Higher tariffs and cost-cutting measures at Singapore Telecommunications Z74 ’ Australian unit, Optus, boosted its underlying earnings for 1HFY2025, which ended in September. However, net profit fell due to the absence of a one-off gain from its Indonesian associate, Telkomsel. NCS, Singtel’s enterprise services arm, also contributed by securing additional contracts, the telco reported on Nov 13.
For the six months ended September, Singtel reported earnings of $1.23 billion, down 42% y-o-y. The year-earlier period was distorted by a one-off gain from the reorganising of its stake in Indonesia’s Telkomsel. The telco’s ebitda was up 9% y-o-y to $1.95 billion, and its ebit, or earnings before interest and taxes, was up 27% y-o-y to $738 million. Singtel’s operating revenue remained stable at $6.99 billion.
Optus saw a 58% y-o-y ebit growth to A$223 million ($195 million), while ebitda was up 7% y-o-y. Similarly, NCS saw robust ebit growth of 40% y-o-y to $130 million, while revenue grew 3% y-o-y to $1.43 billion, thanks to improved margins and growing contract volumes. NCS is securing more growth in the future with bookings of some $1.5 billion. “Optus and NCS drove the positive momentum, underscoring our focus on execution and operating rigour,” says group CEO Yuen Kuan Moon.
Ng Tian Chong, CEO of Singtel Singapore, says that certain big accounts are spending less because of macroeconomic headwinds. However, there are still “pockets of growth” as well. This includes customers moving away from legacy technology to cloud-based, software-defined solutions, such as transitioning from voice to unified communications (UC).
For example, Singtel recently announced its partnership with Swiss multinational Nestlé to enhance its cloud-based network infrastructure and connect its global network using software-defined wide area networks (SD-WAN).
Additionally, Singtel launched Southeast Asia’s first quantum-safe network, designed to protect against potential threats from quantum computers, which can break commonly used encryption algorithms and disrupt the digital economy.
While the macroeconomic environment and overall market sentiment have been “soft” in the past 12 to 16 months, Singtel has capitalised on these pockets of growth, which are growing at double digits y-o-y and will continue to do so, adds Ng.
Greater optimism
In a sign of greater optimism, Singtel has narrowed the range for its FY2025 ebit growth rate guidance from high singles to low double digits. Given its sprawling interests in various markets worldwide, the company is keeping a close eye on the bigger picture. As such, it is monitoring geopolitics. According to CEO Yuen, Singtel must be prepared regardless of the outcome of the US elections and within Southeast Asia, the stance has been very clear. “We want to make sure that we are doing business with all parties, and we welcome all investment,” Yuen says.
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Still, he acknowledges the challenges ahead, particularly with higher tariffs expected globally. Businesses will need to navigate this shifting landscape. However, Yuen sees opportunities for Singtel to bridge the East and West, leveraging its global reach, connectivity and relationships with telecoms worldwide.
The US presidential elections also impact foreign exchange (forex) volatility, which may affect Singtel, given its regional presence. Singtel reports that, in Singapore dollars, the company’s exposure to forex volatility vis-à-vis the Singapore dollar has held firm, says Yuen. “If the US dollar continues to strengthen, then you would expect the Singapore dollar to continue to appreciate against other currencies in the region,” he says.
Arthur Lang, the company’s CFO, also notes that Singtel benefits from the “portfolio effect” as the telco and its associates operate across multiple countries. While the Singapore dollar may be strong relative to some currencies, other currencies in the portfolio may strengthen or weaken less than others, balancing out volatility. “For a business as large as ours, the currency volatility was a 3% move against our underlying net PAT,” Lang adds. “This is something we have to accept if we want to run a regional business.”
Demand for data centres
In addition to Optus and NCS, Singtel is leveraging the growing demand for data centre capacity to generate new revenue. This demand is underpinned by the increasing demand for digitalisation, cloud services and generative AI. Singtel’s new data centre at Tuas is expected to be available in 2026 and will offer 58 megawatts (MW) of capacity.
Bill Chang, CEO of Digital Infraco, which manages Singtel’s data centre business, says that demand in Singapore remains robust, and activity is continuing to be strong despite the limited supply. Chang notes that Digital Infraco’s revenue growth has been driven by one-time reservation fees for the new Tuas DC, price uplifts for existing customers, and utility pass-through.
The implementation of country sovereignty laws is also a positive trend, driving the demand for local data centres. These regulations ensure that data related to citizens, businesses or government activities stays within national borders and complies with local laws. “We see that moving, and that is evidenced by all these billions of dollars that all these big hyperscalers, especially in the US, are investing in Thailand, Indonesia and Malaysia,” says Chang .
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Singtel has also struck partnerships with regional associates and energy companies in Thailand, Indonesia and Malaysia to take advantage of this growth in demand. Looking ahead, Chang notes that the ebitda of Nxera, Singtel’s data centre joint venture with Telekom Malaysia, is expected to double by 2028 given the upcoming Tuas DC, mismatch in demand and supply currently and their minority stake in regional DCs.
Meanwhile, the telco’s share price has gained around a third year to date, as investors increasingly recognise Singtel’s ongoing operational improvements and active capital management strategy. Shareholders are looking forward to Singtel’s generous dividends, which are paid regularly before the pandemic.
Singtel plans to pay a total interim dividend of 9.8 cents per share. This consists of a core ordinary dividend of 5.6 cents for 1HFY2025 and a so-called value realisation dividend of 1.4 cents, derived from the excess of its capital recycling programme. The 7 cents in interim dividend for 1HFY2025 is an increase of 35% y-o-y. Shareholders are also poised to receive another 1.9 cents from the second tranche of the value realisation dividend the telco declared when it announced its FY2024 earnings in May.
