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Singtel earnings up 14 pc on Airtel sale and profit contribution

May 29, 2023 11:08 AM

Singapore: Singapore's dominant telecom operator Singtel last week announced that net profit for the financial year which ended March 2023 was up 14 per cent to SGD 2.23 billion (USD 1.65 billion). After accounting for exceptional items, underlying profit increased by 6.8 per cent. Group revenue was lower by 4.7 per cent, coming in at SGD 14.6 billion (USD 10.8 billion) mainly due to the absence of revenue from the digital advertising subsidiary Amobee which was sold in July 2022.


EBITDA (earnings before interest, tax, depreciation and amortisation) was marginally down 2.2 per cent but up one per cent in constant currency terms. EBITDA excluding associated companies was up 6.4 per cent before adjusting for currency.


Singtel said that profits rose as a result of the strong performance of its core businesses "underpinned by robust mobile growth and price uplifts as international travel and roaming recovered, rising 5G adoption and an increase in demand for ICT (information and communication technology) services. Airtel benefitted from broad-based mobile growth, helping drive regional associates' pre-tax contributions up by 10 per cent to SGD 2.27 billion."


"Our solid financial performance in the second year of our strategic reset reflects the tangible progress we have made against our business priorities in spite of the uncertain macroeconomic environment. Our 5G leadership, differentiated product offerings, roaming recovery and focus on cost is reinvigorating the core businesses which saw a 15 per cent increase in EBIT," said Singtel Group CEO, Mr Yuen Kuan Moon about the results.


"In our growth engines, our regional data centre business expanded its footprint to Indonesia and Thailand with new projects that will more than double our capacity in the next three years. NCS' inroads into Australia and the enterprise space have allowed us to diversify our ICT business geographically and across customer segments. Our capital recycling programme continued to unlock value this year with more than SGD 2.8 billion raised largely from Airtel, allowing us to strengthen our balance sheet and deliver greater returns for shareholders."


NCS is Singtel's 100 per cent owned ICT services subsidiary. Exceptional items, like the divestment of a 3.3 per cent stake in Airtel for SGD2.25 billion in August last year, boosted net profit by SGD 172 million. The Airtel transaction allowed Singtel to recognise a one-off gain of SGD 18 million but resulted in a drop in Singtel's effective ownership of Airtel to 29.7 per cent at that time. This was further diluted to 29.4 per cent following a stock issue by Airtel after a foreign currency bond conversion.


Other contributors to exceptional items for the financial year include its share of Indus Towers' significant receivable provision for one of its major customers and provision for licence fees related to prior periods which were partially offset by a deferred tax credit in Africa and a fair value gain on revaluation of its foreign currency convertible bonds. There was also an exceptional gain at Telkomsel (Indonesia) and Globe (Philippines) from the sale and leaseback of its telecommunication towers.


There were also one-off losses arising from a non-cash impairment charge on Australian subsidiary Optus' goodwill and a provision for costs related to the cyber attack affecting Optus.


Optus which Singtel wholly owns, accounts for 55 per cent of total Singtel group revenue or SGD 8.5 billion (USD 6.3 billion).
Singtel's regional associates made a significant improvement from last year on the back of "Airtel's sustained growth momentum." This was mainly due to higher mobile ARPU (average revenue per user) resulting in double-digit increases in operating revenue and EBITDA.
Before taxes, Airtel contributed SGD 694 million (USD 514 million) to Singtel's profits, an increase of 60.7 per cent from the previous financial year. This lifted regional associates' pre-tax profit by 9.7 per cent to SGD 2.27 billion. Singtel owns Airtel partly through its 49.4 per cent stake in Bharti Telecom with the remaining shares held directly.


Adjusting for the strength of the Singapore Dollar relative to the trading currencies of regional associates, their contributions would have increased by 15 per cent.


Mr Yuen said, "Our regional associates have also benefitted from the rebound in mobile services post-COVID, and Airtel delivered yet another year of solid growth. With the rapid broadband adoption in their markets, our regional associates are investing heavily in this underpenetrated space as they focus on fixed broadband as their next engine of growth. We are confident they can capture this opportunity with their sizeable mobile base providing unique cross-selling and cost synergies."

 

Singtel said that the Group's businesses have seen a "healthy recovery, capitalising on the reopening of economies and the resumption of international travel." However, it pointed out that it is operating in an uncertain macroeconomic environment with elevated inflation and high-interest rates. It also expects continued currency headwinds due to the strong Singapore Dollar relative to the Australian Dollar and regional currencies.


Singtel in its statement released with the financial results added that it hoped to build on the good momentum established last year and will continue executing its strategy to improve margins in the core business, scaling growth engines such as NCS and the regional data centre business, and continuing its capital recycling programme to fund growth.


"With the actions we have been taking to evolve our operating model, enhance our capabilities and mitigate inflationary pressures, we are well-positioned to capture substantial growth and value from the accelerated pace of digitalisation in the region.


In the new financial year, we're going a step further with the synergistic integration of our consumer and enterprise businesses in both Singapore and Australia to make them more agile, competitive and compelling when bringing solutions to market. We will also continue to drive profitability and identify monetisation opportunities to boost shareholder returns," CEO Mr Yuen added.

 

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