Singapore Telecommunications (Singtel) saw its operating revenue fell 1.5 percent year-on-year to SGD 4.41 billion for the quarter ended 31 December 2016, impacted by the decline in mobile termination rates. Excluding the rates change, revenue would have increased by 3 percent, Singtel said. Net profit grew 2 percent to SGD 973 million, thanks to a stronger contribution from associate companies, and would be stable in constant currency terms.
EBITDA was stable year-on-year at SGD 1.22 billion in the fiscal third quarter. It would have declined 2.2 percent in constant currency terms, due to increased competition in Australia. Post-tax underlying profit contributions from the associates increased 6.1 percent, thanks to strong growth at Telkomsel, Globe and NetLink Trust, partially offset by declines at Airtel and AIS.
Free cash flow declined 4.4 percent to SGD 559 million, mainly due to higher capital expenditure and timing difference in Telkomsel’s dividend payment, partially offset by working capital movements, Singtel said.
Singtel said it delivered a resilient third quarter performance, with a strong core business and higher contributions from regional mobile associates. In the core business, ICT revenues grew, boosted by contract wins by NCS and demand for cyber security services. Higher consumer home services revenue in Singapore and growth in postpaid mobile customer numbers in Australia helped mitigate continued voice to data substitution and roaming revenue declines, the company said.
Among the associates, strong performance from Telkomsel offset the impact of very intense competition in India, driving associates’ pre-tax contributions up 2 percent to SGD 660 million. Singtel Group’s share of associate’s earnings this quarter includes a 21 percent stake in Intouch and an additional 7.4 percent stake in Indian operator Bharti Telecom acquired in November 2016.
The Singapore Consumer business segment saw consumer revenues up 4 percent as home services revenue grew 7 percent. Home services revenue grew as the sub-license of Premier League content rights and customer migration to higher-speed fibre broadband plans offset declines in roaming, voice and SMS. Mobile revenue was stable, as the slight growth in postpaid customer base was offset by lower postpaid ARPU. EBITDA rose 6 percent.
In Australia, Optus added 94,000 branded postpaid customers in the quarter, mitigating declines in the wholesale business. Overall revenue declined 10 percent, impacted by mobile termination rate cuts and service credits from device repayment plans. Excluding the previous year’s one-off items, EBITDA would have been up 3 percent, despite higher network costs and content charges. Optus’ 4G network now covers 95.9 percent of the Australian population.
Singtel’s Group Enterprise revenue was stable as ICT and cyber security services helped offset declines in carriage services due to a more subdued business environment in Singapore and heightened competition in Australia. Revenue from cyber security grew 10 percent to SGD 113 million. EBITDA declined 7 percent with the increased investments to build capabilities in cyber security as well as higher mobile customer acquisition and retention costs in Singapore.
Singtel’s Group Digital Life business segment saw its revenues increase 22 percent, driven by digital marketing arm Amobee’s strong performance in social, video and display advertising.
For the current financial year ending 31 March 2017, Singtel Group affirmed its outlook updated in November 2016, with operating revenue from the Core Business (comprising Group Consumer and Group Enterprise) expected to decline in low single digits. EBITDA is expected to be stable. Mobile service revenue from Australia is forecast to decline in the mid-teens, while Mobile Communications revenue from Singapore is expected to be stable.
Group ICT revenue (comprising Managed Services and Business Solutions) is expected to increase by low teens. Cyber security revenue (classified under Managed Services), including a full year’s contribution from Trustwave, is forecast to reach SGD 450-550 million. Revenue from Amobee Group is expected to grow by mid-single digit level, while Group Digital Life is forecast to record negative EBITDA of SGD 150-180 million.
Capital expenditure for the group over the full year is expected to approximate SGD 2.8 billion, including AUD 1.8 billion for Optus and SGD 1 billion for the rest of the group. Capital expenditure on a cash basis is expected to reach SGD 2.4 billion. Group free cash flow (excluding dividends from associates) is forecast at SGD 1.5 billion for the current financial year ending 31 March 2017.
