Singtel to recognise its share of Airtel's provision at $357m

Singtel will include a one-time exceptional loss of $357 million in its full-year results later this month - a move that will put to rest the saga of unpaid spectrum charges and other related levies of its Indian associate.

The telecommunications company told the Singapore Exchange yesterday that the decision is to reflect recognition of 56.4 billion rupees (S$1 billion) as an exceptional charge by Bharti Airtel.

Airtel announced fourth-quarter results on Monday.

Singtel has an effective stake of about 35 per cent in Airtel, India's third-largest telecoms operator by subscribers.

Airtel's provisions arise from an Indian Supreme Court decision in January ordering the country's telcos to pay as much as US$13 billion (S$18.4 billion) for spectrum and licence fees.

Indian telcos had challenged the way the authorities calculated their annual adjusted gross revenue, a share of which is paid as licence and spectrum fees.

The court ruling upheld the government's method, while rejecting the companies' plea to exclude revenue from non-telecoms businesses.

Airtel reported a loss of 52.37 billion rupees for the fourth quarter, mainly due to the spectrum charges.

However, it said revenue rose 15 per cent to 237.23 billion rupees for the three months to March 31.

Airtel shares surged 10 per cent to a record high yesterday as customers upgraded their data and calling plans and the Indian telecoms operator raised mobile tariffs.

Its average revenue per user, a key metric for the telecoms sector, rose 25 per cent, even after Indian telcos had raised calling and data plan prices in recent months.

  • $357m

    The one-time exceptional loss Singtel is set to lodge in its full-year results owing to Bharti Airtel's unpaid spectrum charges and other related levies.

Investors in Singapore also gave a thumbs up by pushing Singtel shares up 1.12 per cent to $2.70 yesterday, but they are still some way from DBS Bank's target price of $3.02, revised up last month.

DBS analyst Sachin Mittal in a recent research report had, among other positive signals for Singtel, noted an expected increase in contributions from Airtel.

Most telcos worldwide are likely to benefit from the pandemic.

With subscribers stuck at home due to lockdowns, the reliance on telcos has increased and may put them back on the map as strategic communication providers.

Data sharing of users' movements - or contact tracing - is being used to slow the spread of the coronavirus.

That is likely to reopen discussions about using data from network infrastructure more effectively.

Even some of the negative impacts, such as a possible slowdown in rolling out 5G services, is likely to help rather than hurt.

Investors expect higher dividend payouts as telcos will be more careful in spending on 5G in the wake of weaker economic conditions.

This will boost free cash flow and hence raise dividend per share of telcos with strong balance sheets.

A version of this article appeared in the print edition of The Straits Times on May 20, 2020, with the headline 'Singtel to recognise its share of Airtel's provision at $357m'. Print Edition | Subscribe