Singtel to take 7% hit on FY23 earnings from Optus data breach: UOBKH

SINGTEL’S FY2023 earnings is expected to take a smaller-than-expected hit from the Optus data breach since it has been spared the full cost of passport replacements for affected customers, according to a report by UOB Kay Hian (UOBKH) on Thursday (Oct 20).

Analysts Chong Lee Len and Llelleythan Tan now forecast a potential provision of around S$240 million for Singtel : Z74 0% — including an anticipated regulatory fine of A$2.2 million (S$2 million) — in Q2 2023, resulting in a 7 per cent hit to its estimated Patmi (profits after tax & minority interests) in FY2023. 

The change comes as UOBKH previously expected that Optus would bear the passport replacement costs for 1.4 million affected customers, or 70 per cent of the 2.1 million total affected customers.  However, Optus has since clarified that only 100,000-150,000 passport details were stolen in the breach, and that it would bear costs only for unexpired passport holders wanting a replacement.

As such, UOBKH has sharply lowered its projections for Optus’ total passport replacement costs by A$260-310 million to A$22-34 million for FY2023, based on estimates that only 100,000 to 120,000 customers would change their passports.

These figures are significantly lower than estimates given in previous media reports, which reckoned that the cost of the breach – including compensation, legal bills and the cost of public relations campaigns — could run as high as US$420 million to US$560 million for Singtel.

Accordingly, UOBKH estimates Optus’ earnings for FY2023 and FY2024 to be impacted by only 4 per cent and 3 per cent respectively, compared to its previous respective estimates of 11 per cent and 3 per cent.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

The research house has thus kept its “buy” rating and target price of S$2.90 for Singtel, as it believes that the company maintains its strong growth fundamentals, with its other business segments slated to benefit from the economy’s ongoing recovery from the pandemic.

It also noted that dividends for H1 FY2023 are unlikely to be affected. According to the research house, Singtel has ample proceeds from its asset recycling programme to absorb the costs of the breach.

As at 11.04 am, shares of Singtel remained unchanged at S$2.46.