Singtel's Q1 earnings hit 16-year low on Airtel losses, higher costs

Singtel's slump in net profit was largely due to losses at Bharti Airtel in India, as well as higher depreciation and amortisation costs in network and spectrum across the group.
Singtel's slump in net profit was largely due to losses at Bharti Airtel in India, as well as higher depreciation and amortisation costs in network and spectrum across the group.PHOTO: ST FILE

SINGAPORE - Singtel's net profit has hit a 16-year low amid industry and economic headwinds, according to results released before the market opened on Thursday (Aug 8).

The mainboard-listed telco posted a 35 per cent dive in net profit for its first quarter ended June 30 to $541.1 million, down from $831.5 million in the year-ago period. This marks its lowest quarterly showing since 2003, when net profit before goodwill stood at $461 million for the fourth quarter to March 31 that year.

Singtel said that the slump in its latest earnings was largely due to losses at its Indian associate Bharti Airtel, as well as higher depreciation and amortisation costs in network and spectrum across the group.

Excluding Airtel, net profit would have fallen 3.4 per cent, Singtel said. Its share of associates' pre-tax profits fell by 13.7 per cent to $359 million, largely led by Airtel.

Despite the intense competition in India's telecom market having whittled the number of players down to three, Singtel management remained cautious on the near-term prospects.

"It depends on how each player will react. The industry continues to be very capital intensive, like most telco businesses around the world, so that's something we also have to be mindful about," said Arthur Lang, head of international business for Singtel, when asked at a morning briefing about the Airtel outlook.

He also said: "We are hoping for the best, but definitely we are prepared here for the next few quarters to be difficult as well, from a balance sheet standpoint."

Group chief executive Chua Sock Koong also said that "I don't think that it would be reasonable to expect us to be able to tell you exactly when Airtel will turn around".

"The market will start to turn around if you see decisive price increases. And, frankly, the timing of that is anyone's guess," she added.

In Singapore, competition remained intense with the entry of new mobile virtual network operators and the launch of all-digital brands by mobile operators, according to Singtel. Its Singapore consumer revenue declined 5.1 per cent, partly offset by higher equipment sales.

Monthly average revenue per user (ARPU) was $40 for post-paid mobile customers here, down from S$46 for the year before, after the launch of digital-only brand GOMO in March.

Yuen Kuan Moon, who heads the Singapore consumer business, said that a lower entry price for the GOMO segment has diluted overall ARPU, but noted that the cost of service was lower than "the traditional mobile customers that come onto Singtel-branded service" as well.

"We're very pleased with the traction that GOMO has gained since we launched last quarter. It is allowing us to address a segment which previously may not (have) considered Singtel as a service provider, so that momentum is actually quite strong," he added.

Meanwhile, the enterprise business was the only segment to post a year-on-year fall in operating revenue, with turnover down by 5.1 per cent to $1.44 billion. Ebitda (earnings before interest, taxes, depreciation and amortisation) in the segment also shrank for the quarter, by 7 per cent.

Singtel group enterprise chief Bill Chang said that the company is keeping an eye on economic slumps both globally and closer to home.

"There is a certain impact on longer decision cycles and cutbacks in some of this," he said. "However, we're also ensuring that we're innovating and bringing services that require less capital expenditure, like cloud as a service."

Ms Chua also said in a statement: "The Airtel impact aside, business is stable as we continued to execute to strategy in the first quarter."

Earnings per share for the quarter was 3.32 cents, down from 5.09 cents a year ago.

No dividend was recommended for the first quarter, the same as the corresponding period last year, but Singtel has committed to maintain ordinary dividends at 17.5 cents a share for the 12 months, until the end of this year.

Singtel's first-quarter results come a week after credit agency Standard & Poor's cut the telco's outlook to "negative" on expectations of weaker financial metrics for the coming year, after Moody's Investors Service and Fitch Ratings likewise lowered their outlook to "negative" in March.

Singtel headed into the midday trading break down four cents or 1.22 per cent at $3.25, after the results were released.