Bharti Airtel in money laundering probe

The authorities are investigating top mobile phone carrier Bharti Airtel under its money laundering and foreign exchange rules in a probe related to the grant of airwaves a decade ago.

Bharti shares fell as much as 5.1 per cent during trade yesterday after Minister of State for Finance S S Palanimanickam told Parliament that the Directorate of Enforcement was investigating the company. The shares pared most losses to close 1.2 per cent down.

Indian mobile market leaders Bharti and Vodafone’s local unit are not involved in a massive scandal over alleged below-market-price sale of lucrative telecoms licences in 2008 that has rocked the once-booming sector. They are, however, being investigated over airwave grants during 2001 and 2002.

Bharti, controlled by India’s fifth-richest man Sunil Mittal, said in a statement it was cooperating with investigators. It did not give the reason for the investigation, but a company source told Reuters that it was related to the probe over airwave grants.

“Bharti Airtel maintains the highest standards of corporate governance and regulatory compliance. We have already provided all relevant details asked for by the relevant authorities in this matter and will be happy to cooperate further,” the company said in the statement.

The Minister, who was replying to questions from a lawmaker through a written statement, declined to give further details.

Bharti, nearly one-third owned by South-east Asia’s top phone company, SingTel, operates in 20 countries across Asia and Africa and is the world’s fifth-biggest mobile phone carrier by subscribers. India is its biggest market.

Shares in Bharti, valued at more than US$21 billion (S$26 billion), lost 3.6 rupees (S$0.08) to close at 304.15 rupees, after hitting an intra-day low of 292.05 rupees.

A series of corruption scandals during Prime Minister Manmohan Singh’s second term have rocked the government and businesses, sparking street protests by anti-graft activists and spurring a flurry of investigations of companies.

The scandal over the 2008 licence grant has ensnared prominent politicians and high-profile corporate executives. The police have charged a total 19 people and six companies in the scandal, which the CAG has estimated has cost the exchequer as much as US$34 billion in lost revenue.

Last November, the police conducted searches at offices of Bharti and Vodafone India seeking details of airwaves allocated to them in 2001 and 2002 by a government then led by the Bharatiya Janata Party (BJP), now in opposition.

The investigation is continuing and police are yet to file any formal charge against the companies. Both Bharti and Vodafone India have denied any wrongdoing.

The BJP had attacked the Congress-led government over the corruption scandals and forced a near-shutdown of Parliament for much of last year. The BJP had alleged that the government was trying to “divert the attention” by probing spectrum grants during its term in power. REUTERS

Associates to grow after two year hiatus

• FY12 core earnings of S$3676m (-3.3% y-o-y) in line with earnings drop due to 41% decline in Bharti’s contribution.

• Final DPS of 9 Scts (including interim DPS of 6.8 Scts) translates to 68% payout ratio and 5% yield; Singtel likely to see high single-digit growth in FY13F.

• Buy for attractive valuation (12.5x PE versus 13.2x hist. avg.), decent growth (FY12-14F EPS CAGR of 5%) and yield (5.6% based on 70% payout ratio).

Highlights

Stable Singapore EBITDA guidance due to start-up losses at Digital Life segment. FY12 EBITDA was stable at S$2.24bn (-0.5% y-o-y) despite 2.3% growth in revenues due to higher mobile connections and costs of acquiring triple play customers. Management guided for low-single digit revenue growth but stable EBITDA on the back of start-up losses at Digital Life. Capex to rise 5% to S$950m due to network enhancements and expansion of Kim Chuan Data Centre.

Stable Optus EBITDA guidance, keeping in mind lower mobile termination rates. FY12 EBITDA was up 1% to A$2357m on the back of a 0.9% growth in revenues. Guidance of low single-digit revenue growth but stable EBITDA due to lower mobile termination rate of 6 cents (prev 9 cents), from January 2012. Staff reduction to help contain costs. Capex to decline 8% to A$1.1bn due to more site-sharing with VHA.

Associates likely to grow 20% in FY13F after two years of decline. FY12 post-tax earnings contribution dropped 12% to S$1414m as Bharti’s 41% decline offset 5% & 31% growth at Telkomsel & AIS respectively. We expect associates to register 20% growth in FY13F on the back of Bharti’s 50% growth (consensus projects 75% growth) and growth at other associates. Bharti’s weakness was due to 3G amortisation costs and paper loss on foreign debt due to weak Indian rupee. Going forward Bharti should register strong growth on a low earnings base as amortization costs are already factored and EBITDA is improving in both India and Africa. Strong SGD is a key risk though.

Lacking Catalysts

Within expectations. FY12 results and dividends were in line with market expectations. FY13 looks set to be a repeat of FY12, but with the additional dampener of start-up losses from its new Digital L!fe division to contend with. Guidance was subdued, with no catalysts to drive either growth or yield. We maintain our SELL call, with a SOTP-derived target price of $2.82. The dividend yield of 4-5% is not attractive when compared to M1 or StarHub’s better yields and higher potential for earnings upside.

