Singtel shares continue slide after second Optus outage, but analysts retain upbeat targets

SINGAPORE – Shares of Singtel fell further on heavy volume after its Australian subsidiary Optus suffered another emergency services outage.

Singtel fell as much as 3.8 per cent to $4.10 shortly after the market opened on Sept 29, before recovering to close the day at $4.12.

It was the most traded stock by value, with more than 60 million shares changing hands. The shares had already lost around 3 per cent of their value last week, following an earlier breakdown.

Optus, Australia’s second-largest telco,

on Sept 28 suffered an outage that disrupted emergency 000,

or triple zero, calls to the police, fire department and ambulance services on its network.

The issue, involving a mobile phone tower site in the Dapto area of New South Wales (NSW), affected around 4,500 customers and calls made between 3am and 12.20pm, including some emergency calls, the media reported.

In a Sept 29 statement, Singtel said one person who required emergency services was impacted, but this person was able to call emergency services from another phone successfully.

Singtel added that the outage experienced is a type that “carriers around the world routinely encounter” and “did not arise from any upgrade or maintenance action being conducted”.

It noted that the latest outage is “totally unrelated to last week’s triple zero incident. It is a different type of outage which was limited to one cell site out of 3,140 in NSW”.

Singtel was referring to an outage that took place across South Australia, Western Australia and parts of NSW on Sept 18 as a result of network upgrading.

A Singtel delegation led by chief executive Yuen Kuan Moon is scheduled to meet Australia’s Communications Minister Anika Wells and Optus CEO Stephen Rue on Sept 30 to discuss that outage, which is linked to the deaths of three people unable to make emergency calls via the 000 hotline.

Mr Rue has blamed human error by staff in Australia and India for “process breakdown”, saying the network’s engineers did not follow standard procedures during the upgrade.

The incidents threaten to trigger an exodus of Optus customers and inflict long-term damage to its reputation.

Optus currently contributes around half of Singtel’s revenues.

While Optus’ credibility has taken a hit, analysts who cover Singtel are not sounding the alarm yet.

Mr Paul Chew, who heads research at Phillip Securities, said that in terms of operations, Optus is capable of recovering and has done so after larger disruptions in the past.

He said Optus’ rival Telstra has also been impacted by a triple zero outage. Australia’s largest telco on Sept 29 also reported a power outage that left some of its customers in Western Australia unable to make 000 calls for about 12 hours.

The 4G network failure was flagged by Telstra as an “unplanned service interruption”.

Meanwhile, most of Singtel’s other operations such as associate mobile services, information technology services and data centres remain on “a resilient growth trajectory”, Mr Chew said.

Phillip Securities is maintaining its recommendation to accumulate Singtel, with an unchanged target price of $4.86. Other brokerages like Maybank are also keeping their “buy” recommendations on the stock, although this will not come without risks.

Optus will face rising pressure from politicians and industry insiders, who are calling for an overhaul of the industry’s minimum performance standards and stronger enforcement powers for watchdogs, for example.

Ms Nerida O’Loughlin, chairwoman of Australia’s federal telecommunications regulator, has also been quoted by the media as saying that she would investigate whether Singtel and Optus had invested enough in the networks to ensure they could provide reliable emergency service connectivity.

In a Sept 24 statement, Mr Yuen noted that Singtel has invested more than A$9.3 billion (S$7.8 billion) in Optus over the past five years, with a large proportion of that put into building network infrastructure across Australia.

He added that Singtel will “continue to invest as needed for Optus to provide reliable communication services to all Australians”.

Ms Wells has warned that Optus can expect significant fines for

the Sept 18 outage

.

The firm on Sept 24 was ordered by the Australia Federal Court to pay a A$100 million penalty – an amount it had previously agreed on with the Australian consumer watchdog – for “unconscionable” conduct, including selling handsets to people with intellectual disabilities and suffering financial hardship between 2019 and 2023.