News Releases

The Singtel Group's results for the third quarter and nine months ended 31 December 2007

Third consecutive quarter of double-digit revenue growth

Underlying net profit up 22 per cent

Singapore, 5 February 2008 -- Singapore Telecommunications Limited (Singtel) today announced its unaudited results for the third quarter and nine months ended 31 December 2007.
 
Highlights
 
 
 
 
Quarter
YOY
Nine Months
YOY
Dec 2007 (S$m)
Dec 2006
(S$m)
Change
Dec 2007 (S$m)
Dec 2006
(S$m)
Change
Operating revenue
3,825
3,433
11.4%
11,086
9,993
10.9%
Operational EBITDA
1,136
1,056
7.5%
3,375
3,186
5.9%
Share of associates’ ordinary earnings
656
506
29.8%
1,945
1,511
28.8%
EBITDA
1,777
1,646
8.0%
5,288
4,969
6.4%
Net profit attributable
to shareholders
952
994
-4.2%
2,867
2,789
2.8%
Underlying net profit [1]
931
765
21.7%
2,713
2,333
16.3%
Underlying earnings per share (S cents)
5.86
4.82
21.6%
17.06
14.24
19.8%

Group

The Group delivered a third consecutive quarter of double-digit revenue growth.
 
Group revenue grew strongly by 11 per cent to S$3.83 billion, driven by an 11 per cent revenue growth in the Singapore business and the appreciation of the Australian dollar.
 
Optus maintained profitability in a highly competitive market.  In Australian Dollar terms, Optus recorded a 3.6 per cent revenue growth while in Singapore Dollar terms, the growth was 12 per cent as the Australian Dollar strengthened by nearly 8 per cent from a year ago.
 
The regional mobile associates continued to record good earnings growth.  Excluding exceptional items, the associates’ pre-tax earnings were up 30 per cent to S$656 million, driven mainly by Telkomsel, Bharti and Globe.
 
Net profit declined 4.2 per cent to S$952 million due mainly to exceptional gains on property disposal in the same quarter last year and the recognition of foreign exchange losses following the completion of the NCIC share swap this quarter.  Excluding the impact of exceptionals and the IDA compensation in the last corresponding quarter, underlying net profit grew strongly by 22 per cent to S$931 million.  The corresponding earnings per share was up 22 per cent to 5.86 cents.
 
In the quarter, free cash flow doubled to S$962 million from a year ago, with S$395 million from the Singapore operations, S$174 million from the Australia operations and S$393 million fromthe associates.
 
Ms Chua Sock Koong, Singtel Group CEO, said: “The Group continued its impressive growth momentum and delivered its third consecutive quarter of double-digit revenue growth.  InSingapore, our focus on winning and leading share in growth segments like Mobile and Data & Internet helped us achieve our third straight quarter of double-digit growth in this highly competitive market.  Optus delivered robust performance in the very competitive Australian market.  Through continuous innovation and aggressive marketing, Optus was able to achieve another quarter of strong mobile net adds.”
 
She added: “Our regional mobile associates continued to deliver good profit and dividend growth.  Together with Singtel and Optus and our six regional mobile associates, we have 172 million mobile subscribers, the largest in Asia outside China.”
 

Singapore
 
Singtel achieved an impressive 11 per cent revenue growth, driven largely by the exceptional performance in the mobile business.
 
Operational EBITDA increased 6.1 per cent to S$482 million and its margin declined 1.8 percentage points to 38.7 per cent.  The margin for the telco business declined 2.6 percentage points to 44.6 per cent, reflecting the higher selling expenses associated with aggressive mobile customer acquisition, costs incurred for key strategic initiatives and the higher proportion of low-margin equipment sales.  IT business margin improved 1.3 percentage points from a year ago to 6.9 per cent.
 
Mr Allen Lew, Singtel’s CEO Singapore, said: “The various business units have delivered a set of impressive results for the third straight quarter despite intense market competition.  Our leading performers include consumer mobile as well as corporate data services such as managed hosting services.  The take-up of mio TV is in line with our projection.  Over the next 18 months, we will continue to focus on leading the market in Singapore while building new revenue growth engines for the future.  They include pay TV services in the consumer market and managed services in the business segment.”
 
mio TV, together with the suite of mio services, is set to invigorate the fixed-line business.  The number of mio Plan customers has risen to 55,000 customers, up 13,000 or 31 per cent from a quarter ago.  mio TV is also adding new subscribers:  17,000 customers were provisioned with mio TV services, bringing the total installed customer base to 27,000 as at 31 December 2007. Although not expected to make a significant contribution to Singtel’s revenue in the short term, mio has helped to strengthen Singtel’s position as a fully integrated provider of infocomm and entertainment services.
 
