Singtel's financial first-quarter results have been hit by a host of factors: intense price competition in India and Indonesia, a reduced economic interest in NetLink NBN Trust, adverse currency impact and higher withholding tax on dividends.
The telco yesterday posted a 6.6 per cent year-on-year fall in net profit to $832 million. Revenue slipped 0.5 per cent to $4.13 billion for the three months ended June 30, while earnings per share fell to 5.09 cents from 5.45 cents.
For its Singapore consumer business, mobile service revenue fell 4 per cent due to the continued voice to data substitution and higher mix of SIM-only plans, while Ebitda (earnings before interest, tax, depreciation and amortisation) for the segment slid 3 per cent, owing in part to the cessation of sub-licensing for the English Premier League.
Group enterprise revenue was down 3 per cent year-on-year due to the completion of a major infrastructure project in the preceding year.
In Australia, overall revenue rose 5 per cent on strong customer growth and higher equipment sales. In Indonesia, profit before tax for Telkomsel fell 38 per cent to $237 million, while Airtel in India and South Asia posted a 78 per cent drop in pre-tax profit to $43 million.
Asked how the group plans to turn around the performance of its Indonesia and India associates, Mr Arthur Lang, CEO of Singtel's international group, said the mandatory registration of pre-paid SIM cards that caused Indonesia's price competition has ended, and since Hari Raya, its operational numbers have been improving. Telkomsel is also focusing on boosting its digital content offering and managing costs.
"Telkomsel has increased prices 4-11 per cent on some of the data plans and this has happened for the other two telco players as well, so (the recovery) is in some ways industry-wide... Telkomsel has publicly said it is expecting price stabilisation to come back in the next few quarters," he added.
AT A GLANCE
$4.13 billion (-0.5%)
$832 million (-6.6%)
For Airtel, the industry has gone through a shake-up with new entrants like Reliance Jio offering aggressive plans, as well as the ongoing merger of Vodafone and Idea. As a result, Airtel India's revenue and average revenue per user (Arpu) have come under pressure, particularly from the entry of Reliance Jio.
Mr Lang said a lot of the impact in high-value customers moving to lower-cost plans had already occurred. While there is still more to come with the Vodafone-Idea merger, he said Airtel was focused on adding customers and in the past quarter had delivered a historically low subscriber churn rate of 2 per cent. This was a good result, he noted, adding that when the industry stabilises in six to nine months, the telco's revenue and Arpu should likewise stabilise.
OCBC Investment Research analyst Joseph Ng said Singtel's first-quarter results came in slightly under the brokerage's expectations, but he was "cautiously optimistic" on the prospects for Telkomsel and Airtel. "While management expects the market to remain soft for the next six months, the worst should be behind Airtel," he added.
CEO Consumer Singapore Yuen Kuan Moon also allayed fears over the entry of a fourth telco in Singapore in the coming months, saying Singtel has differentiated itself by maintaining superior network quality and offering higher value services and innovative offerings. At the group level, it is headed towards a mid-single-digit decline in revenue, while Ebitda remains stable.
Some spin-offs may be in the offing. Preparations for the initial public offering (IPO) of Airtel Africa have started. Singtel is also mulling over a partial or full IPO, or finding a strategic partner, for its digital business, which has yet to show consistent revenue growth and profitability. Revenue for its Digital Life segment slipped 6 per cent to $277 million in the latest quarter, and posted $23 million in losses.
Singtel shares closed unchanged at $3.20 yesterday.
Correction note: An earlier version of the story wrongly attributed a quote by Singtel's CEO Consumer Singapore Yuen Kuan Moon. We are sorry for the error.