SINGAPORE (Feb 8): Singapore Telecommunications (Singtel) saw its earnings fall 8.5% to $890.2 million in the 3Q ended December, from $972.8 million a year ago.
This was mainly due to lower contributions from associates due to lower profits at Airtel, Telkomsel and Globe, as well as lower contribution from NetLink NBN Trust following Singtel’s reduction in its economic interest.
Share of results of associates and joint ventures fell 20.8% to $383.6 million in 3Q18, from $484.6 million a year ago.
Singtel’s 3Q18 earnings were also impacted by voice revenue declines, and higher network depreciation and amortisation from increased infrastructure investments.
Operating revenue grew 4.4% to $4.60 billion in 3Q18, from $4.41 billion a year ago, lifted by contribution from Turn, which was acquired in Apr 2017.
Operating revenue from Singtel’s core business, comprising the Group Consumer and Group Enterprise segments, edged up marginally by 0.4% to $4.28 billion in 3Q18.
Group Consumer revenue grew 3.1% to $2.66 billion during the quarter, led strong growth in the Australia Consumer business, which recorded its highest quarterly postpaid customer growth.
Singapore Consumer revenue, however, fell 5.5% on declines in voice revenues and equipment sales, as well as cessation of revenue from sub-licensing of TV content rights from this quarter.
"A lot of mobile users are switching from the traditional bundled plan to a SIM-only plan. When that switch happens, the pressure will be on the topline because the ARPU (average revenue per unit) of a SIM=only plan is significantly different from a bundled handset smartphone plan. When that happens, you will see a decline of ARPU,” explains Yuen Kuan Moon, CEO of Consumer Singapore, Singtel.
“But it doesn’t mean the margin rate [for SIM-only customers] is any lower than traditionally bundled plan. So it is a transition," Yuen adds.
The higher operating revenue was partially offset by a 3.9% decline in Group Enterprise revenue to $1.62 billion in 3Q18, from $1.69 billion a year ago.
This was mainly attributable to phasing of projects, one-off product sales in the last corresponding quarter, and continued declines in traditional carriage services.
Meanwhile, the group’s digital businesses continued to scale, with revenues more than doubling to $325 million in 3Q18 and digital marketing arm Amobee delivering positive EBITDA for the second straight quarter.
Group EBITDA rose 6.0% to $1.29 billion in 3Q18, from $1.22 billion a year ago.
As at end December, cash and cash equivalents stood at $840.9 million.
“We see our investments in network infrastructure and spectrum as critical to our future growth and longer term returns in this digital world. Already, our transformation strategy is delivering with digital and ICT services accounting for 23% of our revenue this quarter,” says Chua Sock Koong, Singtel Group CEO.
“In our core business, the digitalisation of our services across the group has enabled us to deliver better customer experience and manage costs. The Australia business, particularly mobile, drove profitable growth. We will strive to provide more value to our customers by anticipating their needs and staying ahead of the competition,” she adds.
In a flash note on Thursday, UOB Kay Hian analyst Jonathan Koh notes that Singtel’s underlying net profit of $898 million for 3Q18 was below the research house’s forecast of $975 million.
“Regional mobile associates fared badly with contributions down 17.9% y-o-y,” Koh says. “Earnings contributions from Bharti Airtel dropped 73.4% y-o-y to just $38 million due to mandatory reduction of interconnect usage charge from Rs0.14 to Rs0.06 and intense price competition from Reliance Jio.”
At a results briefing on Thursday morning, Singtel’s Chua maintained that the group is bullish about the long-term prospect in India amid a growing young population that is expected to surpass China. However, she notes that pricing pressures are not expected to ease in the short term, with three major players currently in the market.
Nonetheless, Singtel believes its associate, Airtel, can sustain the telco war in India on the back of its robust balance sheet.
Shares of Singtel closed 2 cents higher at $3.44 on Wednesday.