Data & Internet revenue grew 7.7 per cent to S$351 million in the quarter, backed by strong corporate data demand and broadband growth.  Corporate data services recorded a double-digit growth of 11 per cent to S$248 million.
 
Internet revenue[2] grew 5.7 per cent year-on-year to S$104 million while Broadband revenue grew 6.9 per cent to S$78 million as a result of a higher number of broadband lines.  Despite intense competition, Singtel retained its lead in the broadband Internet market with 471,000 lines as at 31 December 2007. 
 
Revenue from Mobile Communications grew an impressive 18 per cent year-on-year to S$345 million.  Continuing the strong momentum, Singtel further increased its lead in the mobile market with 2.33 million customers.  It added a record 197,000 mobile customers in the quarter and enlarged its overall market share by 0.9 percentage point to 41.2 per cent as at 30 November 2007[3].  Net additions in the prepaid and the postpaid segments were 163,000 and 34,000 respectively. 
 
In the prepaid segment, Singtel successfully penetrated the foreign worker segment and reasserted market leadership with a 37.2 per cent market share as at 30 November 2007.  In the postpaid segment, Singtel’s market share rose slightly to 44.5 per cent as at 30 November 2007.  In spite of record net additions, Average Revenue Per User or ARPUs of both postpaid and prepaid customers were higher by 5 per cent and 12 per cent respectively from a year ago.
 
NCS continued to ride the regional economic growth and leverage its leadership position inSingapore to grow its overseas business.  IT & Engineering revenue for the quarter grew 15 per cent year-on-year, driven by higher contributions from hardware sales and systems integration projects.
 
Overseas revenue accounted for 29 per cent of total IT & Engineering revenue for the current quarter, up from 25 per cent a year ago.  NCS continues to aggressively pursue opportunities in key overseas markets, including Australia, China, Hong Kong and the Middle East. 
 
Major overseas and local contract wins were recorded in the quarter.  New contracts secured byNCS included the Ministry of Education (HQ), National Library Board, Lafarge Asia and China Pacific Insurance Group.
 
International Telephone revenue was up slightly by 1.6 per cent to S$152 million. International telephone outgoing traffic (excluding Malaysia) was stimulated by the strong domestic economy.  ‘Free IDD’ prepaid price plans, which offer free international calls to countries such as Bangladesh and India, also stimulated traffic volume.  With a higher volume of ‘free IDD’ traffic, average collection rate fell 32 per cent from a year ago.
 
Revenue from National Telephone declined 6.6 per cent to S$106 million due to increasing broadband usage, mobile substitution and competition.  Singtel’s market share remained stable at 95 per cent as at 30 November 2007.
 
Operating Expenses increased 16 per cent or S$104 million year-on-year.  Cost of Sales, which recorded the largest increase of 24 per cent or S$34 million, grew in line with higher IT revenues and equipment sales.  Selling and Administrative expenses increased 19 per cent or S$32 million year-on-year, as a result of higher acquisition and retention costs for mobile, and content costs associated with mio TV.  Excluding expenses related to strategic initiatives, the increase would be 14 per cent.
 
Staff costs increased 12 per cent, due mainly to annual salary increments, higher provision for bonus, increased headcount to support business growth as well as the impact of higher employers’ CPF rates with effect from July 2007.  Compared to a year ago, headcount increased by 606 or 6.4 per cent, mainly to support the expansion in overseas IT businesses.
 
Singtel continued to generate strong cash flows.  Excluding dividends received from associates, free cash flow was up 19 per cent to S$395 million due mainly to lower taxes.
 
Singtel Optus

In the third quarter, Optus delivered an increase in operating revenue of 3.6 per cent to A$2.0 billion and maintained its market position through creative and innovative product launches and reinvigorated customer acquisition activities.
 
“The third quarter saw Optus increasing scale in mobile and fixed on-net; gaining profitable market share in Optus Business, prepaid mobile and Unbundled Local Loop (ULL) on-net; and delivering profit increase.  With the success of targeted campaigns and innovative product offerings, Optus recorded strong customer growth in mobile and in ULL,” said Mr Paul O’Sullivan, Optus Chief Executive.
 
“In Mobile, Optus reached the significant milestone of 7 million mobile customers – with a total of 108,000 new mobile subscribers added this quarter.  The range of competitively priced Wireless Broadband products launched by Optus proved popular with customers as did the widely promoted mobile caps products.
 
“Throughout the quarter, strong demand continued for the innovative Optus Fusion product, a combined fixed line phone and broadband cap plan.  There were 76,000 on-net broadband adds in the quarter taking total broadband subscribers to 893,000,” Mr O’Sullivan said.
 
