SingTel Q1 profit up 7 percent on cost cutting

SingTel Q1 profit up 7 percent on cost cutting

Summary: Profitability was improved largely thanks to the "strategic initiatives" rolled out last year and lower handset subsidies doled out, but the telco's subsidiary Optus is facing headwinds from a weaker Australian dollar.

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Southeast Asia's largest telco SingTel has boosted its first quarter earnings largely on the back of cost cutting measures and strategic initiatives rolled out last year which included tiered mobile plans.

For the three months ended June, the group booked a 7 percent rise in net profit at S$1.01 billion (US$797 million). This was despite a 5.3 percent dip in revenue at S$4.29 billion (US$3.38 billion) for the same period.

SingTel noted its initiatives implemented over the last year had begun to bear fruit. According to Chua Sock Koong, SingTel Group CEO, the telco managed to improve yield and capture value from increased data usage in Singapore especially with tiered mobile data plans gaining traction among customers. Overall margins were also lifted with lower expenses for handset subsidies, and earlier restructuring measures in Australia.

The company added it would be focusing on strengthening its core business to grow revenue and for a more competitive cost structure. It pointed out the last quarter saw many significant investments in network, spectrum and digital businesses. Last May, the telco also outlined a transformation strategy which includes allocating up to S$2 billion (US$1.6 billion) over the next three years to pursue strategic acquisitions in the digital space.

Boost from regional associates

SingTel's regional associates all posted stronger performances from the previous year, which saw profit before tax rise 14 percent to S$552 million. Indian associate Bharti Airtel notably showed promise in turning the corner, despite the continued drag from its Africa business now facing regulatory hurdles and unrest in key markets.

"Our regional mobile associates have continued to perform well. We are also pleased to see some pricing discipline returning to the Indian mobile market and are optimistic that Airtel, as the market leader, is positioned to benefit from this," said Chua.

singtel q1
Boost from regional associates, with brighter outlook for India's Airtel. (credit: SingTel)

However, the weaker Australian dollar could hit its Australia subsidiary Optus in the current quarter. For the previous three months, Optus posted a 8 percent rise in net profit of A$167 million (US$152 million) despite a 5.3 percent dip in revenue of A$2.2 billion (US$2 billion) on customer losses.

Weaker outlook on currency losses

The weakening currency meant SingTel would revise downwards its group outlook. It now expects group revenue to decline by a "mid-single digit level" and earnings before interest, tax, depreciation and amortization to drop at a "low single digit level". The company had previously forecasted "stable" sales.

SingTel separately announced it would keep its Australian satellite unit after concluding a strategic review launched in March. The fleet of five satellites delivers free-to-air and pay TV, mobile telephony and broadband services to over two million Australian households and multi-national companies.

"Based on the review, SingTel is committed to growing and investing in the satellite business," the company said in a statement. According to Reuters, offers received by SingTel were below its A$2 billion (US$1.8 billion) reserve price.

Topics: Telcos, Networking, Singapore, SingTel

About

Loves caption contests, leisurely strolls along supermarket aisles and watching How It's Made. Ryan has covered finance, politics, tech and sports for TV, radio and print. He is also co-author of best seller "Profit from the Panic". Ryan is an editor at ZDNet's Asia/Singapore office.

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