SingTel Posts Smallest Profit in 6 Quarters on Currency

Singapore Telecommunications Ltd., Southeast Asia’s biggest phone company, posted its smallest profit in six quarters as the country’s currency cut the value of income from its overseas affiliates.

Net income attributable to shareholders fell to S$834.6 million ($668 million) in the three months ended June from S$1.01 billion a year earlier, the company known as SingTel said in a regulatory statement today. Net profit after tax fell 17 percent after one-time gains in the year earlier, it said.

The result illustrates Chief Executive Officer Chua Sock Koong’s challenge in diversifying SingTel’s earnings beyond its home country and Australia, where its second-ranked operator Optus faces intensifying competition from Telstra Corp. The company gets most of its sales from outside Singapore, with the nation’s currency gaining against that of the major markets for its regional affiliates.

“The core Singapore business itself is a pretty slow-moving, slow-changing business,” Chris Lane, an analyst at Sanford C. Bernstein & Co. in Hong Kong, said by phone before today’s results. “There’s a lot of promise in India but in the short term it’s not enough to move the needle.”

Shares of SingTel fell 0.3 percent to S$3.90 as of 10:46 a.m. in the city state. The stock has gained 6.6 percent so far this year compared with the 4.3 percent advance in the benchmark Straits Times index.

Currency Impact

SingTel owns about a third of India’s Bharti Airtel Ltd., 35 percent of Indonesia’s PT Telekomunikasi Selular, 47 percent of Manila-based Globe Telecom Inc., and 23 percent of Advanced Info Service Pcl, Thailand’s largest phone operator. It also has stakes in undersea cable companies and Singapore’s postal service and owns all of Optus.

The Indonesian rupiah fell 19 percent against the Singapore dollar in the quarter while the Australian dollar dropped 5.4 percent and Indian rupee slipped 7.2 percent, according to the company.

The currency effects meant that SingTel’s profit fell two percent even after excluding one-time items, the company said in a presentation. “Underlying” earnings would have risen 5 percent without the currency impact, it said.

The company had a one-time gain of about S$150 million a year earlier from the dilution of its stake in an affiliate company, and paid an exceptional A$24 million to fire Australian workers in the most recent period.

Earnings from mobile phone companies in emerging markets would have risen 20 percent if currency effects had been stripped out, compared to the 7.6 percent growth the company reported, according to the presentation.

The company is likely to focus merger and acquisition activity on its regional associates, it said.

“These are businesses we have been associated with, we understand the business, we understand the management, we understand the market,” CEO Chua told reporters in Singapore today. “It’s our preference to increase our shares in our associates given the opportunity.”

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