SingTel – BT

SingTel Q3 profit notches up 0.8%

The telco was dragged by weak performance from regional associates

A WEAKER performance across most of Singapore Telecommunications’ (SingTel) key regional associates resulted in a largely flaccid third quarter for the company, with its net profit inching up 0.8 per cent to $998 million, from $991 million a year earlier.

Earnings per share for the three months ended Dec 31, 2010, rose marginally to 6.27 cents, from 6.22 cents a year earlier. Operating revenue grew 5.7 per cent to $4.7 billion, from $4.45 billion.

The result was better than the average net income forecast of $925 million from four analysts polled by Bloomberg. Industry watchers had issued a more ominous forecast for SingTel’s third-quarter results due to the continued weakening of its associate earnings, in particular from Indian operator Bharti.

Share of ordinary pre-tax profits from six regional associates fell 12.8 per cent to $488 million in its fiscal third quarter.

SingTel, which derives 74 per cent of its Ebitda (earnings before interest, tax, depreciation and amortisation) from overseas, continues to be weighed down by the price of Bharti’s expansion into South Africa.

In June last year, Bharti, in which SingTel has a 32 per cent stake, successfully acquired the 15 South African mobile assets belonging to Kuwaiti conglomerate Zain.

As a result, pre-tax profit contributions from the Indian operator fell 21.7 per cent over the year to $184 million in Q3. Bharti’s profitability was impacted by the financing costs of the Zain acquisition as well as foreign currency losses.

It also incurred additional costs from the re-launching of a ‘unified’ Bharti brand across its key markets, according to SingTel Group CEO Chua Sock Koong.

The silver lining, she added, is that Bharti’s operations are showing signs of recovery.

‘In Africa, we’ve seen an improvement in (Bharti’s) Ebitda margin (sequentially),’ she told reporters at the group’s results briefing yesterday.

Beyond Bharti, SingTel’s bottom line was also impacted by poorer performances from Indonesia’s Telkomsel and Filipino operator Globe.

Telkomsel’s pre-tax contributions fell 10 per cent to $214 million and Globe’s contribution plunged 26.6 per cent to $40 million as a result of heightened competition in the two countries.

SingTel’s investments in Pacific Bangladesh Telecom Ltd (PBTL) and Warid continue to be in the red, chalking up pre-tax losses of $4 million and $14 million respectively.

The sole bright spot among the firm’s regional portfolio was AIS in Thailand, which saw its pre-tax contributions climb 31.3 per cent to $68 million in Q3.

However, the Thai operator is now embroiled in a tussle with state-owned telecommunications firm TOT Public company over the latter’s claim for damages.

TOT is seeking compensation from Thai operators, including AIS, for unpaid access charges and alleged losses from controversial concession deals that were sanctioned by past governments.

SingTel’s chief financial officer Jeann Low reiterated AIS’ position that the demands have no legal standing and hence the company did not make a provision for these claims.

However, they have been classified as a ‘contingent liability’ for ‘good corporate governance’, she added.

On its home turf, net income from SingTel’s Singapore operations was up marginally by 1 per cent to $348 million.

Sales and profitability improved across its telco as well as IT and engineering business as the recurring bane of handset subsidies finally started to ease in the third quarter.

Its mio TV revenue stood at $21 million in Q3. The company added 19,000 new pay-television customers during the period to take its tally to 264,000.

SingTel’s Australian unit Optus recorded a 3.9 per cent gain in Q3 net profit to $218 million on the back of strong mobile subscriber growth.

For the first nine months of its current fiscal year, the operator’s group net profit fell 2 per cent to $2.8 billion, while revenue rose 8.3 per cent to $13.4 billion.

SingTel shares closed four cents lower at $3.05 yesterday.

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