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SingTel profit misses estimates on currencies, falling sales at its Australian Optus unit

Earnings growth from Indonesian and Thai associates undermined by declines in currencies against the Singapore dollar

Gulf News

Singapore: Singapore Telecommunications Ltd., Southeast Asia’s biggest phone company, posted first-quarter profit that missed analyst estimates as currency moves and lower sales at its Australian unit cut earnings.

Net income rose 3.2 per cent to S$945.3 million (Dh2.79 billion) in the three months ended June 30 from a year earlier, the company, also known as SingTel, said in a statement on Tuesday. That compares with the S$974.3 million average of three analyst estimates compiled by Bloomberg.

Increased sales in Singapore, where the former government agency has about 46 per cent of the mobile-phone market, was offset by falling sales at its Australian Optus unit, where pay- as-you-go customer numbers fell and call rates were cut, SingTel said. Earnings growth from its Indonesian and Thai associates was undermined by declines in the countries’ currencies against the Singapore dollar, the company said.

“They still need to look for new ways to drive their revenues,” Sachin Gupta, an analyst at Nomura Holdings Inc. in Singapore, said by telephone before the results. Nomura has a neutral rating on shares of the Singapore-based company.

SingTel shares fell 0.9 per cent to S$3.36 at the close of trade in Singapore, compared with a 0.8 per cent gain in the Straits Times Index. The stock, with a dividend yield of 4.7 percent, has gained 8.7 percent this year.

Dividend yield

“The market has been buying this stock for the yield, maybe expecting some sort of better-than-expected dividend,” Gregory Yap, an analyst at Kim Eng Securities Pte., said by telephone from Singapore. “I don’t think that’s going to happen.”

Excluding one-time items, profit after tax fell 3 percent to S$850 million, the lowest figure on that measure since the quarter ended December 2008, according to data compiled by Bloomberg.

Revenue for the full year through March 2013 will increase at “low single digit” rates, while earnings before interest, tax, depreciation and amortization will be “stable,” the company said.

The earnings contribution from regional associates rose 2.4 percent to S$483 million in the quarter, the company said.

SingTel holds minority stakes in phone operators in more than 10 countries in Asia and Africa, with a total customer base of about 462 million as of June 30, making its earnings vulnerable to currency fluctuations.

Strong dollar

“The Singapore dollar was very strong against most of the regional currencies and against the Australian dollar,” Chua Sock Koong, chief executive officer, told reporters in Singapore after the results. “As a result the Singapore dollar earnings were impacted adversely.”

Among 10 Asian currencies tracked by Bloomberg, the Indonesian rupiah and the Indian rupee are among the worst performers against the Singapore dollar this year. The Thai baht has also depreciated against the city-state’s currency.

Sales from Singapore rose 8 percent to S$1.67 billion, while those from Optus fell 3 per cent in Australian dollars to A$2.24 billion ($2.4 billion). Total revenue dropped 1.6 per cent to S$4.53 billion.

“There’s been significant erosion of profitability in the industry” in Australia in recent years, Paul O’Sullivan, Optus’s chief executive officer, told a media conference.

Optus’s competitors — Telstra Corp. and the Vodafone Hutchison Australia Pty. venture of Vodafone Plc. and Hutchison Whampoa Ltd. — had engaged in “a significant amount of profit destruction”, he said.