Singtel Q4 profit shrinks 19% to S$781m on forex effects, lower associates' contributions

SINGTEL on Thursday posted a 19 per cent fall in net profit to S$781 million for its fourth quarter ended March 31, 2018, down from S$963 million a year ago.

Revenue grew 0.4 per cent to S$4.326 billion this year from S$4.308 billion in the previous year, the telco said. Earnings per share were 4.78 Singapore cents, compared with 5.90 cents last year.

Singtel said that the group's results for the quarter were adversely impacted by negative currency movements, a temporary suspension in connecting and migrating customers to Australia's National Broadband Network (NBN) and lower associates' contributions from Telkomsel, Airtel and NetLink NBN Trust.

Post-tax profit contribution from Telkomsel in Indonesia dropped by 22.1 per cent on the previous year, to S$219 million, but international CEO Arthur Lang told a morning results briefing that "the situation in Telkomsel is quite different at this point" from the heated market competition in India, where Singtel has a stake in Airtel.

"It is not just a weakness in Telkomsel. Actually, the whole industry went through a bit of an adjustment in this past quarter," said Mr Lang.

He cited factors such as data revenue growth not keeping up with the decline in traditional services, because of "a deluge of pre-activated SIM cards in the market", which "depressed the prices temporarily".

A new rule requiring SIM cards to be registered with the Indonesian authorities also "created a bit of adjustment in the customer base, and there was churn here and there", Mr Lang noted.

But he added that industry players expect to see a recovery after Lebaran - as Hari Raya Puasa is called in Indonesia - when prices are set to increase.

"Again, the sector seems quite confident that in the coming quarters, things will improve, so fundamentally, if you look again, I think the smartphone penetration numbers, the data penetration numbers, the fact that Telkomsel is moving towards digital quite aggressively, I think gives us quite a bit of confidence that things will actually improve over the last quarter," Mr Lang remarked.

For the full year ended March, the group's revenue grew by 4.9 per cent to S$17.53 billion, up from S$16.7 billion a year ago, while net profit rose by 41.5 per cent to S$5.45 billion, up from S$3.85 billion in the previous year. Earnings per share came up to 33.4 Singapore cents, versus 23.96 cents last year.

Free cash flow for the full year rose 12.8 per cent to S$3.61 billion, and for the quarter, grew 4.8 per cent to S$800 million.

Singtel group chief Chua Sock Koong said in a media statement: "These results reflect the strong execution of our digital transformation strategy in both our core and new digital businesses. Optus gained market share in Australia underscoring its network and content strategy while our ICT and digital businesses now account for 24 per cent of revenue, with digital marketing arm Amobee achieving growth and positive Ebitda (earnings before interest, taxes, depreciation and amortisation) for the year."

In the Singapore consumer business, which saw mobile service revenue down by 6 per cent in the quarter, division CEO Yuen Kuan Moon observed that turnover is expected to decline in the coming year.

"With regard to the Singapore mobile environment, we are seeing a transition. The industry is moving away from the traditional revenue of voice, and into data. So, very similar to other markets, you are seeing this shift, and this shift will take time for data growth to actually fully mitigate the decline in traditional voice," said Mr Yuen.

"So that's one effect, why we are projecting that the industry will decline by mid-single digits. And, secondly, you're also seeing a trend of users switching out of the traditional bundled price plans, which includes handsets, into SIM-only plans, where they buy their own devices - and therefore the subscription fee of their plans would be reduced because there's no equipment component added into the price plan. So, for these two reasons, you'll see that the industry will not be growing but will have adjustments over a period of time, until it stabilises."

But, on the entry of multiple mobile virtual network operators (MVNOs), Mr Yuen said that "we expect the market to be very vibrant".

"We also expect a few more MVNOs coming onto the market in the next few months, all the way throughout 2018. As long as there is interest in the market on MVNOs, we'll be prepared to work with them to see how we can supply them with our network service to cover different segments of the market," he told the briefing.

Singtel has proposed a final ordinary dividend per share of 10.7 Singapore cents, bringing the total ordinary dividend per share for the year to 17.5 Singapore cents, representing a payout of about S$2.86 billion. It also paid out a special dividend of three Singapore cents a share in January on proceeds from the NetLink NBN Trust divestment.

Singtel said: "Barring unforeseen circumstances, the group expects to maintain its ordinary dividends of 17.5 Singapore cents per share for the next two financial years and thereafter, will revert to the payout of between 60 per cent and 75 per cent of underlying net profit."