Robust Q2 performance boosts SingTel earnings

Singapore

SINGAPORE Telecommunications (SingTel) posted perkier results for its second quarter ended Sept 30, 2014, with net profit up 19.3 per cent at S$1.04 billion on better revenue, a more spirited showing from its associates and exceptional gains . In constant currency terms, profit would have risen 22 per cent year on year.

For the quarter, the group recorded S$59 million in net exceptional gains, mostly from the dilution of 2.2 per cent of SingTel's equity interest in SingPost after the latter's equity placement. Even so, underlying net profit was also up 10.8 per cent year-on-year to S$979 million.

The earnings, the group's strongest in recent quarters, sent SingTel's counter up five Singapore cents - or 1.3 per cent - to S$3.90 on Thursday.

Operating revenue, which grew 3.5 per cent to S$4.31 billion, was also nudged upwards by additional revenue from the telco's acquisitions of Adconion and Kontera during the quarter.

Excluding the acquisitions, operating revenue grew 2.5 per cent to S$4.27 billion, with higher turnover from its consumer and enterprise divisions.

SingTel's share of its associates' pre-tax profit also bolstered the bottom line, growing 24.2 per cent to S$644 million. Airtel shone during the quarter, with its pre-tax contribution more-than doubling from S$88 million to S$203 million on higher data traffic and average revenue per user (ARPU), as well as better operational efficiency in India.

Even news from Down Under was on the up, with operating revenue for Optus increasing 1.7 per cent to A$2.155 billion, and Ebitda (earnings before interest, taxes, depreciation, and amortisation) rising 1.2 per cent to A$652 million.

In Singapore, SingTel's mobile customer base grew by 55,000 over the quarter, taking the total to 4.07 million. Mobile revenue was 1.3 per cent higher year-on-year, at S$523 million.

Postpaid monthly ARPU, however, fell from S$79 in the corresponding quarter a year ago to S$75, due to the dilution from data-only SIMs and mobile share plans, as well as lower inter-operator SMS volume and roaming usage. The mobile combo plans that were launched during the quarter drew more than 75,000 customers in the consumer and enterprise segments as at the end of September, SingTel said.

mio TV added 1,000 residential customers to its subscriber base over the quarter, bringing the total figure to 419,000. mio TV revenue grew 53.7 per cent to S$63 million. Excluding revenue from the 2014 Fifa World Cup, this would have come in at S$53 million.

For the quarter, the group's enterprise division posted a 3.3 per cent increase in operating revenue, at S$1.59 billion.

SingTel maintained its outlook for the rest of the year, but tweaked its Group Digital Life guidance to take into account having brought digital marketing firms Adconion and Kontera into the fold. Instead of rising 50 per cent as previously estimated, revenue for the division is set to exceed S$300 million for the financial year, with three-quarters of that to come from digital marketing services.

Already, the group's digital division revenue for the quarter has more-than doubled from S$35 million a year ago to S$85 million, driven by the contributions of these two acquisitions.

Start-up costs and investments in new business and initiatives resulted in a negative Ebitda of S$50 million for the division, against a negative Ebitda of S$40 million in the previous financial year's Q2. Excluding Adconion and Kontera, negative Ebitda came up to S$43 million. For the six months ended Sept 30, 2014, the division had racked up negative Ebitda of S$95 million.

This is set to widen to S$200 million-S$250 million for the financial year, SingTel said on Thursday. Previously, it had guided for a 20 per cent decrease in negative Ebitda for the digital division's existing businesses, which did not then include Adconion and Kontera.

"For the full year, with the losses and amortisation of intangibles from the two acquisitions, we expect losses to increase, and that's why the revised guidance on the loss levels at (Group) Digital Life," SingTel's group CEO Chua Sock Koong said.

For the six-month period ending Sept 30, 2014, SingTel's net profit was half a per cent lower at S$1.87 billion, while operating revenue was flat at S$8.46 billion.

Earnings per share for the quarter and six-month period stood at 6.51 Singapore cents and 11.75 Singapore cents respectively, against 5.46 Singapore cents and 11.81 Singapore cents from the corresponding periods a year ago.

The group declared an interim dividend of 6.8 Singapore cents per share, the same as last year's.