Singapore Telecommunications Limited’s Mobile Business: 1 Big Trend Investors Should Know

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

For the reporting quarter, Singtel registered an 8% rise in revenue, posting S$4.3 billion in sales. The solid growth in the topline was credited to a strong performance from the Australian consumer segment and its digital businesses. With that in mind, let’s take a closer look at the former.  

A bird’s eye view

Singtel posted S$8.78 billion in sales for Optus for the financial year ended 31 March 2017 (FY16/17), a decline from S$9.30 billion recorded in FY15/16. The tide began to turn in the fourth quarter when Optus posted a 7.6% year-on-year revenue increase.

The diagram below summarises its Australia consumer segment’s business performance for FY17/18’s fiscal first quarter.

Source: Singtel’s earnings presentation

As you can see, the segment posted A$1.7 billion in revenue, an increase of 6% from a year ago. In Singapore dollar terms, Optus saw an 8.3% increase year-on-year.   

The mobile segment has under pressure from voice to data substitution.

In a recent earnings briefing, Singtel’s Chief Executive Officer, Chua Sock Koong, said:

“In Australia, our consumer business kept its momentum and added strongly to its postpaid mobile and NBN customers. Optus continues to differentiate through network investments and exclusive content in a highly competitive environment.”

Optus added 85,000 4G customers quarter-on-quarter to lift its mobile subscriber base to 5.88 million. Meanwhile, the Australia subsidiary also boosted its NBN broadband customer base by 51,000 quarter-on-quarter to end with 279,000 subscribers. Chua added that there were plans on the way to invest more:

“Optus is spending $1 billion over the next year to enhance capacity and expand its 4G coverage by another 500 sites in regional Australia. Optus is also committed to bringing the best entertainment, sports and music experience to customers.”

Allen Lew, Chief Executive Officer for Consumer Australia and Optus, added his thoughts:

“… we believe that for Optus to be successful it’s not only about price, because a lot of customers in this market are driven by the quality and the coverage of the mobile network as well.

So I think that is where our investment in the regional as well as in the metro areas in terms of extending our coverage and deepening our coverage will give us the ability to provide a premium mobile network that has got not just a competitive price but a quality service as well.”

To be sure, Optus continues to see heightened competition in certain sectors in the market. 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.