Singtel warns earnings could fall this year

John Burton
Financial Times

Singapore Telecommunications warned on Thursday that earnings could fall this year due to slowing demand in overseas Asian markets, which provide more than two-thirds of its sales and profits.

”If you look at the economic data that continues to be released, we’re still seeing a downtrend,” said Chua Sock Koong, the SingTel chief executive. “The economic outlooks remains ‘very uncertain’ in spite of ”some tenative signs that maybe a bottom is approaching.”

SingTel said it was still looking at foreign acquisitions, with Pakistan as a possible area of growth due to industry consolidation. It owns 30 per cent of Pakistan’s Warid Telecom.

South-east Asia’s largest telecoms group said net earnings fell 17.3 per cent to S$903m ($616m) in the January-March period and declined by 12.9 per cent to S$3.96bn for the full fiscal year ending March 31. Sales fell 5.1 per cent to S$3.57bn in the fourth fiscal quarter, but rose by 0.6 per cent to S$14.9bn for the full year.

But the group said a stronger Singapore dollar could depress future foreign earnings. It partly blamed the profit fall in the final fiscal quarter on foreign exchange volatility. Although revenues from Australia’s Optus, its biggest foreign unit, rose in local currency terms, they fell when measured in Singapore dollars because of the Australian dollar’s steep decline.

SingTel also took a S$330m goodwill impairment charge for investments in Warid and Pacific Bangledesh Telecom.

Mobile subscribers in the region appear to be cutting back on calls in response to the recession. Pre-tax earnings from SingTel’s six regional mobile partners fell by 22.4 per cent to S$489m during the last fiscal quarter, with the weakest performances reported by Indonesia’s Telekomsel and Thailand’s AIS.

Other regional affiliates – including India’s Bharti and Globe in the Philippines – proved more resilient.

SingTel’s home market gained strength in spite of Singapore being Asia’s worst performing economy this year. SingTel gained market share in terms of mobile subscribers at the expense of its two local rivals, StarHub and Mobile One. It said the increased use of broadband services countered a decline in local mobile calls.

However, SingTel will need to rely on overseas markets for future growth, with the slowing of the cellular penetration rate in Singapore, which reached 132 per cent in the January-March period, according to the city-state’s Infocomm Development Authority.

While SingTel’s local operating revenues were up by 12.7 per cent in the first quarter of 2009, it expects that will slow to single digits for the coming 12 months.

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