SingTel Q1 beats forecast on Asian mobile growth

Singapore Telecommunications, One of Southeast Asia's largest phone firm, beat market expectations with a 10 percent rise in quarterly profit as strong Asian mobile growth outweighed a margin squeeze at its Australian unit.

SingTel, Singapore's largest listed company, said there were no significant changes to its full-year forecast for flat operating revenue and earnings before interest, tax, depreciation and amortisation.

"The results are a tad above expectations," said Citigroup analyst Anand Ramachandran. "We remain buyers of the stock - we think SingTel offers a mix of mature cash flows from Singapore and Australia, and exciting growth prospects from the best-in-class wireless stable in Asia."

Battling heavy competition at home, where the mobile phone penetration rate has reached 100 percent, SingTel has spent S$17 billion (US$10.8 billion) in recent years buying firms in high-growth Asian nations and in the bigger Australian market.

It derives about 75 percent of revenues and two-thirds of pre-tax earnings from operations outside Singapore.

The company, 56.3 percent-owned by state investor Temasek, earned underlying net profit before goodwill and exceptionals of S$837 million for the fiscal first quarter to June 30, up from a restated S$759 million a year ago.

This was above an average underlying net profit forecast of about S$787 million from a Reuters survey of three analysts.

The earnings were boosted by an additional quarter of results from Philippine mobile associate Globe Telecom after its financial period was aligned with SingTel's.

The Singapore group also benefited from lower depreciation and interest costs after creditors took control of its loss-making submarine cable business C2C.

Attributable net profit in the quarter was S$840 million, compared with S$794 million a year before, while operating revenue fell 1.4 percent to S$3.17 billion, largely due to a fall in the Australian currency against the Singapore dollar.

"Across our businesses, we've been making steady progress. Our associates continue to perform strongly and Optus is performing in line with our guidance despite competitive pressures," outgoing CEO Lee Hsien Yang told a media briefing.

According to Lee, surprised investors last month by announcing he would resign after 12 years in the job. He gave no reason for leaving, but said he would stay on until a replacement was found.

Optus, Australia's No. 2 mobile operator, reported a seven percent drop in operating earnings to $478 million as operating margins fell to 26.1 percent, from 29.5 percent in the year-earlier period, hit by stiff price competition and regulatory changes.

Sales at Optus rose 5.3 percent to $1.83 billion due to new acquisitions.

To trim operating expenses, Optus has moved its call centre services to India. It would also seek other ways to cut costs.

In May, Optus said it aimed to exceed overall market growth and forecast a slight rise in full-year sales, adding that mobile revenues would slow. It said EBITDA margin would decline, but stay above 26 percent.

SingTel also owns major stakes in five operators: 21.5 percent of Thailand's Advanced Info Service Plc., 30.8 percent of India's Bharti Group, 44.6 percent of Globe in the Philippines, 35 percent of Indonesia's PT Telkomsel and 45 percent of Pacific Bangladesh Telecom Ltd.

Net profit from the affiliates surged 31 percent to S$359 million in the quarter, driven by Telkomsel, Bharti and Globe.

Meanwhile, SingTel is on the prowl for more acquisitions in Asia, Chief Financial Officer Chua Sock Koong said.

"We continue to look for new investment opportunities in high-growth markets with low penetration and large population sizes," she said at a media briefing.

When asked which markets SingTel found particularly attractive in the region, Lee pointed to Vietnam. Chua had also said in May that the group remained keen on purchases in South Asia and Pakistan in particular.

SingTel shares fell 4.2 percent in the April-June quarter, compared with a 1.6 percent slide for Telstra, Australia's leading phone company.

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