Singtel Q4 profit falls 25.7% to S$574m

SINGAPORE Telecommunications (Singtel) posted a 25.7 per cent drop in net profit to S$574.4 million for its fourth quarter ended March 31, 2020 from S$773 million a year ago.

This came as the telco took a net exceptional charge of S$302 million for the quarter, mainly arising from key Indian associate Bharti Airtel's provision for a one-time spectrum charge, the mainboard-listed company said on Thursday.

Earnings per share stood at 3.52 Singapore cents for the quarter, down from 4.74 cents for the preceding year, while net asset value shrank to S$1.64 a share, from S$1.83 before.

Operating revenue for Q4 fell 10.2 per cent to S$3.90 billion, from S$4.34 billion a year earlier, which Singtel attributed to lower mobile service and equipment sales revenues across Singapore and Australia. Still, turnover saw a broad-based fall, including in enterprise and digital life.

Singtel's board has proposed a final ordinary dividend of 5.45 Singapore cents per share, almost half the 10.7 cents per share a year ago. This will bring the total dividend per share for the year to 12.25 Singapore cents, from 17.5 cents a year earlier.

Singtel said that the lower payout "is prudent to conserve financial headroom to cope with uncertainties in the current Covid-19 operating environment and the capacity to invest in 5G".

Still, Citi analysts suggested that the "earlier-than-expected cut could have near-term repercussions on the name", as they argued that Singtel's free cash flow "could comfortably sustain" the board's initial plans to keep the full-year dividend unchanged.

Once approved by shareholders at an upcoming annual general meeting, the dividend will be paid on Aug 18, after books close on Aug 6.

Singtel will not offer an earnings guidance for its next financial year, as group chief executive Chua Sock Koong cited "unprecedented disruption from Covid-19".

"We will update the market when there are material developments or when there is greater clarity in the operating environment," she said, while also remarking that it will be "some months" before the full impact of Covid-19 on the group's business can be ascertained.

Singtel has blamed travel and movement restrictions for "significant reductions in roaming and prepaid revenues", as business spending suffered from a weaker economic climate.

In the Singapore consumer business, mobile service revenues lost 9.7 per cent year on year, even though the number of subscribers rose to nearly 4.3 million, from 4.2 million lines before. Post-paid average revenue per user (ARPU) fell to S$33 a month, from S$41 before, while overall ARPU fell to S$26, from S$32 previously.

Consumer head Yuen Kuan Moon told an earnings briefing that the difference between prepaid and post-paid customers is blurring, as more users switch to SIM-only plans.

Given the coronavirus situation, roaming revenues have taken a hit, while smartphone supply shortages in China - where the virus began life - meant that "customers are not recontracting into their existing plans and some have moved over to SIM-only", he added.

But Ms Chua outlined ongoing strategic plans, such as multi-year capital expenditure on 5G wireless technology, despite noting in a statement that the group has been challenged by "structural shifts in the industry, already soft economic conditions, adverse regulatory outcomes in India and the onset of Covid-19 in the fourth quarter".

"We are undertaking a review of our tower assets in Australia to explore strategic options and have engaged advisers to assist with this review," she told the briefing, adding that "we are committed to helping our associates grow their digital enterprise businesses".

Besides a potential transaction for wholly owned Optus's A$2 billion (S$1.88 billion) tower portfolio, Ms Chua added that Singtel will consider deals for "other strategic assets, if the conditions are right".

"But clearly, with the market environment being what it is, we won't rush just for the sake of doing the deal," she continued.

Digital life head Samba Natarajan struck a similar note when asked about Singtel's digital businesses, from which the group has previously said it wants to "unlock value".

"Covid will likely impact these plans as our businesses will take a little bit of a hit in the short term... Investor interest will also get delayed as a consequence," he said.

"That being said, we are trying to make our assets resilient... so that we are well-positioned to realise this value in the post-Covid era."

For the full year ended March 31, net profit was down 65.3 per cent to S$1.07 billion, while revenue slipped 4.8 per cent to S$16.54 billion, aggravated by the onset of Covid-19. 

Singtel's full-year profit slumped to its lowest since 1993, Bloomberg data showed. In November last year, the telco posted an unprecedented quarterly loss of S$668 million for the three months to Sept 30, on the back of a provision for past telecom dues in India.

Singtel shares were trading at S$2.55 on a cum-dividend basis at 11.20am, down by S$0.07 or 2.67 per cent, after the results release.