SingTel Third-Quarter Net Falls on Costs to Keep Customers, Bharti Airtel

Singapore Telecommunications Ltd. (ST), Southeast Asia’s biggest phone company, posted a 9.6 percent fall in third-quarter earnings on costs to retain domestic customers and a slump at its Bharti Airtel Ltd. (BHARTI) unit in India.

Net income fell to S$902 million ($717 million), or 5.7 Singapore cents a share, in the three months ended Dec. 31 from S$998 million, or 6.3 cents a year earlier, SingTel, as the Singapore-based company is known, said in a statement today. The result missed the S$951.5 million average of four analysts’ estimates compiled by Bloomberg.

SingTel’s margin, which measures profit as a proportion of sales, shrank 1.3 percentage points to 26 percent as selling and administrative expenses in Singapore surged 22 percent on higher costs to add and retain customers. Competition in Australia is curbing growth for its Optus unit and sliding earnings at part- owned Bharti are crimping profitability.

“The big disappointment here is the change in the cost structure and the decline in its margin,” said Theo Maas, who holds SingTel among the $5 billion he helps manage at Arnhem Investment Management Pty. in Sydney. “They have been quite aggressive in terms of handset subsidies.”

SingTel rose 2 percent to S$3.13 in Singapore trading. The shares have gained 1.3 percent this year.

Singapore, Australia

Third-quarter earnings before interest, tax, depreciation and amortization from Singapore operations fell 7 percent to S$547 million. Revenue rose 3 percent.

Mobile revenue rose 6 percent to S$491 million after the company added 61,000 customers and increased its market share to 46 percent.

Sydney-based Optus, which trails only Telstra Corp. (TLS) in Australia, posted a 2 percent rise in earnings to A$562 million ($601 million) as it added 182,000 customers.

Full-year forecasts were affirmed, with the company expecting “stable” earnings in Singapore and growth in Australia at “low single digit levels.”

“They have affirmed things are sound with the guidance,” said Arnhem’s Maas.

Regional Units

SingTel owns all of its Singapore and Australian phone businesses in addition to minority stakes in six other mobile operators with 434 million customers in more than 20 countries in Asia and Africa.

Third-quarter earnings from associates, such as Bharti, PT Telekomunikasi Selular in Indonesia and Advanced Info Service Pcl (ADVANC) in Thailand, fell 7.9 percent to S$449 million.

New Delhi-based Bharti, India’s largest wireless operator, last week posted a 22 percent decline in profit as customers curbed mobile-phone use amid rising call rates and it incurred costs for the for the expansion of 3G services. The contribution to SingTel fell 30 percent to S$128 million.

The earnings contribution to SingTel from Indonesia’s PT Telekomunikasi (TLKM) rose 5.6 percent to S$226 million and profit from Advanced Info, Thailand’s largest mobile-phone operator, advanced 23 percent.

To contact the reporter on this story: Robert Fenner in Melbourne at rfenner@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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