You are here
Singtel's Q1 earnings fall 6.6% on price wars in India, Indonesia
INTENSE price competition in India and Indonesia, a reduced economic interest in NetLink NBN Trust, adverse currency movements and higher withholding tax on dividends hit Singtel's first-quarter results.
The telco on Wednesday posted a 6.6 per cent fall in net profit to S$832 million. Revenue slipped 0.5 per cent to S$4.13 billion for the quarter ended June 30, while earnings per share were 5.09 Singapore cents, down from the previous year's 5.45 cents.
For its Singapore consumer business, mobile service revenue fell 4 per cent due to the continued voice-to-data substitution and higher mix of SIM-only plans, while Ebitda - a measure of operating profit - for the segment slid 3 per cent, partly due to the cessation of sub-licensing of its popular Premier League.
Group enterprise revenue was down 3 per cent year on year due to the completion of a major infrastructure project in the preceding year. In Australia, overall revenue rose 5 per cent on strong customer growth and higher equipment sales.
In Indonesia, profit before tax for Telkomsel fell 38 per cent to S$237 million, while Airtel in India and South Asia recorded a 78 per cent drop in pretax profit to S$43 million.
Asked how the group plans to turn around the performance of its Indonesia and India associates, Arthur Lang, CEO of Singtel's international group, said the mandatory registration of prepaid SIM cards that caused Indonesia's price competition has ended, and its operational numbers are improving. Telkomsel is also focusing on improving its digital content offering and managing costs.
"Telkomsel has increased prices 4-11 per cent on some of the data plans, and this has happened for the other two telco players as well, so (the recovery) is in some ways industry wide. Telkomsel has publicly said it is expecting price stabilisation to come back to the industry in the next few quarters."
For Airtel, the industry has gone through a shake-up with new entrants like Reliance Jio offering aggressive plans, a well as the ongoing merger of Vodafone and Idea. As a result, Airtel India's revenue and average revenue per user (ARPU) have come under pressure.
Mr Lang said: "I think a lot of the major downdraught in high-value customers moving due to a drop in price plans has already happened. "Airtel in this past quarter delivered 2 per cent churn, which is a historical low - a pretty good result."
OCBC Investment Research analyst Joseph Ng said Singtel's Q1 results came in slightly under the brokerage's expectations, but he came away from the analyst briefing "cautiously optimistic" on the prospects for Telkomsel and Airtel.
"While management expects the market to remain soft for the next six months, the worst should be behind Airtel, which would now train its focus on customer net adds," he said.
CEO Consumer Singapore Yuen Kuan Moon also allayed fears of how the entry of a fourth telco in Singapore in the coming months will affect Singtel's performance, saying that it has differentiated itself by maintaining superior network quality and offering higher value services and innovative offerings. At the group level, it continues to guide for operating revenue from the core business to grow by low single digit, while Ebitda remains stable.
Meanwhile, some spin-offs may be in the offing. Preparations for the initial public offering (IPO) of Airtel Africa have started, possibly in the first quarter of the next financial year at the earliest. Singtel is also mulling a partial or full IPO. It may rope in additional strategic partners for its digital businesses, which first need to show consistent revenue growth and profitable growth.
Revenue for its digital life segment slipped 6 per cent to S$277 million in the latest quarter. The segment posted S$23 million Ebitda losses.
Shares of Singtel ended flat at S$3.20.