SingTel's profit down 16%, may further cut costs if economy worsens
Posted: 10 February 2009 0911 hrs
SINGAPORE: Singapore Telecommunications (SingTel), Southeast Asia's largest telecoms firm, Tuesday reported a 16.1 per cent fall in third-quarter net profit, but said currency depreciation weighed on earnings.
SingTel said its performance was strong in Singapore and in Australia, but some of its regional mobile associates in Indonesia, the Philippines and Pakistan were weaker.
"The global economic slowdown has started to impact the group," added the company.
Net profit in the three months ended December 31 was S$799 million, down from S$952 million during the same quarter a year earlier, the company said.
The net profit was better than the S$774 million forecast in a poll of analysts by Dow Jones Newswires.
Operating revenue fell by 3.2 per cent to S$3.7 billion but would have risen by 14 per cent if the Australian dollar had remained stable, SingTel said.
"The group reported strong operational performance in Australia and Singapore in the quarter with both countries posting double-digit revenue growth amid the slowing economic environment," SingTel said.
It added that the strength of the Singapore dollar relative to the Australian dollar and major regional currencies affected results.
SingTel has a wholly-owned subsidiary, Optus, in Australia. It also has stakes in Thailand's Advanced Info Service (AIS), India's Bharti, Globe Telecom of the Philippines, Indonesia's Telkomsel, Pacific Bangladesh Telecom and Pakistan's Warid Telecom.
The group's share of pre-tax profit from the associates fell 24 per cent or S$156 million because of regional currency depreciation, without which the contributions would have fallen by only 13 per cent, SingTel said.
"The decline was attributable to weaker operational performance of Telkomsel, Globe and Warid, as well as fair value losses recorded by Telkomsel and Bharti on their foreign currency liabilities," it said.
On Monday, SingTel announced that its regional mobile subscriber base had risen 35 per cent over the past year to 232 million on December 31. Bharti posted the biggest jump in customer numbers among the associates, SingTel said.
Compared with the same period a year earlier, Optus' operating revenue rose 10.2 per cent during the quarter to AS$2.2 billion (US$1.47 billion).
At home, SingTel's domestic revenue increased 21 per cent to a record S$1.51 billion for the quarter but the company's Singapore chief executive, Allen Lew, warned this year "is going to be even more challenging, with the government now expecting the economy to contract deeper than originally forecast."
Singapore is facing probably its most severe recession in more than 40 years, arising from the worst global economic decline in decades, the finance minister has said.
"With the current uncertain economic outlook, the group would be vigilant and disciplined in its business decisions and leverage on its vast experience to improve business performance," SingTel said.
The company is in a strong financial position and will focus on "further efficiencies in our cost structure," group chief executive officer Chua Sock Koong said.
SingTel had implemented cost cutting measures such as a hiring freeze, and said retrenchments will be a last resort.
However, the telco said that if the economic situation were to worsen, pay cuts in the form of a reduction in the variable wage component may take place. Carey Wong, research manager at OCBC Investment Research, said this will equate to a 10 per cent saving from staff costs for the telco.
It is also cutting back on expenses in Singapore and Australia ahead of what it expects to be a rough year.
Ms Chua said: "We have started to see the impact of the slowdown on our business as well. So for head count, we have already instituted the freeze across the businesses in Singapore. And in Australia, we have already tightened on a number of discretionary expenses."
But despite this, SingTel is still keeping an eye out for potential acquisitions.
For the full year 2009, SingTel is expecting operating revenue in Australia and Singapore to grow at a single-digit pace. But considering the current environment, experts say that now could be an opportune time for the telco to invest further into current regional associates.
Senior market analyst at IDC Asia Pacific, Kenneth Liew, said: "Singapore and Australia will be the main growth markets for SingTel, so the growth revenue will mostly come from these two. The regional ones will actually face challenges because they are more of mobile consumer products, whereas SingTel and Optus rely on business data services as well.
"As the share prices of these regional associates drop, it will be quite attractive for SingTel to look into more acquisitions and it will help to increase their area of coverage in the region."
Ms Chua said: "I think the associates who have already completed their network roll out - we see a number of them are cash flow generated, and they are all paying significant amounts of dividends. So unless there are expansion plans, we will not be looking at the equity injection."
SingTel shares closed up 2.1 per cent on Tuesday at S$2.48 a share.
