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SingTel Q3 down 8.3 percent on Optus restructure, currency

[UPDATE] Telco saw third quarter net income drop to S$827 million (US$669 million) due to exceptional charges from Australian unit restructuring, weaker foreign currencies, and a drag from Philippine and Indian associates.
Written by Ryan Huang, Contributor

SINGAPORE--SingTel has booked a lower than expected third quarter earnings, which were dragged down by exceptional charges from the restructuring of its Australian unit Optus, weaker foreign currencies, and poorer results from Philippine and Indian associates.

Southeast Asia's largest telco said net profit for the three months ended December was down 8.3 percent to S$827 million (US$669 million) from the previous year, according to results released Thursday. This missed the forecast of S$907 million (US$734.5 million) according to a Bloomberg poll of four analysts.

SingTel is set to book its first drop in annual revenue in 14 years in current financial year.

Third quarter revenue was down 5 percent to S$4.6 billion (US$3.72 billion).

In a results briefing here, group CEO Chua Sock Koong said the lower profit was partly due to exceptional charges of S$67 million (US$54 million), which included the ex-gratia payments in the restructuring of Optus and charges related to the equipment upgrades at Philippine associate Globe Telecom.

She added SingTel's investments in its networks and to strengthen its core business for long term growth also put pressure on the bottomline--already hit by weaker foreign currencies. These factors included higher depreciation, spectrum amortisation, increased cost from the acquisition of digital companies.

The poorer group results were also dragged down by its Optus, which posted a 9.2 percent slump in its own third quarter net profit.

Indonesia, Thailand lift overseas earnings
Regional associates posted a 1.2 percent rise in pre-tax profit to S$455 million (US$368 million), with strong results by Indonesia's Telkomsel and Thailand's AIS offsetting weaker growth from India's Bharti Airtel and the Philippines Globe Telecom.

Paul O'Sullivan, CEO of group consumer at SingTel, was optimitic of a turnaround in its Indian associate due to a combination of factors.

He pointed out the country's market was starting to stabilize and more players had been exiting partly due to the regulatory uncertainty over licenses and additional charges squeezing their margins.

O'Sullivan said Bharti would also start to move toward a clearer tariff and pricing structure to retain customers. This includes restructuring reseller commissions, as historically they had been incentivized to churn customers to buy new SIM cards.

The Indian telco would also review the pricing of 2G tariffs in order to invest in 3G networks moving forward, he said.

SingTel regional associates Q3
Strong results by Telkomsel and AIS help lift pre-tax profits of SingTel's regional associates. (Credit: SingTel)

Interest in Myanmar
The group CEO also confirmed SingTel had made an expression of interest (EOI) in Myanmar's first tender for two telecom licences open to foreign players.

"We will study the terms as they become clearer," she said. The deadline for submission for EOI closed on February 8 2013, and interested parties are expected to receive documents from the regulator with an outline of conditions. The tender has attracted at least 18 companies from countries such as India, Norway, Malaysia, Thailand, Singapore, according to the Financial Times.

Last month, SingTel sold its loss-making stake in Pakistan associate Warid Telecom for US$150 million, following a "strategic review" on competitive position and opportunity.

In response to media queries, Chua said the company was prepared to increase its current stakes in its associates under the "right terms and conditions" such as regulations and pricing.

SingTel reaffirmed its revenue outlook for the current financial year of a low single-digit decline--which will be its first drop in 14 years.

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