Things Are Stable In SingTel’s Latest Quarter


Singapore’s largest telecommunications operator SingTel (SGX: Z74) released its second quarter earnings this morning and saw its revenues decline while profits held steady.

Following a reorganisation in April last year, SingTel now has three business segments: Group Consumer; Group Enterprise; and Group Digital Life.

The first segment groups together the company’s consumer businesses in Singapore and Australia (through the wholly-owned subsidiary Optus), as well as the investments SingTel has made in various regional mobile companies that includes AIS in Thailand; Airtel in India and Africa; Globe in Philippines; PBTL in Bangladesh; and Telkomsel in Indonesia.

The segment deals with the core carriage business of mobile, residential pay TV, fixed-line, and equipment sales.

The Group Enterprise segment takes care of the enterprise market in Singapore and Australia. The key services provided include mobile, voice and data infrastructure, managed services, cloud computing, IT services, and professional consulting.

Finally, Group Digital Life is where businesses such as e-commerce, concierge and hyper-local services, and mobile advertising are grouped under. SingTel describes it as such: “Group Digital Life focuses on using the latest internet technologies and the assets of [SingTel’s] operating companies to develop new revenue growth engines by entering adjacent businesses where it has a competitive advantage.”

Some basic numbers

For the three months ended 30 Sep 2013, Singtel’s operating revenue dipped 9% year-on-year to S$4.16b while profits inched up 0.3% to S$870m.

Currency fluctuations were a major theme in this quarter’s earnings results as the company’s decline in revenue was mainly due to a weaker Australian dollar. In constant currency terms, operating revenue had dipped by only 3%.

Profits, despite the slight growth, was actually “negatively impacted” by the appreciation of the Singapore dollar against other foreign currencies; in constant currency terms, profits actually grew 7%.

SingTel also declared an interim dividend of 6.8 cents per share, unchanged from the declared dividend in the corresponding period one year ago.

Free cash flow for the six months ended 30 Sep 2013 for the company came in 1% lower year-on-year at S$1.81b.

Operational highlights and the balance sheet

SingTel ended the quarter with 486 million mobile customers across 25 countries through its wholly-owned subsidiaries as well as regional associates, representing a 3.8% increase from 468 million customers a year ago.

The Group Consumer segment saw operating revenue decline 12.3% year-on-year to S$2.57b, though its earnings before interest, taxes, depreciation & amortisation (EBITDA) had gone up 3.9% to S$858m.

The Singapore consumer business brought in good performance with a 3% rise in revenue to S$567m while EBITDA was up 6%. The Australian side was mixed though as revenue had declined 6% to A$1.73b while EBITDA grew 15%.

Negative revenue impacts from the Australian consumer business on the Group Consumer segment were exacerbated by the weaker Australian dollar, while the positive EBITDA contribution was muted by the currency fluctuations.

As for the regional mobile associates, SingTel’s share of their pre-tax profits suffered year-on-year decreases across the board.

For the Group Enterprise segment, revenue had declined 4% to S$1.55b amid “a cautious business environment in Asia Pacific and keen competition.” Meanwhile, the segment’s EBITDA had inched up by 1% as costs were better managed and there was more higher-margin business activity. Similar to the Group Consumer segment, the weaker Australian dollar also made its presence felt in here.

Year-on-year revenue growth was explosive at 44% at the Group Digital Life segment. Unfortunately, its EBITDA had declined from a negative S$31m to a negative S$40m. I’ve highlighted this situation previously and wrote that “investors should watch the digital segment closely to ensure that management is allocating capital efficiently and not throwing good money after bad.”

Here’s some customer number figures for the quarter:

  Number of Customers Year-on-Year Change
Singapore mobile customers 3.94 million 6.5%
Pay-TV customers 414,000 5.9%
Australian mobile customers 9.49 million -0.5%

Interestingly, SingTel’s local rivals for mobile customers, Starhub (SGX: CC3) and M1 (SGX: B2F), had both reported growth in customer numbers in their latest quarterly results. Market saturation’s not arrived yet, and it seems that there’s still space for all three.

With the Pay-TV segment, however, it seems SingTel’s gaining fast on Starhub. While it’s certainly not a winner-takes-all category where only one can survive – it’s easy to envision customers subscribing to both companies’ Pay TV plans – Starhub has seen customer attrition there while SingTel managed to grow its numbers.

That’s a small bright note for investors in SingTel, given how the performance of its Singapore operations has dwindled over the past few years.

Moving on to SingTel’s balance sheet, it has improved from a year ago. Net debt (total debt minus cash) had gone down from S$7.70b to S$7.55b; total debt had decreased from S$8.58b to S$8.42b while cash went down to S$861m from S$883m.

What’s next for SingTel

On a broad level, SingTel’s outlook is for a “mid-single digit level” decline in overall revenues while EBITDA is expected to fall by “low single digit level.” The company has earmarked S$2.5b for capital expenditures to expand its LTE coverage and enhance its 3G network.

In addition, S$2b has been set aside for investments into SingTel’s digital business over the next three years, but like I mentioned earlier, it’s a space that bears watching.


The market seems ambivalent about the company’s results, given that it’s 0.8% higher at S$3.79 from Wednesday’s close at the timing of writing. In comparison, the broader market, represented by the Straits Times Index (SGX: ^STI), is up by almost the same amount at 0.84%.

At S$3.79, shares of the teleco operator are valued at 17 times trailing earnings and carry a dividend yield of 4.4% based on its pay-out last year.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.