Singtel's Q1 earnings up 12.8% at S$942m

Singapore

HELPED by an exceptional gain and improved contributions from associate companies, Singapore Telecommunications (Singtel) reported a strong fiscal first quarter (Q1 FY2016), with net profit up 12.8 per cent year-on-year at S$942 million.

This translated to earnings per share of 5.91 Singapore cents, up 12.8 per cent from the previous corresponding quarter's 5.24 cents.

Operating revenue for the April-June period rose 1.5 per cent to S$4.21 billion.

In constant currency terms, that is if exchange fluctuations were eliminated, net profit would have risen 16 per cent and revenue 8.3 per cent.

Singtel registered a net exceptional gain of S$47 million, which resulted from divestment gains from venture investments and Airtel Africa's tower assets. This is a reversal from the previous corresponding period when net exceptional items were a negative S$46 million.

Excluding exceptional items, underlying net profit grew 1.6 per cent to S$895 million from S$881 million one year ago. This would have grown 4.6 per cent on a constant currency basis.

During the quarter, Singtel's Ebitda (earnings before interest, taxes, depreciation and amortisation) fell one per cent to S$1.24 billion due to the decline in the Australian dollar. In constant currency terms, Ebitda would have been up 5.3 per cent. During the reporting quarter, the Australian dollar decreased 10.6 per cent against the Singapore dollar.

The regional mobile associates of Singtel executed well this quarter with AIS, Globe, Telkomsel and Airtel India delivering strong earnings as network investments continue to accelerate data adoption, and 3G handset and smartphone penetration increased. Singtel's share of pre-tax earnings from regional associates was S$665 million, up 7 per cent from S$622 million one year ago.

In Australia, Singtel's wholly owned subsidiary Optus reported a strong first quarter of Ebitda and net profit growth, underpinned by the performance of its mobile operations. Ebitda grew 7.3 per cent to A$641 million (S$658 million). Net profit rose 19.6 per cent year-on-year to A$196 million.

A Singtel spokeswoman said Optus continues to invest to enhance the depth and reach of its 4G plus mobile network. With the 700 MHz spectrum which was available from January 2015, 4G coverage is now extended to close to 90 per cent population coverage. Optus is investing in network and innovation to offer compelling value and an enhanced customer experience to customers, she added.

Of Singtel's three business group, Group Consumer revenue was up 1.9 per cent at S$2.6 billion from S$2.55 billion one year ago. Group Consumer comprises the consumer businesses across Singapore and Australia, as well as the group's investments, mainly, AIS in Thailand, Airtel in India, Africa and South Asia, Globe in the Philippines, and Telkomsel in Indonesia.

Singtel's Singapore Consumer business revenue was up 5.8 per cent at S$611 million from S$577 billion a year ago. Australia Consumer business revenue was up 12.8 per cent at A$1.9 billion from A$1.69 billion one year ago.

In Singapore, the quarter saw a robust growth in data revenues. The company sold 26,000 data-centric prepaid tourist SIMs since its April launch. Singtel's household Arpu (average revenue per user) rose one per cent to S$61 and 78 per cent of its broadband customers are on fibre broadband as at June 2015. In the mobile communications segment, postpaid Arpu was down 2 per cent mainly due to lower roaming charges.

The company's Group Enterprise business, which comprises the business groups across Singapore and Australia and focuses on growing the Singtel's position in the enterprise markets, registered a revenue of S$1.5 billion down 3.3 per cent from the S$1.55 billion one year ago.

Singapore contributed 73 per cent (Q1 FY2015: 72 per cent) and 84 per cent (Q1 FY2015: 84 per cent) to the Group Enterprise's operating revenue and Ebitda respectively. Excluding fibre rollout and maintenance, operating revenue was stable at S$1.5 billion as against S$1.51 billion one year ago. Pricing remained competitive and the results were impacted by a weaker Australian dollar. If the Australian dollar was held constant against the Singapore dollar, operating revenue would have increased 2.6 per cent.

Singtel's third and smallest business unit, Group Digital Life saw a more than three fold increase in Q1 revenue to S$102 million, from S$35 million a year earlier. Digital Life is focused on three key businesses - digital marketing, regional premium video, and advanced analytics and intelligence. Revenue grew mainly from Amobee's acquisition of Adconion and Kontera last year. Amobee's digital marketing business continues to build differentiation and scale with proprietary technologies like real-time Brand Intelligence. HOOQ, Singtel's regional premium video service, continued to grow its presence and now serves customers in the Philippines, Thailand and India.

Commenting on the results, Chua Sock Koong, Singtel Group CEO said: "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.

"I am pleased that we are gaining good momentum on our growth initiatives in the enterprise segment for cyber security, cloud and smart city services in Singapore and the region."

SingTel shares closed trading on Thursday at S$3.98, up nine cents.