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SingTel's Q2 profit climbs to $805.8M

Singapore telco reports a 19.3 percent growth in net profit to S$1.04 billion (US$805.85 million) on revenue totaling S$4.31 billion for the second quarter, but sees losses in digital life group on new investments.
Written by Eileen Yu, Senior Contributing Editor

SingTel has posted a net profit growth of 19.3 percent to S$1.04 billion (US$805.85 million) in its second-quarter results, boosted by "strong performance" across its business units.

The Singapore telco clocked a year-on-year 3.5 percent climb in revenue to S$4.31 billion for the quarter, ended September 30, and would have recorded a higher 22 percent profit growth if foreign currencies had stayed constant. Currencies for most of the markets the company played in, including Australia, Thailand, and the Philippines, dropped against the Singapore dollar compared to the same quarter last year, with the exception of India.

Speaking to reporters Thursday, SingTel Group CEO Chua Sock Koong said the company's "strong results" were fueled by better performance organization-wide including its consumer and enterprise businesses.

The carrier booked a 2 percent growth in consumer revenue to S$2.63 billion for the quarter, with a 1 percent increase in EBITDA to S$849 million. In Singapore alone, the business unit saw a 4 percent climb in revenue to S$588 million and 5 percent increase in EBITDA to S$189 million on higher TV and fiber broadband sales.

Mobile revenue for Singapore grew 1 percent to S$523 million with declines in voice, SMS, and roaming, though this was buffered by higher data consumption, Chua said. Household ARPU (average revenue per user) climbed 11 percent to S$61, while broadband sales inched up 2 percent.

The telco added 19,000 post-paid and 36,000 pre-paid mobile subscribers for the quarter to clock 4.07 million in total, but saw a 5 percent dip in post-paid ARPU to S$75. This was dragged down by lower inter-operator SMS volume and roaming consumption, SingTel said, as well as an uptake in data-only SIMs that excludes voice and mobile share plans, which are supplementary lines that allow for shared data, voice, and text.

Higher 2Gbps fiber connectivity limited by user equipment

The company signed up 22,000 new fiber broadband customers, bringing its total to 369,000 subscribers. Asked how the ISP planned to counter ViewQwest's latest 2Gbps fiber broadband service, SingTel's Singapore CEO for consumer Yuen Kuan Moon said such offerings would only make sense if consumers had the right equipment to support the higher connection speed.

Before ViewQwest's announcement earlier this week, Japan was the only other country to offer the high-speed connectivity via So-net, which first launched its service in April last year running on Sony's network.

Yuen explained that SingTel evaluated the 2Gbps service in Japan and identified certain limitations in customer experience with scaled rollouts of such services. "There are still limits on the equipment end in terms of the types of computers and modems the consumer is running," he said, noting that connection speeds were limited by the specs of the user's equipment, which might not support higher speeds such as 2Gbps connectivity.

Most people today also use wireless connections at home, with few actually physically plugging into the Ethernet cable to access maximum speeds, and this will further impact the eventual broadband connectivity experienced by the user, he said. Bandwidth speeds will also be affected if the user is accessing overseas websites.

Yuen said SingTel would continue to closely monitor the market for next-generation technology and will roll out new services when ready.

On the enterprise side, the telco in Singapore recorded a 5 percent increase in revenue to S$1.15 billion and a 9 percent EBITDA growth to S$466 million. Revenue growth for the business unit in Australia remained flat at S$387 million, though the carrier saw a 3 percent climb in EBITDA to S$76 million.

SingTel said the boost in its enterprise business came from growth in ICT and mobile services, where it saw higher revenue on managed services contracts in Singapore and Australia.

Chua also pointed to recent announcements in cybersecurity services targeted at the enterprise and government sectors in Asia-Pacific as well as investments in a trans-Pacific cable system to support higher traffic demand.

SingTel last month also announced a partnership with FireEye in which both companies would co-invest up to US$50 million over five years to build cybersecurity monitoring facilities in Singapore and Sydney. Scheduled to be operational in first-quarter 2015, the new centers will support customers of the two partners under a revenue-sharing model. 

The Singapore telco in October further unveiled a new Cloud Operation System Network through its alliance with Microsoft, allowing enterprises in Asia-Pacific to access the Azure public cloud as well as run Microsoft applications on SingTel's cloud environment. Data is hosted in the carrier's data centers in Singapore and Australia, through its subsidiary Optus, which reported a net profit increase of 5.4 percent to AU$230 million for the second quarter. 

SingTel's enterprise CEO Bill Chang noted that the company was seeing higher cloud adoption than the average market growth, driven primarily by data loads for Singapore's G-Cloud network. He added that its partnership with the Economic Development Board would facilitate its participation in the country's smart nation initiatives.

SingTel, however, saw losses in its digital life group although the unit booked a 142 percent increase in revenue to S$103 million with the acquisitions of Adconion and Kontera earlier this year, as well as Amobee in 2012. Chua attributed the unit's negative EBITDA of S$50 million to investments and initiatives in mobile-commerce, video, and data analytics. 

The telco has been making efforts to expand its digital life business, which encompasses mobile video and digital advertising, as it looks for new revenue beyond pure-play telecommunications services. In June this year, SingTel-subsidiary Amobee acquired Adconion and Kontera Technologies for a total of US$385 million in a bid to boost its mobile digital advertising play. Adconion provides digital advertising tools across multiple devices, while Kontera specializes in digital data intelligence and marketing technology. 

For its financial year ending March 31, 2015, SingTel is expecting its digital life business to see further losses with negative EBITDA of between S$200 million and S$250 million, on revenue exceeding S$300 million. Some 75 percent of the unit's revenue will come from digital marketing services. 

The group's capital expenditure is expected to be S$2.3 billion, where S$900 million will be spent in Singapore and S$1.4 billion in Australia. Investments here will go toward mobile network, particularly in Australia, and increased spending in customer care and management systems. 

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