Krishna Baidya’s Random Musings

Foreign exchange hurts SingTel: quarterly profit down 17%

Posted on: May 14, 2009

  • SingTel yield better result than expected – Q4 profit beats forecasts
  • Continue to look at M&A (Pakistan market consolidation is of particular interest)
  • Earnings impacted by strong Singapore dollars against regional currency

singtelSingTel, South East Asia’s biggest telecom company, reported a 17 percent drop in quarterly profit in the fourth quarter. It made S$903 million compared to previous year’s more than S$1.09 billion. For the financial year (ending 31st March), the group’s net profit dropped 13 percent to S$3.45 billion, compared t o S$3.96 billion in the previous year.

SingTel contributed the drop in net profit to foreign exchange volatility and a good will impairment charge of S$330 million for its regional mobile associates, Warid Telecom and Pacific Bangladesh Telecom. Though, these charges were partially offset by an exceptional gain of S$217 million from Bharti’s dilution of its equity interest in a subsidy.

SingTel continue to reap benefit from its heavy investments in Asia in recent years capturing great share of fast-developing regional markets (Optus in Australia, Advanced Info Service (AIS) in Thailand, the Bharti Telecom Group in India, Globe Telecom in the Philippines, Pacific Bangladesh Telecom (PBTL), Telkomsel in Indonesia and Warid Telecom in Pakistan). Since, its operations outside Singapore accounts for more than two-thirds of its business, the group remains sensitive to currency movements in the region.

SingTel reported 35 percent annual growth in its regional mobile subscriber base. As of March 31, the number of mobile subscribers increased by 64 million from a year earlier to 249.4 million.

According to official statement Australia and Singapore continued strong momentum and showed resilience with their impressive growth despite the economic uncertainties. SingTel has performed particularly well in its home turf to register 12.7 percent revenue growth (including revenue from SCS) and a quarterly net profit of S$428 million (61.3% growth). In Singapore, revenues from its wireless broadband internet customers largely compensated for lower ARPU and minutes of usage (MOU) from mobile business. Its “Mio” service (broadband and IPTV services) too started gaining traction among locals.

In a statement the company mentioned that while its results for the coming financial years will be affected by foreign exchange fluctuations, future earnings growth will not be dependent on acquisition. The company is expected to focus on controlling its costs amid continued market uncertainties and suggested infrastructure sharing as one resort in some markets.

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