SingTel Q2 profit down 1.6 percent, downgrades Australia outlook

SingTel Q2 profit down 1.6 percent, downgrades Australia outlook

Summary: [UPDATE] Southeast Asia's largest telco braces itself for first drop in annual revenue in 14 years, as it books worse than expected earnings partly due to higher costs and weakness from Australian unit Optus.

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SINGAPORE--Southeast Asia's largest telco Singapore Telecommunications (SingTel) has booked poorer than expected second quarter earnings, partly due to higher costs and weaker results from its Australian unit Optus and Indian associate Bharti Airtel.

For the three months ended September, SingTel's net profit dropped 1.6 percent to S$868 million ($709.9 million), according to its filing [PDF] with the Singapore stock exchange Wednesday. This was on the back of revenue down 0.8 percent at S$4.57 billion (US$3.73 billion).

Underlying net profit was S$886 million (US$724.3 million), below analyst estimates of S$896 million (US$732.5 million) based on a Reuters poll.

For the same period, rival StarHub had booked a 27 percent jump in net profit at S$96 million (US$78.55 million), while the country's smallest telco M1 saw net profit dip 20 percent to S$33.1 million (US$27 million).

Support from Singapore growth
According to SingTel group CEO Chua Sock Koong at a media briefing here, revenue from the domestic business rose 4 percent to S$1.67 billion (US$1.36 billion), with all segments improving.

The core mobile business expanded 2 percent to S$487 million (US$398 million). The pay TV segment saw further traction, with Mio TV revenue up 24 percent at S$31 million (US$25.3 million)--with an additional 11,000 customers to reach a base of 391,000.

SingTel Singapore revenue Q2 FY2013
SingTel Singapore revenue Q2 FY2013 (source: SingTel presentation slides)

Optus and Group outlook downgraded
However, the telco noted against a negative mobile industry growth in Australia due to price competition and reduced mobile termination rates, Optus’s revenue fell 3.6 percent to A$2.24 billion (US$2.33 billion). 

Chua said guidance for Optus would be reversed, and expects the Australian unit's full year operating revenue to "decline by mid-single digit level" instead of its previous guidance of growth by a low single digit level.

She explained this meant a downgrade for the group's full year revenue outlook, now expected to decline, instead of grow, by a low-single digit level. This would be its first drop in annual revenue in 14 years.

SingTel also revealed it had cut an extra 184 jobs at Optus, outside the original plan of 750 as part of its restructuring.

Increased competition expected for some regional associates
Pre-tax earnings from the regional mobile associates grew 17 pecent S$549 million (US$449 million), supported by stronger results from Indonesia's Telkomsel, Thailand's AIS and Philippine telco Globe.

This partially offset the lower earnings from Bharti Airtel and weaker regional currencies, said Paul O'Sullivan, CEO for group consumer at SingTel.

SingTel regional associates Q2 2012
SingTel regional associates contribution Q2 Fy2013 (source: SingTel presentation slides)

O'Sullivan was optimistic over the Indonesian market which has become a "stronger and better environment", pointing out the industry has been focusing more on profitability and building out networks. This follows a period of steep competition which had previously focused on rate cuts.

Instead, there was likely to be more aggressive competition in the Philippines, he said. O'Sullivan pointed out  rival Philippine Long Distance Telephone Company (PLDT), with its acquisition of Digital Telecommunications, would likely be "marking its territory."

Another market with increased competition would be Thailand, noted Allen Lew, CEO of digital life at SingTel. This would be driven by the fight for subscribers once the 3G license issues are resolved.

Topics: Tech Industry, Networking, Telcos, 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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