SingTel profit falls

November 12, 2008
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, SINGAPORE, November 12 – Singapore Telecommunications said Wednesday net profit fell 12.1 percent for the second quarter as regional income was hit by a strong local currency and rollout costs for the launch of Apple\’s iPhone.

For the three months to September, net profit came to 868 million Singapore dollars (586 million US), down from 988 million dollars in the same period last year.

The result beat a Dow Jones Newswires poll of analysts who predicted an average net profit of 859.8 million dollars for the quarter.

Operating revenues totalled 3.89 billion dollars, up 5.3 percent from 3.69 billion dollars last year, said SingTel, Southeast Asia\’s largest telecoms company.

In the half-year to September, net profit fell 8.8 percent year-on-year to 1.75 billion dollars while operating revenues were 5.6 percent stronger at 7.67 billion dollars, the company said.

"Our expansion in the region subjects us to the volatility of the regional currencies," said SingTel\’s group chief executive officer Chua Sock Koong.

"A stronger Singapore dollar reduces our mobile associates\’ earnings.

"The current global financial crisis is unprecedented and the negative impact on businesses will be inevitable."

Carey Wong, an analyst with OCBC Investment Research, said: "SingTel has further watered down its outlook for the rest of year."

Operating expenses rose 18 percent to 834 million dollars, partly due to the Singapore and Australia debut of the iPhone, SingTel said.

"For the second quarter, the incremental impact of the iPhone 3G activations reduced EBITDA by approximately 27 million Singapore dollars in Singapore and approximately 44 million Australian dollars (29.46 million US) in Australia," it said.

EBITDA is earnings before interest, taxes, depreciation and amortisation.

Chua said the company, which has a wholly-owned Australian subsidiary Optus, has already implemented a freeze on new hiring in Singapore and Australia to cope with the weaker business climate.

"The financial turmoil that we see in the markets, we expect would cause businesses to slow down… We have implemented a hiring freeze," Chua said at a news conference.

Staff cuts would be "a last resort," she said.

SingTel said pre-tax profit contributions from its regional mobile associates tumbled 26 percent to 461 million dollars during the second quarter.   

This included a 41-million-dollar post-tax loss from Warid Telecom, the fourth largest cellular operator in Pakistan.

Aside from Warid, SingTel holds equity stakes in five other mobile operators: Bharti of India, Indonesia\’s Telkomsel, AIS in Thailand, Globe Telecom of the Philippines and Pacific Bangladesh Telecom.

The Indian rupee, Indonesian rupiah, Philippine peso and Thai baht depreciated against the Singapore dollar during the quarter, which resulted in currency translation losses for the group, said Chua.

"As a high proportion of the group\’s earnings contributions are from outside Singapore, its financial performance is sensitive to currency movements in the countries the group operates in," she said.

In Australia, the weaker Australian dollar also impacted SingTel\’s earnings at the group level even though Optus delivered a 6.8 percent jump in operating revenues from a year ago.

During the quarter, Optus recorded operating revenues of 2.06 billion Australian dollars and net profit of 125 million Australian dollars, up 1.8 percent from last year.

SingTel saw revenues in its home market rise 10 percent to 1.33 billion dollars from a year ago but net profit dipped 4.8 percent to 353 million dollars, it said.

By Wednesday afternoon, SingTel shares were up 10 cents to 2.45 dollars.
The company is 55 percent owned by state-linked investment firm Temasek Holdings.

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