Airtel once again pinned for dragging down Singtel earnings

Adverse court judgment in India slaps Singtel with a SG$1.4 billion hit to its bottom line.

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An October ruling by the Supreme Court of India that has led to Indian telcos coughing up $13 billion in fees has wiped out the positive numbers from Singtel's second quarter earnings.

Singtel's Indian associate, Bharti Airtel, has allocated 2.9 billion rupees (SG$5.5 billion) for payments, which has translated to Singtel's earnings as a SG$1.93 billion pre-tax hit, and SG$1.4 billion post-tax.

This has left Singtel with a SG$668 million net loss for the second quarter to September 30, undoing increases in earnings before interest, tax, depreciation, and amortisation (EBITDA) and increases in associate revenue.

For the entire company, revenue dropped 3% to SG$4.15 billion as EBITDA increased by 3% to SG$1.17 billion, giving an underlying net profit number of SG$737 million prior to the Airtel hit.

In Singapore, consumer revenue grew by 2% to SG$563 million as increased equipment sales made up for a drop in mobile service revenue and fixed services, while EBITDA increased 4.5% to SG$191 million.

Singtel now has 2.6 million postpaid customers in Singapore and 1.6 million prepaid customers. Average revenue per user (ARPU) is now down to SG$30 as postpaid ARPU has decreased SG$4 over the past year to AU$39, and prepaid is down a SG$1 to SG$17.

Revenue was down 5% in the enterprise sector to SG$1.49 billion, with EBITDA falling 12% to SG$389 million. Singtel said the drop in EBITDA was due to its Australian operations, which otherwise saw EBITDA decrease by 1.7%.

For its regional associate telcos, Indonesia's Telkomsel saw contributed revenue steady at SG$290 million; in Thailand, AIS saw revenue increase by 31% to SG$103 million while Intouch grew revenue by 32% to SG$29 million; Globe in the Philippines was up 18% to SG$104; while Airtel decreased its loss to SG$112 million across India, Sri Lanka, and Africa.

"Notwithstanding the court ruling, Airtel has made positive strides in the wake of the recent industry consolidation, gaining market share, and increasing mobile service revenue for a third straight quarter," Singtel CEO Chua Sock Koong said.

"The weak global economic environment has affected the industry although on a positive note, our diversified earnings base and our cost management have lifted our performance."

Across the Singtel group, staff costs were down 2.6%, mostly made up of a 12% headcount reduction year-on-year within its Australian Optus operations. Optus now has a headcount of 7,092 while the rest of the group accounts for 16,000 people.

The company added it is preparing plans to build out its Singaporean 5G network, while Optus now has 300 5G towers in Australia.

For its second quarter, Optus reported revenue was steady at AU$2.2 billion as profitability increased by 11% to AU$703 million.

Three months ago, Singtel reported a slight dip in revenue of SG$21 million to SG$4.1 billion alongside a 2% drop in earnings before interest, tax, depreciation, and amortisation (EBITDA) to SG$1.18 billion for its first quarter of fiscal year 2020 to June 30.

Thanks to a SG$162 million exceptional loss by Airtel and increased depreciation, Singtel saw its underlying net profit drop by 22% to SG$575 million and net profit fall 35% from SG$832 million to SG$541 million.

The loss by Airtel was related to provisioning for "derivative liabilities relating to customary indemnities provided to a group of investors of Airtel Africa and expenses relating to its listing", as well as depreciating 3G assets and spectrum refarming, the company said.

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