Posted: 10 February 2009 0911 hrs
SINGAPORE: Singapore Telecommunications (SingTel), Southeast Asia's largest telecoms firm, Tuesday reported a 16.1 per cent fall in third-quarter net profit, but said currency depreciation weighed on earnings.
SingTel said its performance was strong in Singapore and in Australia, but some of its regional mobile associates in Indonesia, the Philippines and Pakistan were weaker.
"The global economic slowdown has started to impact the group," added the company.
Net profit in the three months ended December 31 was S$799 million, down from S$952 million during the same quarter a year earlier, the company said.
The net profit was better than the S$774 million forecast in a poll of analysts by Dow Jones Newswires.
Operating revenue fell by 3.2 per cent to S$3.7 billion but would have risen by 14 per cent if the Australian dollar had remained stable, SingTel said.
"The group reported strong operational performance in Australia and Singapore in the quarter with both countries posting double-digit revenue growth amid the slowing economic environment," SingTel said.
It added that the strength of the Singapore dollar relative to the Australian dollar and major regional currencies affected results.
SingTel has a wholly-owned subsidiary, Optus, in Australia. It also has stakes in Thailand's Advanced Info Service (AIS), India's Bharti, Globe Telecom of the Philippines, Indonesia's Telkomsel, Pacific Bangladesh Telecom and Pakistan's Warid Telecom.
The group's share of pre-tax profit from the associates fell 24 per cent or S$156 million because of regional currency depreciation, without which the contributions would have fallen by only 13 per cent, SingTel said.
"The decline was attributable to weaker operational performance of Telkomsel, Globe and Warid, as well as fair value losses recorded by Telkomsel and Bharti on their foreign currency liabilities," it said.
On Monday, SingTel announced that its regional mobile subscriber base had risen 35 per cent over the past year to 232 million on December 31. Bharti posted the biggest jump in customer numbers among the associates, SingTel said.
Compared with the same period a year earlier, Optus' operating revenue rose 10.2 per cent during the quarter to AS$2.2 billion (US$1.47 billion).
At home, SingTel's domestic revenue increased 21 per cent to a record S$1.51 billion for the quarter but the company's Singapore chief executive, Allen Lew, warned this year "is going to be even more challenging, with the government now expecting the economy to contract deeper than originally forecast."
Singapore is facing probably its most severe recession in more than 40 years, arising from the worst global economic decline in decades, the finance minister has said.
"With the current uncertain economic outlook, the group would be vigilant and disciplined in its business decisions and leverage on its vast experience to improve business performance," SingTel said.
The company is in a strong financial position and will focus on "further efficiencies in our cost structure," group chief executive officer Chua Sock Koong said.
SingTel had implemented cost cutting measures such as a hiring freeze, and said retrenchments will be a last resort.
However, the telco said that if the economic situation were to worsen, pay cuts in the form of a reduction in the variable wage component may take place. Carey Wong, research manager at OCBC Investment Research, said this will equate to a 10 per cent saving from staff costs for the telco.
It is also cutting back on expenses in Singapore and Australia ahead of what it expects to be a rough year.
Ms Chua said: "We have started to see the impact of the slowdown on our business as well. So for head count, we have already instituted the freeze across the businesses in Singapore. And in Australia, we have already tightened on a number of discretionary expenses."
But despite this, SingTel is still keeping an eye out for potential acquisitions.
For the full year 2009, SingTel is expecting operating revenue in Australia and Singapore to grow at a single-digit pace. But considering the current environment, experts say that now could be an opportune time for the telco to invest further into current regional associates.
Senior market analyst at IDC Asia Pacific, Kenneth Liew, said: "Singapore and Australia will be the main growth markets for SingTel, so the growth revenue will mostly come from these two. The regional ones will actually face challenges because they are more of mobile consumer products, whereas SingTel and Optus rely on business data services as well.
"As the share prices of these regional associates drop, it will be quite attractive for SingTel to look into more acquisitions and it will help to increase their area of coverage in the region."
Ms Chua said: "I think the associates who have already completed their network roll out - we see a number of them are cash flow generated, and they are all paying significant amounts of dividends. So unless there are expansion plans, we will not be looking at the equity injection."
SingTel shares closed up 2.1 per cent on Tuesday at S$2.48 a share.
