Generates strong cashflow and maintains sound financial position
Higher dividend payout ratio with revised policy

Singapore, 11 November 2010 – Singapore Telecommunications Limited (Singtel) today announced that Group revenue rose strongly by 8 per cent to S$4.44 billion in the second quarter, led by robust revenue growth in Singapore and Australia. The stronger Australian dollar also helped lift revenue.

Revenue from Singapore grew 10 per cent to S$1.59 billion and from Australia rose 5 per cent to A$2.32 billion. The Australia business grew EBITDA strongly at 9 per cent. Implementation of key strategic initiatives to grow its ICT and new multimedia services, however, resulted in the Singapore business recording lower EBITDA.

The Group’s earnings were impacted by the inclusion of the first full quarter of losses from the newly-acquired Africa operations by Bharti (Bharti Africa) and the related acquisition financing cost. Coupled with higher depreciation and net finance cost, the Group’s net profit fell 7 per cent to S$892 million. Excluding the impact of Bharti Africa, net profit would have declined 3 per cent.

Highlights

Ms Chua Sock Koong, Singtel Group CEO, said: “The Group continues to generate strong revenue growth and cash flows from Singapore and Australia. We are committed to achieving an optimal capital structure and have raised our dividend payout to 55 to 70 per cent of underlying net profit while maintaining financial flexibility for our growth initiatives.

“We have been investing in these initiatives to transform ourselves into a multimedia and ICT solutions provider. It is important to make these investments and we have made inroads. These strategic initiatives are however expected to incur costs before delivering longer term scale benefits.

“Similarly, our associates are also transforming themselves and investing in growth as evidenced by Bharti’s foray into Africa.”

Pre-tax ordinary earnings from the regional mobile associates declined 6 per cent to S$536 million largely due to lower contributions from Bharti and Telkomsel. Excluding the impact of Bharti Africa, the regional mobile associates’ pre-tax earnings would have declined by a lower 3 per cent.

EBITDA for the Group was stable at S$1.76 billion. Net finance expense increased 27 per cent to S$88 million due to higher interest cost at Optus and foreign exchange loss from the revaluation of monetary assets and liabilities. Depreciation expenses also rose as a result of a larger asset base following investments in submarine cable, mobile and mio TV.

The Group has increased its dividend payout ratio to between 55 to 70 per cent of underlying net profit, from the previous ratio of 45 to 60 per cent. The Board has also approved an interim dividend of 6.8 cents a share, a 10 per cent increase from the interim dividend last year. This represents a payout ratio of 59 per cent of underlying net profit for the half year.

The Group continued to generate steady free cash flows across its businesses. For the half year ended 30 September 2010, overall free cash flows increased 12 per cent to S$1.87 billion. Free cash flows from Australia grew 34 per cent in Australia dollar terms and from Singapore, it remained stable. Dividends from associates, including the special dividend from AIS received in respect of its financial year 2009, rose 3 per cent.

Singapore

Revenue from the Singapore business grew 10 per cent driven by strong growth in IT & Engineering and Mobile. EBITDA fell 6 per cent to S$524 million, impacted by key strategic initiatives to drive higher smartphone adoption and data usage, as well as to build scale in multimedia services, in particular mio TV.

Mobile revenue continued to record double-digit growth, increasing 11 per cent to S$437 million driven by strong growth in postpaid customers and higher ARPU reflecting the higher rate plans from data pull through and increased roaming traffic.

In the quarter, Singtel registered its highest postpaid mobile net additions in two years.  It added 39,000 new postpaid customers, spurred by launches of Apple iPhone 4 and Samsung Galaxy S. Singtel continued to lead the mobile market with an overall share of 44.1 per cent as at 30 September 2010.

Mr Allen Lew, CEO Singapore said: “Our Mobile and IT & Engineering operations continue to register robust revenue growth, enabling us to grow overall service revenue at a faster pace than our competitors.”

For wireless broadband, demand remained strong with 103,000 new customers added during the quarter, bringing the total customer base to 670,000 as at 30 September 2010.

Data and Internet revenue grew 2 per cent to S$402 million. In the quarter, Singtel unveiled an exciting suite of high-speed fibre services, ‘exStream,’ ‘exCite’ and ‘eVolve’ for consumers and businesses. It will continue to leverage technology developments such as the Next Generation National Broadband Network (NGNBN) to lead and shape the digital media and ICT markets.

Mr Lew added: “Moving forward, in the new NGNBN era, our distinctive suite of high-speed fibre services will provide entertainment, lifestyle and productivity applications that include Singapore’s first internet TV search engine, ‘exCite’ TV, and integrated unified portal to differentiate us from our competitors and drive new revenue streams."

IT & Engineering revenue grew a strong 17 per cent to S$374 million. This quarter, Singtel recorded S$72 million in revenue as the key sub-contractor to OpenNet in rolling out Singapore’s NGNBN fibre network.

Revenue from NCS Group rose 5 per cent to S$302 million because of higher network integration and facilities management revenue. NCS’ order book remained strong at about S$1.9 billion as at end September 2010 as it continued to secure significant customers contracts.

Revenue from mio TV amounted to S$22 million as it built its customer base further with attractive entertainment and sports content bundling offers. mio TV added 25,000 new customers in the quarter to reach 245,000 as at 30 September 2010. The broadcast of the Barclays Premier League started this quarter from 14 August 2010 with enhanced interactive features including video-on-demand playback.

Total operating expenses grew 20 per cent to S$1.07 billion. Selling and administrative expenses grew 39 per cent, reflecting higher mio TV and rollout costs to connect new customers, increased mobile customer acquisition and retention costs on higher connections and smartphone sales.

