Singtel sees SG$107m profit growth for Q2

Singapore's largest telco has announced a profit rise of 16 percent, with gains in 4G data and currency losses thanks to a weakened Australian dollar.

Singtel has released its results for the second quarter of 2015, reporting a group net profit rise of 16 percent in constant currency, or 12.8 percent in reported currency due to a weak Australian dollar, from SG$835 million up to SG$942 million.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) fell by 1 percent year on year in reported currency, and rose by 5 percent in constant currency, from SG$1.25 million to SG$1.24 million.

The company had operating revenues of SG$4.21 million, a 2 percent increase in reported currency and an 8 percent growth in constant currency, up from the SG$4.15 million reported during the same period last year.

Free cash flow was SG$974 million, a drop of 17.7 percent in reported currency from last year's SG$1.2 billion, while earnings per share stood at SG$5.91, an increase of 12.8 percent from last year's SG$5.24.

The company's total net debt also increased, however, by 7 percent, from the SG$6.5 million reported this time last year to the current SG$6.995 million, but this was offset by the company's continuing growth across most market segments.

Singtel Group CEO Chua Sock Koong attributed the company's growth to continuing investment in its 4G network and worldwide business, and in the continued uptake of mobile data.

"This quarter's results reflect the strong execution in our business. Across our different markets, we are taking bold strategic measures to shape our business and the market. We are accelerating investments in spectrum, networks, and systems, and transforming our cost structure. We strive to deliver a great customer experience with innovative products and plans," the CEO said in a statement on Thursday.

"I am pleased that we are gaining good momentum on our growth initiatives in the enterprise segment for cybersecurity, cloud, and Smart City services in Singapore and the region."

Within Singapore, its mobile business revenue was up 2 percent, to SG$530 million, with 134,000 4G customers added in the quarter to take its total 4G subscriber base to 2 million. Post-paid average revenue per user (ARPU) was down 2 percent, to SG$74, due to less data roaming.

The company's fixed TV revenue in Singapore was down 6 percent, to SG$60 million, with ARPU down 3 percent, at SG$40. Both of these were dragged down due to customers who signed up for the pay TV service for the 2014 FIFA World Cup only, and subsequently cancelled their subscriptions. Excluding these World Cup subscriptions, ARPU rose by 7 percent and revenue by 13.2 percent year on year from the same period last year.

Singtel gained 22,000 fixed-line fibre customers within Singapore during the quarter to June, bringing the telco's total customer base to 440,000.

Singtel Group's entire global mobile customer base, encompassing its businesses in Singapore, Australia, Indonesia, India, the Philippines, and Thailand, rose by 8 percent this quarter, to 565 million subscribers.

Global mobile communications were up 3.6 percent year on year, from SG$316 million last year to SG$327 million. Sale of equipment jumped by 53.1 percent, from SG$51 million to SG$78 million. Fixed broadband also saw an increase, from SG$50 million to SG$53 million.

The company's global pay TV, international telephone, and national telephone segments all fell, however: Pay TV by 1.5 percent, from SG$55 million to SG$54 million; international telephone by 3.6 percent, from SG$53 million to SG$51 million; and national telephone by 5 percent, from SG$32 million down to SG$31 million.

The falls in telephone usage and pay TV mark a continuing trend in consumers shifting from traditional voice and TV services to using data for communications and streaming entertainment.

Accordingly, Singtel last month switched on its 4G+ network, becoming the first telco in Southeast Asia to offer a tri-band 4G network using LTE-900, with the upgrade promising to provide customers who own compatible mobile devices with improved 4G coverage, most notably underground and in indoor areas.

"Demand for data is growing exponentially, and we are always looking for ways to improve the mobile experience for our customers. Our goal is to deliver the most reliable and seamless connectivity," Singtel's VP of mobile marketing Diana Chen said at the launch in late July.

"We have invested heavily over the past year to improve the quality and extent of coverage, particularly indoor coverage. We have also enhanced zones that have been in need of a signal boost."

Singtel in addition revealed a partnership with McDonald's to outfit 123 fast-food restaurants with a Wi-Fi service by mid-2016. Unlimited access to the network is free for Singtel customers to access until November, and will be thereafter be capped at 2GB per customer per month.

In June, along with other Singapore telcos M1 and StarHub, Singtel announced that it would be switching off its 2G network services by April 2017.

"Today, the majority of mobile customers are on 3G and 4G networks; only an extremely small percentage of customers remain on 2G-only mobile devices," a joint statement from the three companies said.

The results on Thursday underline the effect of the weakened Australian currency on Singtel's overall revenues and profit, an impact that resulted in the Singaporean telco seeking permission to be delisted from the Australian Securities Exchange (ASX) in April.

"After careful consideration, the Singtel board has determined that there are minimal shareholder benefits from maintaining Singtel's listing on the ASX. The delisting will also have the effect of reducing the costs arising from dual-listing requirements," the company said at the time.

Singtel largely operates in Australia under the Optus brand, which simultaneously announced its results for the quarter. The Singtel subsidiary recorded an increase in net profit of 19.5 percent, from AU$164 million last year to AU$196 million this year.

Operating revenue was AU$2.3 billion for the second quarter of 2015, an 11.3 percent year-over-year growth in constant currency terms from the AU$2.1 billion reported during the same period last year, while EBITDA grew by 7.3 percent for the quarter, from AU$597 million in the three months to June last year, to AU$641 million this year.

Last month, iiNet shareholders voted in favour of TPG's AU$1.5 billion takeover bid. The acquisition, which is yet to be approved by the Australian Competition and Consumer Commission (ACCC) and the court, will result in TPG becoming Australia's second-largest telco, eclipsing Optus' numbers by increasing its customer base to 1.7 million.

Optus' primary rival Telstra also reported its results (PDF) on Thursday, recording a net profit after tax of AU$4.29 billion for the 2014-15 financial year, down AU$260 million or 5.8 percent year on year from last year's AU$4.55 billion. EBITDA decreased by 3.5 percent, down from AU$11.1 billion to AU$10.7 billion.

Australia's dominant telco attributed its loss in net profit to the sale of its Hong Kong mobile business, increased price competition from its rivals, and significant investment in its mobile 4G network. However, it is continuing to see growth in its mobile data, network applications and services, and IPTV businesses.

Singapore's third-largest telco, M1, last month announced a SG$90 million profit for the first six months of 2015, an increase of 3.8 percent year on year, with service revenue of SG$408.6 million. M1's EBITDA for H1 was SG$166.9 million, a 1.4 percent increase from the same period last year. Mobile telecommunications revenue increased by 0.4 percent year on year, to SG$333.1 million, with revenue from fixed services growing by 18 percent, to SG$39.5 million.

StarHub, the second-largest telecommunications provider in Singapore, last week reported a six-month net profit decrease of 3.2 percent year on year, from SG$178.5 million down to SG$172.8 million. For the quarter to June 30, EBITDA rose by 3.8 percent, from the SG$187.4 million reported during the same period last year, to SG$194.5 million.

Singtel had previously announced an 11 percent rise in net profit to SG$970 million for the quarter ending December 31, 2014, with EBITDA falling 2.8 percent to S$1.23 billion due to higher costs of customer acquisition.

In April, the telco acquired a 98 percent equity interest in US managed cloud security services provider Trustwave. The acquisition cost Singtel an estimated $810 million.