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SingTel parks $1.6B for acquisitions amid Q4 profit decline

The telco outlines transformation strategy to raise business performance, lift customer experience, and leverage group assets for scale benefits, following its first drop in annual revenue in 14 years.
Written by Ryan Huang, Contributor

SINGAPORE--Amid rising pressure on its growth, SingTel has 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.

In an earnings briefing Wednesday, Southeast Asia's largest telco noted its fourth quarter income was dragged down by continued weakness in its Indian associate Airtel, lower revenue from Australian unit Optus, and a one-off divestment of its stake in telco Warid Pakistan. However, earnings were lifted by strong performances from Indonesia's Telkomsel and Thailand's AIS.

Q4 singtel associates
Indonesia and Thailand help offset weakness from India's Airtel. (source: SingTel)

For the three months ended March 2013, the telco booked a 33 percent drop in net profit due to a one-time loss of S$225 million (US$180 million) from the divestment of Warid Pakistan. In the same period a year ago, the company was also boosted by an exceptional tax credit of S$270 million (US$217 million). Excluding exceptional items, underlying profit was down 2 percent to S$1 billion (US$0.8 billion). This was on the back of a 6.3 percent dip in revenue to S$4.48 billion (US$3.6 billion).

Q4 singtel breakdown
SingTel added 6,000 customers to its pay TV service Mio in the quarter for a total of 404,000. This compares with a drop of 4,200 subscribers to 532,000 seen by rival StarHub for its cable TV service. (source: SingTel)

For the full year, SingTel recorded its first dip in annual revenue in 14 years. Net profit after exceptional items declined 12 percent to S$3.51 billion (US$2.82 billion), on the back of a 3 percent decline in revenue to S$18.18 billion (US$14.63 billion).
For its full year outlook, the company expects overall revenue to be stable, with earnings before interest, taxes, depreciation and amortization (EBITDA), to grow by a low single digit level, led by productivity and yield management initiatives.

Focus on digital space, profitability to drive growth

singtel board meeting
SingTel executives discuss the Q4 results in a media briefing. (credit: Ryan Huang/ZDNet)

"Our transformation requires twin tracks of confident investments in new markets and digital business and a diligent focus on increasing profitability from our core business. This is a multi-year journey," said Chua Sock Koong, Group CEO of SingTel.
As part of those plans, the telco will review investment opportunities, including increasing its stakes in its current associates and investing in large under-penetrated telecoms markets. Such markets include Myanmar, where it has submited a bid for a license as part of a consortia.
To create "next-generation growth engines in the digital space", SingTel will set aside S$2 billion (US$1.6 billion) over the next three years to pursue strategic acquisitions in the sector to drive growth. It has already been making much headway over the past year with its purchases of mobile advertising firm Amobee and Adjitsu, lifestyle sites Hungrygowhere and Eatability, photo app Pixable, and investments in startups such as TheMobileGamer.
SingTel highlighted four key elements in its transformation strategy:

  1. Raising business performance of the core business by driving profitable revenue growth, operational efficiencies and creating a competitive cost structure.
  2. Lifting customer experience with simplified and compelling value propositions, supported by extensive and strong networks.
  3. Leveraging the group's assets to drive scale benefits.
  4. Creating innovative and differentiated digital services to enhance the core business and deliver new revenue streams.
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