Singtel Q3 profit falls 23.8% to $627.2m

Singtel's operating revenue stood at $4.38 billion, down 5 per cent from $4.63 billion a year earlier.
Singtel's operating revenue stood at $4.38 billion, down 5 per cent from $4.63 billion a year earlier.PHOTO: ST FILE

SINGAPORE (THE BUSINESS TIMES) -Singtel posted on Thursday (Feb 13) a 23.8 per cent slide in its third-quarter net profit to $627.2 million for the three months ended Dec 31, down from $822.8 million a year ago.

This was due mainly to weaker enterprise performance and the final settlement of a gain on the Airtel Africa pre-initial public offering investment, as well as lower exceptional gains compared with the previous year.

Earnings per share for the quarter came in at 3.84 cents, versus earnings per share of 5.04 cents in the preceding year.

Operating revenue stood at $4.38 billion, down 5 per cent from $4.63 billion a year earlier. This was mainly attributable to lower equipment sales, weak business sentiment and spending, continued price erosion in its carriage services as well as heightened market competition.

In particular, the group highlighted increased competition in its enterprise business in Australia, where new entrants reselling NBN has impacted revenue and Ebitda (earnings before interest, taxes, depreciation and amortisation) for Optus Business.

Regional associates' pre-tax profit contributions were up 15 per cent to $393 million on the back of improved operational performances of Airtel and Globe. Contributions were partly dragged down by a weaker performance from Telkomsel, which is facing slowing data growth due to intense competition outside Java, Indonesia.

Airtel recorded narrower losses due to price increases across the Indian market and strong growth in 4G customer net adds. Arthur Lang, chief executive officer, international, said in a results briefing that the group is "strongly encouraged" by the growth in 4G subscribers, and expects it to continue into the current quarter and subsequent quarters this year.

Singtel reported a quarterly loss for the first time in November, after Airtel recorded a hefty provision of $5.49 billion for an Indian court judgement that ordered operators to pay the state billions in past dues. Airtel is currently awaiting a Supreme Court decision after operators filed an application for modification, and has not made payments that were due on Jan 23, 2020.

Mr Lang, commenting on Airtel's ability to pay the fine depending on the outcome of the Supreme Court, said: "I would say Bharti's balance sheet is rock solid today." He also pointed to Airtel's "very successful" raise of U$3 billion in January, through a share placement and convertible bond issue, that reflected market optimism of Airtel.

Asked about the impact of the novel coronavirus outbreak on Singtel's business, group CEO Chua Sock Koong said the most immediate impact would be on roaming traffic - both inbound and outbound - due to travel restrictions in Singapore and other countries.

But the group has also seen a greater need from customers for software and cloud-based unified communications services as more companies kick-start their business continuity plans.

Singtel has made a downward revision of its forecast for the current financial year ending March 31, 2020 to reflect the competition the group is facing, as well as the impact of dampened business and consumer sentiment. Group revenue is expected to be stable and Ebitda is expected to decrease by a low single digit.

Excluding NBN migration revenue in Australia, group revenue is expected to decline by a mid single digit and Ebitda is expected to decline by low teens. Singtel had previously expected group revenue, excluding NBN migration revenue, to be stable.

No dividend was recommended for the quarter as Singtel makes payouts on a half-yearly basis. The board most recently approved an interim one-tier exempt ordinary dividend of 6.8 cents per share, which was paid in January this year.

Looking ahead, Singtel noted that the group's operations will continue to face "further intense competition and carriage declines" due to weak business and consumer sentiment.

Singtel shares closed at $3.34 on Wednesday, up four cents or 1.2 per cent.