SingTel Net Income Misses Estimates as Australia Sales Dip

Singapore Telecommunications Ltd., Southeast Asia’s biggest phone company, posted fourth-quarter profit that missed analysts’ estimates as sales in Australia dropped and weaker currencies affected contributions from units.

Net income rose 3.5 percent to S$898.3 million ($718 million) in the three months ended in March, from S$868.2 million a year earlier, the Singapore-based company said in a statement to the stock exchange today. That compares with the S$904 million average of five analysts’ estimates compiled by Bloomberg for net income GAAP.

SingTel is trying to reignite growth at its Optus phone division in Australia, its biggest unit, where sales have dropped in recent quarters. It’s also increasing its foothold in new digital businesses, including mobile advertising. The company, which gets less than half its revenue from its home market, is expanding in Asian markets, including India, where it holds a stake in Bharti Airtel Ltd.

“They’re losing traction in Australia,” Carey Wong, an analyst at OCBC Investment Research in Singapore, said by phone. “The rollout of 4G may help them capture market share, though pricing pressures could still be an issue. Improvements in Singapore won’t immediately offset the weakness in Australia.”

SingTel’s underlying net profit, or earnings before exceptional items, fell 8.1 percent to S$920 million, compared with the S$916.8 million average of six analysts’ estimates for adjusted net income. Total sales dropped 7.9 percent to S$4.13 billion, beating the average projection of S$3.84 billion.

Shares Performance

SingTel shares rose 0.3 percent to S$3.85 at the close in Singapore, compared with the benchmark Straits Times Index, which added 0.4 percent.

SingTel owns all of its Singapore and Australian phone businesses in addition to minority stakes in other mobile operators, including Bharti Airtel, Indonesia’s PT Telekomunikasi Selular and Globe Telecom Inc. in the Philippines.

“Associate contributions were a little below expectation, due to weak contributions from Telkomsel as a result of a weaker rupiah,” Kelvin Goh and Ian Martin, analysts at CIMB Group Holdings Bhd. who rate the stock add, said in a report. “Operationally, they performed within expectations.”

Australia Sales

Sales at the Australia division fell 4.9 percent to A$2.07 billion ($1.94 billion), while pretax profit contribution from regional associates rose 4.8 percent to S$566 million, the company said. The Australian Dollar, Indonesian Rupiah and the Indian Rupee weakened by between 11 percent and 20 percent against the Singapore dollar during the quarter, it said.

Consumer revenue in Singapore increased 5 percent, bolstered by continued growth in mobile and cable television services, SingTel said.

Group revenue and earnings before interest, tax, depreciation and amortization, or Ebitda, are expected to remain stable in the current financial year, the company said. SingTel said it expects mobile sales in Singapore to increase by mid single digit, while those in Australia will decline by low single digit.

The company’s board is recommending a final ordinary dividend per share of 10 cents, bringing the total ordinary dividend per share for the year to 16.8 cents, equivalent to a payout ratio of 74 percent of underlying net profit. Group capital expenditure will be S$2.3 billion in the current financial year, comprising S$900 million for Singapore the balance for Australia, it said.

Optus Investment

SingTel’s Optus unit plans to invest A$1.2 billion ($1.1 billion ) in infrastructure this year, the biggest in more than a decade, the Australian reported April 19, citing Paul O’Sullivan, head of the company’s consumer group. The unit may cut more than 200 jobs in Australia, the Australian Financial Review said on April 29.

The company was fined S$6 million for a fire at its Bukit Panjang Exchange in October last year that disrupted services to as many as 60,000 customers. The accident was caused by an employee that wasn’t following strict maintenance procedures, which included using an unauthorized blowtorch, the company said in November.

(An earlier version of this story was corrected to fix an error in the estimate for adjusted net income and currency for year-earlier net income.)

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