Singapore operator Singtel posted a net profit of SGD 627 million in its fiscal third quarter ended 31 December 2019, which represents a decline of 24 percent year-on-year. The profit decrease was due to weakness in the enterprise business, the impact of the final settlement of a gain on the Airtel Africa pre-IPO investment and lower exceptional gains, Singtel said. Excluding exceptional items, underlying net profit fell 19 percent.
Operating revenue reached SGD 4.38 billion, down 5 percent year-on-year, on lower equipment sales, weak business sentiment and spending, continued price erosion in carriage services and increased market competition. EBITDA amounted to SGD 1.16 billion, up 1 percent in constant currency terms, lifted by an increase in NBN migration revenue in Australia and cost management initiatives.
Australian unit Optus saw eroding margins in its fixed retail business with the higher mix of NBN customers. NCS and Trustwave saw higher order books and Singtel’s data centre services also saw positive growth.
In Australia, Optus has rolled out over 400 5G fixed wireless sites while in Singapore, Singtel plans to submit its 5G proposal to the government later this month. A joint application with consortium partner Grab for a digital full bank licence in Singapore has also been submitted in December 2019.
The regional associates’ pre-tax contributions for the quarter rose 15 percent driven by strong data growth across all markets, the company said. Airtel’s losses narrowed, on the back of strong 4G customer growth, customer upgrades and price increases in India. Singtel’s African operations also saw growth momentum in carriage and mobile money services. The stronger operating performances mitigated higher costs and depreciation from its network expansion.
In January this year, Indian unit Airtel raised USD 3 billion through a share placement and convertible bond issue. Globe in the Philippines maintained strong growth momentum in mobile and broadband services. In Thailand, AIS’ revenue rose on device sales and subscriber gains but was offset by higher marketing expenses and depreciation and amortisation charges. In Indonesia, Telkomsel’s results were impacted by competition in the region outside Java.
The Group’s net debt stood at SGD 12.45 billion at 31 December 2019, including SGD 2.25 billion of lease liabilities recognised under the new accounting standards. Free cash flow was SGD 2.74 billion for the nine months, up 8 percent as a result of favourable working capital movements, increased NBN migration revenue and lower tax payments.
In Australia, revenue rose 1 percent as higher NBN migration revenue was partially offset by lower equipment sales and price competition. Mobile service revenue declined due to a higher mix of SIM-only customers and data price competition. ARPU was stable for a second consecutive quarter. The number of postpaid customers increased by 52,000 while the prepaid customer base grew by 157,000 with the addition of a new mobile virtual network operator. EBITDA jumped 10 percent boosted by increased NBN migration revenue. Excluding NBN migration revenue, EBITDA declined 22 percent, reflecting lower margins from both handset sales and retail fixed business, with the increased NBN access costs and higher mix of NBN customers.
In Singapore, mobile revenue was lower due to the timing of handset launches, lower voice usage and data price competition. Revenue from fixed services was up 1 percent on steady growth in broadband while pay-TV revenue was up 1 percent. Although overall revenue fell 5 percent, EBITDA was stable as a result of digitalisation initiatives and content cost management.
Group Enterprise’s revenue this quarter declined 4 percent and EBITDA dropped 11 percent in the period. Group Digital Life’s revenue for the quarter was down 15 percent due to spending cuts by Amobee’s major clients and declines in the digital marketing arm’s managed media and social businesses.
For the financial year ending 31 March 2020, the Group expects its operations to continue to face intense competition and carriage declines amid weak business and consumer sentiment. Increases in mobile market pricing and unbundling of handsets from mobile service plans in Australia have moderated customer additions and equipment sales. The company expects lower equipment sales and more sales of lower margin devices to continue into the fourth quarter.
For the year ending 31 March 2020, the Group expects revenue to be stable and EBITDA to decrease by low single digit. Excluding NBN migration revenues in Australia, Group revenue is forecast to decrease by mid single digit and EBITDA is expected to decline by low teens.
Capital expenditure is expected to reach SGD 2.1 billion, comprising AUD 1.3 billion for Optus and SGD 0.8 billion for the rest of the Group. Free cash flow (excluding spectrum payments and dividends from associates) is expected to be around SGD 2.3 billion, with dividends from the regional associates of SGD 1.3 billion. Revenue from ICT services is forecast to rise by low single digit, and cyber security revenue is expected to increase by mid single digit.
