Singapore Telecommunications Limited’s Latest Earnings: 3 Things Investors Should Know About Its Group Enterprise Business

Singapore Telecommunications Limited (SGX: Z74) is Singapore’s largest operational telco, and it currently has three business segments: Group Consumer, Group Enterprise, and Group Digital Life.

In mid-August, Singtel reported its first quarter results for its fiscal year ending 31 March 2018 (FY2018). The reporting quarter was from 1 April 2017 to 30 June 2017. Since Singtel has three different business segments, I thought it would be useful to have a look at the performance of the individual segments.

In a previous article, I had discussed the Group Consumer segment’s results in the reporting quarter. Here are three important things investors may want to know about the Group Enterprise segment’s latest performance:

1. The overall result

The table below shows the operating revenue, EBITDA (earnings before interest, taxes, depreciation, and amortisation), and EBIT for the segment in the first quarters of FY2018 and FY2017:

Source: Singtel FY2018 first quarter earnings announcement

We can see that revenue for the Group Consumer segment was up 1.1% year-on-year. This was due to 6.4% top-line growth in the ICT (information communication technology) business, which offset declines in traditional carriage services. .

But, operating expenses grew even faster as Singtel invested in its cyber security and ICT capabilities. As a result, EBITDA for the Group Enterprise segment fell by 1.2% in the reporting quarter.

2. Performance of the Singapore business

The Group Enterprise segment can be broken down into a few other sub-segments. One of them is Singapore Enterprise. The following table shows the performance of the Singapore Enterprise sub-segment in the reporting quarter:

Source: Singtel FY2018 first quarter earnings announcement

In its earnings release, Singtel made the following comments about this sub-segment:

“Operating revenue was stable with growth in ICT services offset by decline in traditional carriage services. EBITDA fell with continued investments in cyber security and ICT capabilities.”

What we can see from the table above is that traditional telecommunication services (voice, mobile, international telephone, and national telephone) were all facing challenges. What was surprising was that data also saw revenue fall.

3. Performance of the Australia business

Another sub-segment within Group Enterprise is Australia Enterprise. This comes mainly from Singtel’s full ownership of Australian telco, Optus. The table below shows the revenue and EBITDA of the Australia Enterprise sub-segment in the first quarters of FY2018 and FY2017; the numbers are given in the Australian dollar.

Source: Singtel FY2018 first quarter earnings announcement

In a similar manner to the Singapore Enterprise sub-segment, the Australia Enterprise business saw revenue growth in ICT services, but this was again offset by lower revenue from traditional telco services.

Editor’s note: An article reviewing the performance of the Group Digital Life segment has been published. It can be found here.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.