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SingTel Q4 net seen down 13%

Singapore Telecommunications, Asia's fifth-biggest phone company, is expected to post a 13 per cent fall in quarterly net profit.

india Updated: May 02, 2006 15:58 IST

Singapore Telecommunications Ltd, Asia's fifth-biggest phone company, is expected to post a 13 per cent fall in quarterly net profit on Thursday as stiff competition and a margin squeeze in Australia outweigh mobile growth in the rest of Asia. Optus, Australia's second-largest mobile operator, faces intense price competition, slowing subscriber growth and regulatory changes in a saturated domestic market, where more than eight in 10 people own a mobile phone, analysts said.

SingTel's A$14 billion bid for Optus in 2001 was its largest acquisition. Optus Mobile, which has a third of the Australian market, is SingTel's single-biggest revenue and profit generator.

But analysts added that contributions from mobile investments in the rapidly growing markets of India, Bangladesh, Indonesia, and - to a lesser extent - Thailand and the Philippines, will be the mainstay of growth for SingTel, Singapore's largest listed firm with a market value of US$30 billion.

"SingTel faces continued margin erosion at Optus, while its Singapore operations remain weak as growth slows in a saturated market," said DBS Vickers Securities analyst Bowen Phua.

"Contributions from the mobile associates will offset some of the decline..."

SingTel will probably show an underlying net profit, which strips out goodwill and exceptionals, of S$765.7 million ($486 million) for the fiscal fourth quarter ended March 31, based on the average forecast of six analysts polled.

This compares with S$881 million in the year-earlier quarter. The estimates ranged from S$538 million to S$952 million.

SingTel, 56.3 per cent-owned by state firm Temasek Holdings, warned in November it might not hit its target of double-digit growth in underlying profit in the March 2006 fiscal year. It said it hoped to achieve that goal in the medium term.

It also said full-year group operating revenue would rise, but operational EBITDA (earnings before interest, tax, depreciation and amortisation) would fall.

Optus eyes cost-cuts

Facing a home market of just 4.4 million people, where over nine out of 10 people already own a handset, SingTel has spent S$17 billion ($10 billion) in recent years buying operators in high-growth Asian nations, and in the bigger Australian market.

It now derives about 75 per cent of revenues and two-thirds of pre-tax earnings from operations outside Singapore. SingTel owns stakes in Thailand's Advanced Info Service Plc, India's Bharti Group, Globe Telecom Inc in the Philippines, Indonesia's PT Telkomsel and Pacific Bangladesh Telecom Ltd.

Optus said it expected revenue growth for the full year to moderate and its operational EBITDA margin to decline from the previous year but remain above 28 per cent.

Last year, the Australian Competition & Consumer Commission (ACCC) cut fees that telecoms companies charge each other when their customers make calls to people on rival networks, and when a fixed-line call from one goes to the mobile network of another.

Rivals Telstra Corp, Hutchison Telecommunications (Australia) Ltd and Vodafone Group Plc have also been wooing new users with aggressive price deals.

Analysts said Optus' cost-cutting measures, which include staffing cuts, would help boost earnings in the new fiscal year.

Chief Financial Officer Chua Sock Koong said in February that Optus was exploring ways to cut operating costs, such as job cuts, outsourcing selected customer services, and automating processes.

Analysts are also counting on a higher dividend pay-out in the absence of any big-ticket acquisitions. SingTel usually pays 40-50 per cent of its underlying earnings as ordinary dividends.

Analysts predict SingTel will hand out dividends of up to 30 cents a share for the March 2006 fiscal year, more than double last year's. This comprises 4-21 cents in special dividends and 9-12 cents in ordinary dividends.

SingTel shares gained 1.5 per cent in the January-March quarter, compared with a 4.8 per cent decline for Telstra.

First Published: May 02, 2006 15:58 IST