2 profit up 10.1% at $956m

Revenue up 5.4%; higher interim dividend of 6.2 cents

Singapore Telecommunications adds further proof that economic recovery is at hand as its quarterly profits rise for the second time in a row on the back of a strong performance in Singapore, Australia and Indonesia.

South-east Asia’s largest telco yesterday posted a 10.1 per cent rise in fiscal second-quarter net profit to $956 million, up from $868 million a year earlier.

Earnings per share for the three months ended Sept 30 rose 10.1 per cent to 6.00 cents, while operating revenue increased 5.4 per cent to $4.1 billion.

SingTel, which derives 72 per cent of its Ebitda – earnings before interest, tax, depreciation and amortisation – from overseas, benefited from a rebound in associate earnings in the quarter, particularly Indonesian telco Telkomsel.

Although the Australian dollar and Indonesian rupiah both strengthened against the Sing dollar sequentially, pre-tax earnings from its six regional affiliates still grew 32 per cent to $571 million.

Telkomsel’s share of pre-tax profits stood at $252 million in Q2, up 45.9 per cent from last year.

Indonesia’s largest wireless operator added 19.3 million mobile customers during the quarter and extended its market share lead by 5.4 percentage points to 51 per cent.

Contributions from SingTel’s largest regional associate Bharti Airtel climbed 26.4 per cent to $236 million in Q2.

Earlier this month, SingTel announced plans to raise its stake in the Indian operator from 30.43 per cent to 31.95 per cent through the purchase of an additional 730,000 shares.

The deal, which could cost as much as US$641 million (S$898 million), comes on the heels of Bharti’s second failed merger attempt with South Africa’s MTN Group. Bharti is reportedly on the lookout for other acquisition targets in the republic and SingTel could lend its blessings to any new deal that might emerge.

‘We continue to look at new areas where there is a high potential for growth. Africa is an extension of what we believe to a synergistic market to India,’ said SingTel’s head of international operations Lim Chuah Poh.

Within Asia, the group will focus on telecommunications markets that are not ‘fully-liberalised’. ‘Markets like Vietnam continue to present a potential opportunity,’ he told reporters at the company’s results briefing yesterday.

SingTel’s four remaining associates – Thailand’s AIS, Globe in the Philippines, Pakistan’s Warid Telecom and PBTL in Bangladesh – turned in a less impressive Q2 scorecard.

Earnings contributions from AIS and Global fell 16.7 per cent and 12.3 per cent respectively to $53 million, while Warid and PBTL weighed SingTel down with losses of $19 million and $3 million respectively.

The group’s Singapore operations registered a 9 per cent fall in Q2 net profit to $321 million.

There was a 62.7 per cent spike in revenue from SingTel’s local IT and engineering business due to higher contributions from its last acquisition Singapore Computer Systems (SCS).

Revenue from the firm’s Singapore telco business, however, fell 1.2 per cent as a result of lower handset sales.

Australian subsidiary Optus saw a 21.4 per cent jump in second-quarter net profit to $184 million, buoyed by strong mobile and wireless broadband subscriber growth.

For the first half of its financial year, SingTel’s group net profit rose 8.9 per cent to $1.9 billion while revenue edged up 3.7 per cent to $7.95 billion.

SingTel has declared a higher interim dividend of 6.2 cents per share on account of its positive first-half performance, 11 per cent more than what it has been paying shareholders in the last two years. This translates to a payout ratio of 52 per cent.

‘The ratio is in line with our dividend payout policy (of paying between 45 per cent to 60 per cent). It should be sustainable,’ said SingTel group CEO Chua Sock Khoong.

Looking ahead to the full year, she expects SingTel’s operating revenue and Ebitda in its two core markets – Singapore and Australia – to grow within the single-digit range, and pre-tax earnings from Bharti and Telkomsel to be higher in local currency terms.

SingTel shares closed four cents higher yesterday at $2.98.

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