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Earnings Preview: 3 Key Things to Look Out for in Singapore Telecommunications Limited

Shares of Singapore Telecommunications Limited (SGX: Z74) ended up slightly in 2016.

Although Singtel’s shares held up well, there have been some challenges for the company’s business. In the first half of its fiscal year ending 31 March 2018 (FY17), operating revenue was down 4.8% compared to a year ago. Underlying net profit was better though, recording a 3.4% increase. The next earnings report for Singtel will be for its third fiscal quarter.

Here’re three things investors may want to look out for.

Cash, cash, cash

Telcos might be prized for their recurring free cash flows. And from the free cash flows come dividends.

Singtel has recorded healthy growth in free cash flow for the first half of FY17. The telco brought in S$1.87 billion in free cash flow, up from S$1.45 billion a year ago. Its interim dividend was also unchanged for the first half of the fiscal year.

Investors will have to see what the next quarter brings. It could be important to observe how the telco’s free cash flow figures measure up against the dividend payout.

“G’day mate”

Singtel’s Australian consumer segment contributed a hefty A$1.7 billion to the company’s overall topline of S$4.09 billion in the second quarter of FY17.

But, this is a decline from the A$1.9 billion that the segment recorded in the same period a year ago. A big part of the fall was caused by a decline in mobile termination rates in Australia. Singtel might be based in Singapore, but its Singapore consumer revenues are dwarfed by the Australian consumer segment.  The segment accounted for around 44.5% of Singtel’s total sales and is worth keeping an eye on.

Regional mobile associates

A major piece of Singtel’s profit comes from the contributions of its regional mobile associates.

Singtel’s associates include Indonesia’s TelkomselIndia’s Airtel, Thailand’s AIS and Philippines’ Globe. Collectively, the quartet dished out S$679 million in profit before taxes for Singtel in the second quarter of FY17. This represented growth of 7% year-on-year. With the rollout of 3G and 4G still in the early innings in places like India, Africa, and Indonesia, this segment’s performance could be the key to Singtel’s long term profit growth.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.