SingTel to Spend S$2 Billion on New Acquisitions

Singapore Telecommunications Ltd., Southeast Asia’s biggest phone company, plans to spend S$2 billion ($1.6 billion) within three years on acquisitions to boost growth after posting a drop in profit.

The company will focus on digital operations, including mobile advertising, and may increase stakes in regional associates, SingTel said in a filing. Net income fell 33 percent to S$868 million in the fourth quarter ended March, after the carrier took a loss on a stake sale and paid higher taxes.

SingTel’s expansion into Southeast Asian mobile-phone markets, including a stake in Thailand’s Advance Info Service Pcl, is limiting the effect of slowing growth at Indian associate Bharti Airtel Ltd. and its Optus unit in Australia. Excluding one-time items, profit fell 2 percent to S$1 billion in the quarter, the Singapore-based company said.

“SingTel has exposure to Indonesia, Thailand and Philippines; these are all growing markets,” said Kelvin Goh, an analyst at CIMB Securities Sdn in Kuala Lumpur. “There’s no guaranteed returns to the huge investment in the digital business. There could be startup losses.”

The carrier owns stakes in Indonesia’s PT Telekomunikasi Selular and Globe Telecom Inc. in the Philippines.

Group revenue this year will be little changed while earnings before interest, tax, depreciation and amortization will rise by a “low single-digit level,” SingTel said. The company has also been investing to improve its core business and to create the next growth engine in the digital space.

Startup Losses

SingTel shares closed unchanged at S$3.99 in Singapore. The stock has climbed 21 percent this year, compared with an 8.7 percent advance in the benchmark Straits Times Index.

The company spent about $400 million last year on acquisitions in the digital business, Chief Executive Officer Chua Sock Koong said. In March 2012, SingTel agreed to buy Amobee Inc. for $321 million to expand into mobile advertising.

“In this investment phase, we would expect to see startup losses,” Chua told a briefing today. “We’re going to see the business grow very strongly.”

The carrier completed 12 acquisitions valued at about $665 million in 2012, almost double the $344 million spent in 2011, according to data compiled by Bloomberg. SingTel’s largest ever deal is the 2001 purchase of Optus from Cable & Wireless Plc for $9.7 billion. SingTel had cash and near-cash of S$911 million as of March 31, the company said today.

Increased Dividend

Singapore’s biggest mobile phone operator raised its final dividend by 11 percent to 10 cents a share as it targets a payout range between 60 percent and 75 percent, SingTel said.

SingTel in March completed the sale of its 30 percent stake in Warid Telecom (Private) Ltd. for $150 million and will receive a 7.5 percent share of the net proceeds from any future sale, public offering or merger. It took a loss of S$225 million from the deal.

The company had a one-time tax credit of S$270 million last year from recognizing an increase in the value of an asset transferred to an associate.

Australian Sales

Fourth-quarter Ebitda at Optus, Australia’s second-largest phone company, rose 3.4 percent to A$700 million ($692 million). Revenue fell 5.4 percent. The unit agreed to pay A$649 million for an allocation of airwaves to build up its wireless network to attract more customers from Telstra Corp. and other competitors.

SingTel made 62 percent of its sales in Australia during the quarter.

The earnings contribution from regional associates rose 3.2 percent to S$540 million in the quarter as strong results from Indonesia and Thailand limited the effect of weaker results at Bharti, the company said.

The pretax earnings contribution from Bharti slumped 31 percent to S$96 million. Bharti on May 2 reported earnings that missed analyst estimates after a weaker rupee increased interest payments and network equipment costs.

SingTel owns all of its Singapore and Australian phone businesses in addition to minority stakes in five other mobile operators with 468 million customers in countries in Asia and Africa. That excludes those from Warid since it was sold.

The company and its partners were among 12 applicants that will be able to submit bids by June 3 for two telecommunications licenses in Myanmar. The winners will be announced by June 27, according to the Myanmar government.

Morgan Stanley and Credit Suisse Group AG will offer a highly-leveraged debt package to help sell Optus’s satellite division, according to three people familiar with the matter.

The banks, which were hired in March to study options for the unit, are prepared to lend buyers more than six times Optus Satellite’s Ebitda, two of the people said. The sale could fetch A$2 billion, according to Nomura Holdings Inc.

(Corrects story published May 15 to show 12 acquisitions completed, in 10th paragraph.)
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