Singtel half-year results unfazed by currency headwinds

Singapore Telecommunications (Singtel) has reported mobile data growth across its core business and regional associates offset significant currency headwinds, delivering strong operating results across each of its markets in the half year ended September 30.

The company reported that group net profit rose 5.3 percent year on year to SG$1.97 billion, and in constant currency terms it was an 8.7 percent rise. However, revenue dropped 0.8 percent year on year to SG$8.39 billion, but up 6.7 percent in constant currency terms.

On a quarter by quarter basis, the company said net profit stabilised in Q2 at SG$1.03 billion, up 3 percent in constant currency terms. However, due to a 13 percent decline in the Australian dollar, operating revenue for the group slid 3 percent to SG$4.18 billion; while earnings before interest, tax, depreciation, and amortisation (EBITDA) was also down 3 percent to SG$1.29 billion. In constant currency terms, however, both operating revenue and EBITDA grew 5 percent.

Singtel Group CEO Chua Sock Koong said the company continued to strengthen its position across all of its markets: Singapore, Australia, and the associates' markets.

"Mobile data growth continues to be a key focus," she said in a statement on Wednesday.

"Our investments in 3G and 4G network infrastructure and spectrum, alongside increasing smartphone penetration, are delivering improved experiences for customers. While currency weakness has affected our reported numbers, our underlying performance is resilient."

In the company's consumer business, Singapore posted EBITDA growth of 10 percent on stable overall revenue, while Australia delivered revenue and EBITDA growth of 9 percent respectively

The company said the growth was due to Singapore and Australia customers trading up for higher-tier data plans as the company made greater investments in its 4G network and offerings, including the further deployment of its LTE service on the 900MHz spectrum in Singapore, and Optus continuing its network investments in 700MHz spectrum, with 4G coverage now reaching over 90 percent of the population.

At the same time, Singtel said growth in data revenue underpinned its consumer operations in both Singapore and Australia.

In Singapore, more than half of all customers in the prepaid space consumed data services, the company said. The telco debuted a SIM-only data plan for postpaid customers in September.

In Australia, its mobile services revenue rose 3 percent with strong gains in postpaid handset customers and average revenue per user; and mobile data grew 21 percent.

In the content space, group consumer revenue and EBITDA rose 7 percent and 9 percent respectively, in constant currency terms. Singtel attributed the rise as a result of the company securing broadcast rights to the English Premier League for both Singapore and Australia. In addition, Optus won mobile rights from Cricket Australia.

A weaker Australian dollar saw the group's enterprise revenue decline by 1 percent while EBITDA grew by 2 percent. In constant currency terms, revenue and EBITDA increased 2 percent and 4 percent respectively.

However, the company continued to make investments during the half-year, including a SG$400 million Tier 3-Plus datacentre for collocation and cloud services. It also completed the acquisition of Trustwave, a deal valued at $810 million.

"I am pleased that we have continued to execute well in ICT amid pricing pressures. This quarter's results also reflect good progress and new wins in cybersecurity, cloud services and advanced analytics, as the Singapore government embarks on its smart nation initiative. These are beginning to contribute to our earnings growth," Koong said.

Looking forward, the company reaffirmed the guidance it issued in May, with the exception of revising its expectations for its mobile communications business in Singapore. It previously expected that it will grow by mid single-digit level, but based on half-year results where it grew only 2 percent, Singtel believes it will remain consistent for the remainder of the financial year and will grow by low single-digit level.

The company also noted that despite the Australian Competition and Consumer Commission's (ACCC) final decision to reduce wholesale prices for mobile terminating access services (MTAS), due to take effect from January 1, 2016, it does not believe the change will have a major impact on Optus' EBITDA for the full financial year. It does, however, expect during the quarter and financial year ending March 31, 2016 to see Optus' incoming mobile service revenue lower by approximately AU$200 million due to reduced MTAS rates.

Earlier this year, Singtel announced it would no longer be publicly listed in Australia, saying the decision to remove itself "reflects institutional investors' preference to hold and trade Singtel shares on its home exchange, the SGX".