Optus Consumer fixed on-net revenue grew 28 per cent.  This strong on-net performance led to a dramatic lift in Consumer margins – up 7 percentage points to 12 per cent.  Consistent with its strategy of focusing on on-net subscriber growth, Optus continued to exit unprofitable consumer fixed-line resale services.  Consumer fixed on-net revenue now represents 68 per cent of total consumer fixed revenues, up from 51 per cent in the same quarter last year. 
 
In Optus Business, a highlight of the quarter was the launch of Optus Evolve – a new advanced IP communications network.  It enables businesses to increase productivity through the convergence of Voice and Data services in a modular manner that allows customers to choose, adapt and grow services without having to rebuild the network.
 
Despite higher acquisition costs related to the growth in postpaid mobile subscribers and the lower incoming revenue from the 40 per cent ACCC-mandated decrease in mobile termination rates, Optus increased its underlying net profit by 5.9 per cent and operational EBITDA by 1.0 per cent year-on-year.  EBITDA margin was 25.4 per cent, down 0.6 percentage point from the last corresponding quarter reflecting increased costs from higher customer acquisition activities and a higher mix of mobile equipment revenue.
 
Free cash flow for the quarter increased 20 per cent to A$134 million due primarily to the timing of capital expenditure payments and working capital movements. 
 
In this quarter, Optus Mobile operating revenue grew 3.8 per cent to A$1.14 billion.  The division contributed 57 per cent to total revenue, consistent with the last corresponding quarter.
 
Outgoing service revenue increased 7.5 per cent with growth in both prepaid and postpaid markets.  Optus continues to lead the prepaid segment with prepaid outgoing service revenue growth of 16 per cent.  Incoming service revenue decreased 22 per cent from lower termination rates mandated by the ACCC.
 
The mobile subscriber base exceeded 7 million and the 3G subscriber base increased to 1.16 million, an increase of 33 per cent compared to a quarter ago.
 
Mobile EBITDA margin was 32 per cent, stable against the preceding quarter.  Operational EBITDA decreased by 10 per cent year-on-year due to lower mobile termination rates and higher subscriber acquisition costs.
 
Optus continued to stimulate SMS and other data revenue, which increased to 29 per cent of ARPU.  The proportion of non-SMS data revenue (including premium SMS) grew to 5.2 per cent of ARPU in the current quarter, compared to 3.7 per cent a year ago.
 
Optus continued with the expansion of its 3G HSPA mobile network, enhancing the quality and speed of mobile services across the country.  Major regional cities of Newcastle and Wollongongin NSW are now receiving Optus 3G services via the network.  During the quarter, Optus announced the award of 3G equipment contracts and a two-vendor strategy for the nation-wide rollout.
 
Total Optus Business and Wholesale Fixed revenue grew 8.3 per cent, driven by the strong 10 per cent growth in Optus Business fixed revenue.
 
Operational EBITDA for the combined division grew strongly by 27 per cent to A$102 million. EBITDA margin was up 3 percentage points to 22 per cent, reflecting the growth from higher margin Data and IP products and other on‑net revenue streams.
 
Optus Business continued to grow IP-VPN, expand the ICT and Managed Services business and successfully manage legacy products.  Its fixed voice revenue grew 5.4 per cent and business data and IP revenue increased 8.0 per cent, underpinned by Optus’ continuing success in migrating customers to IP-VPN.  ICT and Managed Services revenue increased 20 per cent as Optus supported its corporate customers in delivering converged business applications. 
 
Optus continued to win major corporate and government deals this quarter including Luxottica and the Department of Education and Training (Western Australia).  Wholesale Data and IP revenues grew 11 per cent as strong demand for Internet bandwidth and access continued. Satellite revenue increased 5.3 per cent with growth in MobileSat and VSAT revenues.  On 6 October 2007, Optus successfully launched its D2 satellite, second in the new generation of its three D-series satellites. 
 
Optus Consumer and Small & Medium Business (SMB) Fixed delivered EBITDA growth of A$26 million.
 
This quarter, Optus held its strong ULL addition rate, with 265,000 subscribers provisioned with services as at 31 December 2007.  The total ULL network build will include 366 exchanges with a coverage footprint of 2.9 million premises.
 
Broadband revenue grew strongly by 19 per cent albeit in a market with a higher mix of lower-priced broadband plans.  On-net broadband customers increased to 650,000 and broadband customers totalled 893,000, an increase of 166,000 or 23 per cent from a year ago.  The resale customer base declined by 51,000 from a quarter ago as Optus exited from the consumer fixed-line resale business.
 
SMB fixed revenue grew 2.0 per cent with growth in on-net Internet services.
 
In June 2007, the Australian Government announced that OPEL Networks Pty Limited (“OPEL”), an Optus joint venture, had been awarded A$958 million in funding to extend high-speed broadband services to rural and regional Australia.  The funding agreement with the government was signed in September 2007. 
 
