This article was originally published on Thursday, 14 February 2019 at 7:25 A.M. SGT; it has since been updated.
Singtel reported on Thursday its fiscal third quarter net profit fell 14.2 percent on-year to S$823 million amid headwinds in India. The results missed a forecast from DBS.
Underlying net profit fell 28.4 percent on-year to S$680 million, it said.
DBS forecast fiscal third quarter underlying net profit of S$705 million, compared with a consensus estimate of around S$750 million.
Operating revenue for the quarter ended 31 December rose 0.9 percent on-year to S$4.62 million, it said in a filing to SGX before the market open on Thursday. The increase was due to growth in equipment sales, ICT and digital services and on strong postpaid momentum in Australia and Singapore, the filing said.
“Intense competition in India, higher depreciation and amortisation from network and spectrum investments by the regional associates, the increased shift from voice to data, margin erosion in traditional carriage services and lower NBN migration revenue in Australia impacted the group’s results,” Singtel said in the statement.
The share of associates’ pre-tax profit fell 32.9 percent on-year to S$371 million in the quarter, Singtel said.
Chua Sock Koong, Singtel Group CEO, said the company had “stayed the course” despite increased competition and challenging market conditions.
“We’ve continued to add postpaid mobile customers across our core business in both Singapore and Australia while making positive strides in the ICT and digital space,” she said in the statement. “We remain focused on investing in networks and building our digital capabilities – areas that are important to our customers and our future success.”
She added that the long-term view of the regional associates was positive on growth in data usage.
“We expect the regional markets to revert to more sustainable market structures and deliver long-term profitable growth. Meanwhile, we are working closely with them to build a regional ecosystem of digital services that leverages the group’s strengths,” she said.
For key associate Bharti Airtel, operating revenue in India fell 3 percent in the quarter, on a 5 percent drop in mobile service revenue as average revenue per user (ARPU) declined to 104 rupees in the quarter from 123 rupees in the year-ago period, it said.
“During the quarter, Airtel continued to be adversely impacted by the continued disruptive price competition from an operator intent on aggressive market share expansion,” Singtel said. That was despite a 42 percent increase in voice usage and as data usage more than doubled, it said.
The India and South Asia operations posted a pre-tax operating loss of S$50 million for the quarter, swinging from a year-ago operating pre-tax profit of S$134 million, it said.
However, Airtel Africa continued to post growth, with operating revenue and EBITDA, or earnings before interest, tax, depreciation and amortization, rising 4 percent and 9 percent respectively in U.S. dollar terms, Singtel said.
Singtel said its share of Airtel Africa’s pre-tax operating profit increased 8.1 percent on-year to S$86 million, while the mobile customer base grew to 98 million as of end-December, up by 3.8 million on-quarter and by 14 million on-year.
In January, Airtel Africa received an additional US$200 million investment from the Qatar Investment Authority, bringing the total new equity raised to US$1.45 billion, which will go toward reducing existing debt, Singtel said.
Singapore consumer revenue falls
In Singapore, consumer operating revenue fell 5.7 percent on-year in the quarter on lower equipment sales, mainly on weaker demand for certain handset models, Singtel said.
Mobile service revenue in the city-state also fell 4.2 percent on-year on lower local and international voice and roaming call usage, which was partly offset by higher data revenue, it said. The post-paid consumer base grew by more than 36,000 on-quarter, mainly on SIM-only and mobile share plans, it said.
Pre-paid mobile users grew, despite intense competition, due to a partnership with the Centre for Domestic Employees (CDE) and other initiatives, it said.
Australia consumer revenue grows
In Australia, consumer operating revenue increased by 6.0 percent on higher mobile revenue, while total mobile revenue increased 12 percent, mainly on higher equipment sales, Singtel said.
The post-paid handset customer base increased by 126,000 in the quarter, and the branded handset customer base rose by 154,000, it said.
For the nine-month period, Singtel reported net profit fell 50.6 percent on-year to S$2.32 billion on operating revenue of S$13.03 billion, up 0.2 percent on-year. That was broadly in line with Daiwa’s forecast for full year net profit of S$3.03 billion on revenue of S$16.79 billion.
In its outlook, Singtel said it expected revenue would grow by a “low single digit,” while it updated its view to say it expected EBITDA would decline by a low single digit.
“The group’s overall performance has been affected by the global economic slowdown and weaker sentiment. The intense competition in India has also negatively impacted Airtel’s earnings although there are early signs of market stabilization,” it said.
“In the mobile businesses in Singapore and Australia, with the continued shift from voice to data and competitive pressure on data pricing, data revenue growth is not expected to offset the decline in voice revenues,” Singtel added.