Nothing much to shout about. Underlying net profit of SGD3,676m (down 3% YoY) for FY12 and SGD1,023m (up 3% YoY) for 4Q12 were in line with expectations as 4Q12 benefited from seasonally lower operating costs. However, free cashflow declined YoY to SGD3.5b on the back of lower dividend contributions from associates and higher capex in Singapore and Australia. As a result, final dividend was kept at SGD0.09 a share (68% full year payout).

Subdued guidance. FY13 guidance was subdued, with Singapore and Australia revenue to grow in the low single digits and EBITDA to remain stable. Management expects margins to stay under pressure this year as the Digital L!fe division will still be in start-up stage. Australia is preoccupied with fend off competitors willing to sacrifice margins for market share, while in Singapore, TV content cost could be a source of downside to earnings as the Barclay’s Premier League and other “iconic” content comes up for bidding. The current slide in the Indian rupee could also turn into a longer-lived trend.

No upside for dividends. Also, with free cashflow expected to remain stagnant and SingTel already paying out 83% of free cashflow as dividends, there is unlikely to be further upside to dividends. Further, capex is expected to rise further this year on the back of heavy investments in expansion of 4G network coverage and new investments in data centers to support new business initiatives, such as a new cloud computing service targeted at SMEs.

SingTel Q4 profit up 30% on-year to S$1.29 billion

Telco easily beats analyst forecasts

Surpassing analyst forecasts, Singapore Telecommunications (SingTel) this morning announced that fourth quarter net profit for the Group grew 30 per cent to S$1.29 billion, up from S$991.7 million a year earlier, primarily from an exceptional net tax credit of S$270 million on an increase in value of assets transferred to an associate.

Excluding this and other one-off items, underlying net profit grew 3 per cent, driven by strong mobile revenue growth from Singapore and improved contributions from the regional mobile associates. The stronger Australian Dollar also lifted net profit.

Profit beat the S$966 million average of seven analysts’ estimates, reported Bloomberg.

“We assume both Singapore and Australia achieve 2012 financial year earnings before interest, tax, depreciation and amortisation guidance but only by the slimmest of margins, and with a strong fourth quarter,” Commonwealth Securities said before the earnings report.

For the full year, net profit increased 4 per cent to S$3.99 billion, while underlying net profit declined 3 per cent. Group revenue grew 4 per cent to S$18.83 billion, boosted by mobile growth in Singapore as well as its overseas subsidiries.

SingTel reported yesterday morning that its global mobile customer base had grown 42.9 million, or 11 per cent, to 445 million in the 12 months ending March 31, led by an 19.1-million spike in its Airtel unit in India. the company added about 12 million mobile-phone subscribers in during the quarter.

That number includes customers at six phone companies in Asia and Africa in which the company holds minority stakes, as well as the 13 million mobile subscribers in SingTel’s domestic business and its Australian subsidiary Optus.

“There’s strong demand for handsets, especially the iPhone 4S,” analyst Carey Wong at OCBC Investment Research said before the announcement. “Most people are more and more mobile. You’re not on a computer, you’re on a smartphone or tablet.”

In the fourth quarter, revenue for the group rose 3 per cent to S$4.78 billion, SingTel said in its press release this morning. Ordinary pre-tax earnings from the regional mobile associates grew 6 per cent to S$510 million.

The Singapore company controls around a third of India’s biggest mobile phone operator Bharti Airtel, which this month reported a ninth straight fall in quarterly profit partly due to amortisation and interest costs on its 3G network investments, as well as higher tax provisions.

Bharti’s earnings have been on a downtrend since it paid US$9 billion (S$11.3 billion) to expand into Africa.

SingTel’s Indonesian affiliate PT Telekomunikasi Selular posted a 23-per-cent rise in net profit for the quarter ended in March as growth in data services due to the popularity of smartphones offset its declining voice segment.

Said SingTel group CEO Chua Sock Koong in the press release: “It was a challenging quarter but we kept focused on executing our strategy and met the guidance we had set out. The regional mobile associates turned in marked improvements in their operating and financial performance.”

Singtel's Q4 net profit up 30% to S$1.29 bln

Singapore Telecommunications Limited (SingTel) announced on Thursday a 30 per cent increase in its Q4 net profit to S$1.29 billion, from S$992 million a year ago.

Earnings per share for Q4 increased by 2.6 per cent to 6.42 Singapore cents from 6.26 Singapore cents a year ago.

For its full year results in the year ended March 31 2012, its total net profit increased by 4.3 per cent to S$3.99 billion.

The overall earnings per share for the year ended March 31 2012 was at 23.07 Singapore cents, a 3.3 per cent drop from 23.86 Singapore cents a year ago.