Singapore Telecommunications Limited’s Mobile Segment: 1 Threat Eating Away Its Business

Singapore Telecommunications Limited (SGX: Z74) reported its fiscal first-quarter results earlier this month.

For the reporting quarter, Singtel reported a 2% rise in revenue for its Singapore consumer business, which recorded $567 million in sales. However, there was a weakness in its mobile communications revenue, which declined from $323 million a year ago to $318 million in the latest fiscal quarter.

A bird’s eye view

The diagram below summarises the Singapore consumer business performance.

Source: Singtel’s earnings presentation

As you can see, the mobile communications segment accounted for 56% of Singtel’s Singapore consumer business and by far is the most important piece of the Singapore business.

The mobile segment, though, is under pressure.

During the earnings briefing, Singtel’s chief executive for the Singapore consumer business, Yuen Kuan Moon, made two points. 

Firstly, the mobile service revenue is expected to decline:

“Mobile comms revenue if you look at our guidance at the start of the Financial Year we have guided the market that we are expecting a low single digit decline in mobile service revenue.”

Secondly, the presence of alternative services like messaging apps and voice call apps have been eating into Singtel’s business. The problem is acute in the voice roaming revenue. Yuen said:  

“We believe that this is really the impact of voice to data substitution and we continue to see this playing out for the rest of the two, three quarters remaining in this financial year.

Primarily impacting us more probably would be the roaming revenue, so we continue to see a much faster switchover from voice to data and this trend will continue. This quarter we are seeing the roaming revenue as a contribution of total mobile comms revenue down to 16% compared to a quarter ago which was 18%.”

Unfortunately, it looks like the trend will continue for this fiscal year. To be sure, Yuen believes that the decline in mobile service revenue will taper off at some point, but until then, we will have to continue watching developments in this space.

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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.