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SingTel's Q3 profit rises 5.5% to $872m

It lowers revenue forecast on cautious sentiment Down Under, weaker A$

[SINGAPORE] Singapore Telecommunications (SingTel) lowered its group consumer and enterprise revenue forecast for its full financial year yesterday, under the pressures of a weaker Australian dollar and a more cautious business environment Down Under.

Even so, the telco's net profit for the third quarter ended Dec 31, 2013 fended these off - rising 5.5 per cent to $872 million - thanks to better contributions from associates and a tighter cost structure.

Operating revenue for the quarter stood 7.3 per cent lower at $4.26 billion, as the Australian dollar depreciated by 9 per cent. Even in constant currency terms, revenue was 2 per cent lower, with Australia's consumer operating revenue falling 6.9 per cent to A$1.78 billion (A$2 billion) for the quarter.

For the nine-month period, net profit was 4.3 per cent higher at $2.75 billion, while revenue was 7.2 per cent lower at $12.7 billion - also brought low by Down Under.

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This Australian-millstone narrative will hold for the financial year ending March 31, 2014. SingTel's group consumer revenue is now expected to decline by low double-digit levels - previously only slated to decline by the high single-digits. At the same time, group enterprise revenue, previously expected to be stable, is now forecast to decline by the low single-digits. The outlook for group Ebitda - a low single digit-level decline - was maintained, alongside the expectation of a mid single-digit level decline in group revenue.

While the weaker Australian dollar narrative has been a standing feature of late, it has been joined by the less-robust business sentiment held by Australian firms and regional MNCs.

Some of this showed in the third quarter, which saw group enterprise's operating revenue dip 0.2 per cent to $1.55 billion on the weaker Australian dollar. Over the nine-month period, enterprise operating revenue from Australia also declined 0.9 per cent to A$1.14 billion.

Even so, a strong showing from SingTel's regional mobile associates helped to bolster numbers, with the share of their pre-tax profits rising 10.9 per cent to $539 million. This was hauled upwards by Airtel, which saw its pre-tax profit contribution more than double from $70 million to $148 million.

Acquisition-wise, future pickings in emerging markets with low penetration rates and revenue growth opportunities appear slim.

"There're fewer and fewer of those markets left where we think that the valuation is compelling," said Chua Sock Koong, SingTel Group CEO.

As associates' contribution grew in Q3, operating expenses also declined 10.1 per cent to $3 billion - partially driven by lower handset subsidy costs.

This decline was the result of both a conscious lowering of handset subsidies and the Android influence on the mix of handsets sold in the quarter. Android handsets tend to command a lower operator subsidy than iPhones do.

While a gloomy tale was told Down Under, Singapore sang a relatively jaunty tune.

For the third quarter, mobile revenue here rose 5.8 per cent to $322 million. Its local mobile base grew by 205,000 subscribers year-on-year, ending the period with 3.96 million. Monthly average revenue per postpaid user stood at $78 for the quarter, down from $81 in the corresponding quarter the previous year.

At the same time, mio TV's residential customers rose from 398,000 in the previous year's third quarter to 418,000. As the 2014 World Cup looms large in SingTel's goalmouth this year, the operator would only say that it is in discussions with the rightsholder.

"It's very clear in our minds ... what the qualitative and quantitative benefits are of getting that event. Right now, there's nothing significant to tell," said Allen Lew, SingTel's CEO of Group Digital Life.

SingTel's digital division continued an exponential growth in revenue, which rose 40.3 per cent year-on-year to $48 million. Negative Ebitda also surged, from $15 million in Q3 of the previous year to $42 million.

Yesterday, SingTel also revised its expected cash capital expenditure for Singapore and Australia, now expected to come in at about $2.2 billion instead of $2.5 billion, driven by the impact of a weaker Australian dollar and delayed spending.

Earnings per share for the group stood at 5.47 cents and 17.28 cents for the quarter and nine-month period, respectively, up from 5.19 cents and 16.57 cents from the corresponding periods a year ago. The group's counter closed at $3.57 yesterday, up six cents.

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