Australia

Building on momentum gathered over the past two years, Optus’ EBITDA grew 9 per cent year-on-year to A$556 million, driven by strong mobile growth and prudent cost management. Operating revenue grew 5 per cent to A$2.32 billion while free cash flow was A$354 million in the quarter, up 30 per cent.

For the half year, Optus’ operating revenue was up 4 per cent to A$4.58 billion, supported by solid mobile service revenue growth of 10 per cent.  Operational EBITDA grew 10 per cent to A$1.11 billion, with EBITDA margin at 24.2 per cent, up 1.2 percentage points from a year ago.

Paul O’Sullivan, Optus Chief Executive said, “In spite of an increasingly competitive mobile market in Australia, Optus delivered its eighth consecutive quarter of double-digit mobile service revenue growth. Through a combination of industry leading offerings, a continued focus on improving customer experience and enhanced network performance, Optus grew its mobile customer base by 189,000 in the quarter with wireless broadband customers now exceeding 1 million.”

The Mobile business delivered a strong quarter of performance with service revenue growing 10 per cent to A$1.26 billion and EBITDA increasing by 8 per cent to A$374 million. The iPhone 4 launch and the introduction of a new range of compelling mobile cap plans with higher included value saw Optus increase its mobile postpaid customer base by 143,000 this quarter, up 15 per cent from a year ago.

The number of Optus 3G subscribers[2] increased to 4.54 million, a 9 per cent increase from a quarter ago. This included a base of more than a million wireless broadband[3] subscribers.

Blended ARPU grew 2 per cent to A$48, reflecting the acquisition of higher value customers and increased postpaid mix.  Excluding wireless broadband, postpaid ARPU grew 5 per cent.

In Optus Business and Wholesale, growth in business voice and satellite was offset by lower ICT hardware sales, resulting in overall revenue decline of 2 per cent. Operational EBITDA grew 10 per cent to A$124 million and EBITDA margin expanded 3 percentage points year-on-year to 26 per cent as a result of higher on-net mix.

During the quarter, Optus, with its unrivalled leadership in satellite operations, was awarded four key contracts by Australian broadcasters – Southern Cross Media Group, Australian Broadcasting Corporation, Special Broadcasting Service and Imparja Television – to deliver next generation digital free-to-air television services via satellite to households in black spot areas which do not have access to terrestrial digital television signals.

In Consumer & SMB fixed, Optus’ on-net strategy delivered on-net revenue growth of 4 per cent. Operational EBITDA increased 15 per cent to A$58 million with EBITDA margin expanding 2 percentage points year-on-year to 17 per cent. Total on-net broadband customers grew to 935,000 as at 30 September 2010. To support the growing demand for increased broadband speed, Optus launched its new offerings delivering broadband speeds of up to 100Mbps via its HFC cable network.

On 9 September 2010, Optus Finance successfully completed a EUR 700 million, 10-year note issue maturing in September 2020. The issue forms part of Optus’ long term financing strategy, enhancing the diversity of its investor base and maturity of its debt structure.

Regional

The Group’s mobile customer base grew 35 per cent or 94.4 million from a year ago to reach 368 million as at 30 September 2010. This included 40.1 million customers from Bharti’s operations in Africa.

NM denotes not meaningful

Mr Hui Weng Cheong, CEO International-designate, said: “Bharti has executed well relative to competition in India and it continues to focus on its 3G rollout in India and integration of its Africa operations. In Indonesia, Telkomsel continues to be the leader, while keenly monitoring the market and swiftly responding to market disruptions. Similarly, Globe plans to maintain its growth momentum in customer acquisitions with its enhanced prepaid mobile offerings.”

In Singapore dollar terms, pre-tax contribution from Telkomsel declined 9 per cent to S$230 million, as revenue growth was affected by aggressive price competition and promotions, coupled with higher operating expenses and depreciation charges on network upgrades and expansion.

In the quarter, Bharti’s South Asia[6] operations reported a 9 per cent increase in operating revenue and stable EBITDA despite price competition. Pre-tax contribution to the Group from Bharti’s South Asia operations amounted to S$226 million, 4 per cent lower than a year ago.

The Group’s share of Bharti Africa’s first full quarter of pre-tax losses amounted to S$18 million including S$19 million of related acquisition financing cost. As a result, overall profit contribution from Bharti declined 12 per cent to S$209 million.

In Singapore dollar terms, AIS’ pre-tax contribution in the quarter ended 30 June 2010 rose 26 per cent to S$67 million, with strong growth in data revenue driven by higher take-up of smartphones and increased mobile internet usage.

Globe’s pre-tax contribution in Singapore dollar terms declined 8 per cent to S$49 million as competition remained intense in the Philippines. This was partly mitigated by robust growth in the broadband business.

Appendix 1

The following table shows the trends in constant currency terms.

[1] Defined as net profit before exceptional items and exchange differences on capital reduction of certain overseas subsidiaries, net of hedging, as well as significant exceptional items of associates.

[2] 3G subscribers are defined as subscribers who i) own a 3G device and ii) are provisioned with 3G Data Services access.

[3] Wireless broadband subscribers are defined as subscribers provisioned with a HSPA broadband service. Excludes data packs attached to voice services.

[4] Excluding exceptional items.

[5] Singtel accounted for AIS June 2010 quarter results in these results.

[6] Includes India, Bangladesh and Sri Lanka.

[7] Assuming constant exchange rates from the corresponding periods in FY10.

[8] Based on the Group’s share of associates’ earnings before tax and exceptionals.