OPEL will be eligible to receive the agreed funding and commence business once certain specified conditions are met.  The conditions include Government’s approval of commercial arrangements and satisfactory completion of further network planning.  The plans for network build and implementation were lodged with the Department of Broadband, Communications and the Digital Economy in January 2008.
 
Associated companies
Contributions from Singtel’s regional mobile associates continued to grow.  On a post-tax basis, earnings from associates grew 34 per cent year-on-year to S$492 million and accounted for 53 per cent of the Group’s underlying net profit.  Pre-tax earnings from the associates grew 27 per cent to S$642 million, spurred by continued strong growth in Telkomsel, Bharti and Globe. During the quarter, Singtel received S$437 million of dividends mainly from Telkomsel and Globe.
 
Year-on-year, the Group’s combined mobile subscriber base expanded 53 per cent to about 172 million.
 
In the quarter, the Group’s share of Telkomsel’s pre-tax profit grew 33 per cent in Rupiah terms on the back of improved operational performance and a higher subscriber base. However, in Singapore Dollar terms, pre-tax profit contribution was up 23 per cent to S$307 million as the Rupiah depreciated 9 per cent against the Singapore Dollar in the quarter.
 
Telkomsel added 3.4 million mobile subscribers in the quarter, bringing its total subscriber base to 47.9 million, an increase of 12 million or 35 per cent for the year.  Telkomsel maintained its leadership in the Indonesian cellular market with a market share of 52 per cent as at 31 December 2007.
Bharti’s operating revenue increased a robust 42 per cent, led by strong subscriber gains.  The Group’s share of Bharti’s pre-tax profit rose 39 per cent to S$211 million.  The higher contribution was also helped by a 6 per cent appreciation of the Indian Rupee against the Singapore Dollar.
Bharti added 6.3 million net mobile subscribers in the quarter, another record growth, enlarging its total subscriber base to 55.2 million.
 
During the quarter, Bharti formed a wholly-owned subsidiary, Bharti Infratel (“Infratel”), to independently manage and run its passive infrastructure in India.  Infratel owns close to 20,000 sites and holds approximately 42 per cent stake in Indus Towers, a joint venture with two other private mobile operators in India, which has 70,000 sites.  Both Infratel and Indus Towers will provide passive infrastructure services to wireless telecom operators in India.  In December 2007, leading international investors committed to invest US$1 billion in Infratel.
 
Globe’s pre-tax profit contribution increased 56 per cent year-on-year to S$81 million due to robust subscriber growth and the sustained take-up of its various consumer offers.  Globe added 1.1 million net mobile subscribers this quarter, bringing its total subscriber base to 20.3 million, up 30 per cent from 15.7 million a year ago. 
 
AIS’ pre-tax profit for the quarter was up 5.7 per cent to S$55 million year-on-year, helped by a stronger Thai Baht which strengthened 9 per cent against the Singapore Dollar.  Year-on-year, AIS’ subscriber base grew 24 per cent to 24.2 million.  Market conditions in Thailand continued to be very competitive.
 
PBTL, the only CDMA mobile phone operator in Bangladesh, added 87,000 net mobile subscribers in the quarter, bringing its total subscriber base to 1.4 million as at 31 December 2007.  The share of PBTL’s pre-tax losses, excluding exceptional items, decreased 75 per cent year-on-year to S$5 million, primarily due to lower acquisition costs from lower net additions.
 
Warid Telecom, the fourth largest mobile operator in Pakistan, is benefiting from strong growth in Pakistan as the number of its subscribers increased 11 per cent or 1.3 million to 13.2 million from a quarter ago. 
 
The Group completed the acquisition of Warid in September 2007 and has commenced equity accounting of Warid’s results.
 
Cash flow and balance sheet
 
The Group continues to generate strong free cash flow.  In the quarter, free cash flow doubled to S$962 million from a year ago as a result of higher operating cash flow mainly attributable to dividends received from the associates.
 
Singtel retains significant flexibility for further investments and will continue to review its capital structure regularly.  Net debt gearing was 25.9 per cent, down 2.5 percentage points from 28.4 per cent a quarter ago, as gross debt declined following the repayment of bank borrowings in the quarter.
 
Net debt was 1.0 times of EBITDA and the EBITDA interest cover was at 21 times.
 
Outlook
 
The guidance issued earlier with the results for the financial year ended 31 March 2007, with updates provided in the first quarter ended 30 June 2007, is affirmed.
 
 
Please refer to the Group’s Management Discussion and Analysis document for a full commentary on the Group’s results for the third quarter and nine months ended 31 December 2007.  
 
 

[1] Excluding exceptionals, exceptional currency translation gains and IDA compensation.
[2] Excluding the S$5 million one-off revenue adjustment in last corresponding quarter.
[3] Based on IDA’s published information as at 30 November 2007.