Relatively upbeat 3Q10 results

Upbeat 3Q10 results. SingTel has released a relatively upbeat set of 3Q10 results this morning, with revenue up 20.2% YoY and 8.5% QoQ at S$4449.8m, driven by steady growth from Singapore and Australia and assisted by the stronger AUD, while net profit climbed 24.0% YoY and 3.6% QoQ to S$990.7m. Excluding exceptionals, underlying net profit rose 18.2% YoY and 4.0% QoQ to S$990.3m. Associates’ earnings contribution also put in a strong 39.5% YoY jump (though down 1.5% QoQ) to S$459.5m, thanks to a sharp improvement in Telkomsel’s performance and the associates’ fair value gains on forex adjustments. 9M09 revenue rose 9.1% to S$12400.3m, meeting 84.1% of our FY10 forecast, while net profit was up 13.6% at S$2892.1m; underlying net profit climbed 15.7% to S$2887.3m, meeting 83.5% of our full-year estimate.

Stable Singapore showing. Singapore operations put in a stable showing as guided. Revenue grew by 1.5% YoY and 6.1% QoQ to S$1530m, which also included S$55m revenue from the fibre rollout (vs. S$14m in 1QFY10 and S$31m in 2QFY10). Mainstay mobile business jumped 8.8% YoY and 5.7% QoQ, after adding another 81k of new subscribers for the quarter. Its fledging mio TV service also added another 29k users, bringing total subscribers to 155k; numbers are expected to increase after mid-2010 with the start of the EPL broadcast. Overall operational EBITDA margin slipped from 38.6% in 2QFY10 to 37.9% in 3QFY10, but still in line with its EBITDA margin guidance of 36-38% for FY10. It expects its EBITDA to grow at low single-digit level and other guidances also remain unchanged.

Improving Australia operations. SingTel’s Australia business saw a 4.8% YoY (+3.8% QoQ) rise in operating revenue to A$2302m, again aided by decent mobile revenue growth (+9.6% YoY, +5.6% QoQ), which contributed 63% to total revenue; its contribution to EBITDA was also higher at 68% vs. 67% a year ago. For the rest of FY10, SingTel expects Australia’s operating revenue and EBITDA to grow at low singledigit levels; capex at around A$1.1b; and free cashflow to be stable.

Maintain BUY and S$3.51 fair value. For its associates, SingTel expects both Bharti and Telkomsel (its two largest contributors) earnings to grow in local terms, although it notes that ordinary dividend will be lower. We are raising our FY10 revenue by 7.1% and earnings by 3.1% in view of the better than-expected 3QFY10 showing. But our SOTP fair value remains at S$3.51 and we maintain our BUY rating.

Beneficiary of large iPhone subscriber base

At a Glance

• Underlying profit of S$990m inline with ours, slightly above consensus expectations of S$970m.
• Singapore business and Optus delivered strong performances in the mobile business.
• We believe that iPhone customers acquired over the last one and a half year would continue to benefit SingTel
• Maintain BUY and TP for sustained mobile momentum, growth at Telkomsel, stronger regional currencies and potential re-listing of Optus as the catalyst.

Comment on Results 

Singapore profit slightly higher than expectations. Singapore net profit of S$343m (+ 7% yoy, +8% qoq) was slightly higher than our expectation of S$320m, due to (i) strong performance in the mobile segment with revenue up 9% yoy and +6% qoq (ii) Fibre roll out revenue of S$55m, up 77% qoq was also impressive. Singapore EBITDA stood at S$580m (+ 3% yoy, +4% qoq). Mobile market share was stable qoq at 46.2%. Pay TV subscriber base increased by 29K (versus 25K in 2Q10) from strong take up of bundled mio Home plans to reach 155K. 

Australia profit slightly higher. Net profit of A$165m (+16% yoy, +8% qoq) was helped by strong mobile performance where revenue stood at A$1459 (+10% yoy, +6% qoq) while mobile EBITDA margins were stable qoq at 25%. Optus EBITDA stood at A$529m (+4% yoy, +4% qoq). Optus continued to add mobile subscribers while strong A$ (up 6% qoq) continues to lend support. 

Associate results slightly below. Post-tax contribution of S$460m (+23% yoy, -3% qoq) was slightly below our expectations of S$470m as Telkomsel’s profit contribution at S$171m (+55% yoy, -7% qoq) was impacted by accelerated depreciation charges resulting from the shortening of useful life of certain network assets. Further strengthening of IDR should offset the negatives in our view.

SingTel gains more handphone customers

Total of 3.2m – a 46% share of the market – cements its leading position

SINGTEL said its total handphone customers in Singapore grew to 3.2 million by end-December 2009, up 8.1 per cent from a year ago.

According to the company, it added 81,000 new customers in the quarter. This brings its total mobile customer base to 3.2 million, cementing its lead in the market.

SingTel’s estimated market share is 46.2 per cent based on the latest data from regulator Infocomm Development Authority of Singapore.

The telco reports its third quarter results today.

SingTel said its iPhone offerings helped drive strong demand and contributed to 36,000 new postpaid customers, up from 30,000 in the previous quarter. It also gained 45,000 prepaid customers with targeted acquisition promotions.

In the region, the group said on an aggregate basis, the combined mobile customer base rose to 285 million as at Dec 31, 2009, an increase of 23 per cent, or 52 million from a year ago.

Besides its wholly owned Australian Optus, SingTel also owns stakes in telcos in India, Indonesia, Thailand, Bangladesh, Pakistan and the Philippines.

SingTel’s largest associate Bharti added 8.4 million mobile customers for the quarter, up from 8.1 million a quarter ago. Its mobile customer base as at Dec 31, 2009, increased 39 per cent, or 33.2 million from a year ago, to 118.9 million.

Last November, 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.

Its Indonesian associate Telkomsel grew its mobile customer base by 25 per cent, or 16.3 million from a year ago, to 81.6 million.

Optus said postpaid customers grew a record 164,000 during the quarter, to more than four million as at Dec 31, 2009.

During the quarter, Optus tightened its churn policy for customers who remained inactive after various recharge campaigns, and deactivated 272,000 prepaid customers. This resulted in a decline of 145,000 Optus prepaid customers for the quarter with total prepaid customers of 4.2 million as at Dec 31, 2009.