SingTel – BT

SingTel Q1 profit down 0.2% to $943m

Weak contributions from regional units Bharti, Telkomsel, Globe hit results

Singapore Telecommunications’ net profit for the first quarter of its financial year came in flat, as improvements by its units in Singapore and Australia were negated by the weaker performance of regional associates Bharti, Telkomsel and Globe.

For the three months ended June 30, South-east Asia’s largest telco reported a 0.2 per cent dip in net income to $943 million, from $945 million a year earlier. The figure was 3 per cent lower than the average forecast of five analysts polled by Bloomberg.

Underlying earnings per share came in at 5.92 cents, down from 5.94 cents in Q1 last year, while revenue climbed 11.5 per cent to $4.3 billion.

The bottom line was weighed down by a 15.8 per cent drop in pre-tax earnings contributions from regional associates, with Bharti, Telkomsel and Globe the main culprits. SingTel derives 73 per cent of its Ebitda – earnings before interest, tax, depreciation and amortisation – from overseas.

The contribution of its largest regional associate, Bharti, fell 22.7 per cent to $210 million. The Indian operator was hit by a triple whammy of tougher domestic competition, fair-value losses from the weakening rupee and financing costs stemming from its Zain acquisition.

During the quarter, Bharti, in which SingTel has a 32 per cent stake, completed its US$10.7 billion acquisition of the African assets of Kuwait’s Zain group.

‘Africa is an important emerging market and Bharti acquiring effective control of a pan-African operation across 15 countries is a unique opportunity for Bharti to fully leverage its experience, human capital and scale to deliver future growth,’ said SingTel group chief executive officer Chua Sock Koong.

Pre-tax profit contribution from Telkomsel – SingTel’s Indonesian associate – fell 10 per cent in Q1 to $221 million. The decline was due to higher operating expenses resulting from network upgrades and higher depreciation charges.

SingTel’s share of profit from Philippine operator Globe dived 34 per cent to $45 million, as its margins were eroded by cut-throat local competition.

Pakistani operator Warid and PBTL in Bangladesh continued to be in the red, with respective pre-tax losses of $14 million and $5 million.

The only strong performer among SingTel’s six regional associates was Thailand’s AIS. Its pre-tax profit contribution rose 18.6 per cent to $68 million during the quarter.

Stronger earnings from Singapore and Australian unit Optus helped cushion SingTel against a more drastic decline.

‘The Singapore and Australia businesses turned in strong performances, especially in mobile with both reporting double-digit revenue growth,’ Ms Chua said. ‘However, competition in the emerging markets led to lower earnings from Bharti, Globe and Telkomsel, as they responded to competition to protect longer-term market share.’

Optus, which accounts for 30 per cent of SingTel’s Ebitda, enjoyed a strong quarter, with its net profit climbing 32.7 per cent to $208 million.

Net income from Singapore operations rose 9.8 per cent to $372 million on the back of improvements across SingTel’s telecommunications, IT and engineering businesses.

SingTel’s forecasts for its current financial year remain unchanged from guidance issued in May.

Operating revenue is expected to grow at mid single-digit level, while Ebitda is projected to drop slightly.

SingTel’s counter closed seven cents lower at $2.99 yesterday.

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