Singtel's Q1 Net Profit Drops by 23.1% YoY Due to Significant Net Exceptional Loss from Airtel
On August 21st, $Singtel (Z74.SG)$ released its business update for the first quarter ending June 30th, 2023. The company achieved a 2.5% growth in operating revenue and a 20% growth in underlying net profit in constant currency terms. However, due to a significant net exceptional loss from Airtel, the net profit dropped by 23% to S$483 million.
SingTel's CEO Yuen Kuan Moon:" Underlying net profit grew 15% in the first quarter despite prevailing macroeconomic challenges and currency headwinds. Our growth engines, NCS and Digital InfraCo executed well, roaming recovery stayed strong across our consumer and enterprise businesses, and we’ve lowered net finance expenses significantly with the proceeds from our capital recycling initiatives. While we saw better performances and higher contributions from our regional associates as market dynamics improved, increased competition and continued declines in legacy services impacted our core telco business in Singapore and Australia. Our focus on cost has helped to reduce some of the effects of the difficult operating environment."
The Group's operating revenue for 1Q23 decreased by 2.7% to S$3,488 million, with a 9% decline in the Australian dollar. However, on a constant currency basis, the operating revenue would have increased by 2.5%, driven by higher revenues from its growth engines NCS and Digital Infraco.
1) Optus:
The primary revenue contributor of the company, Optus, achieved a modest operating revenue growth of 1.1% despite challenging market conditions from increased competition and weakened consumer sentiment. Mobile service revenue showed modest growth at 2.7%, driven by gains in roaming and postpaid ARPU. These increases more than offset the decline in handset insurance revenue following the sale of the insurance business in the June quarter of last year. Despite these positive developments, operating expenses rose due to high inflation and a spike in energy costs following the expiration of a fixed price contract. As a result, EBITDA declined by 5.5%.
2) Singtel Singapore:
In Singtel Singapore, the operating revenue experienced a decline of 1.8% due to continued erosion in legacy carriage services, as well as intense price competition in mobile services amid a market shift towards lower-end plans. Although international data, pay TV, and voice revenues all fell, these declines were partially mitigated by higher mobile service revenue. Postpaid revenue was boosted by higher roaming as international travel continued to recover. Prepaid revenue remained stable, as an increase in foreigner customer base and data usage was offset by lower prices and IDD. The cessation of the Premier League led to a drop in Pay TV revenue, which was somewhat counteracted by lower content costs. As a result of cost management, EBITDA remained stable.
3) NCS:
NCS experienced a significant increase in operating revenue, up by 14%, which was largely attributed to the subsidiary contributions acquired during the previous year, as well as growth in Enterprise and Telco businesses. Digital, enterprise, and global businesses contributed 51%, 37%, and 15% of total operating revenue, respectively. With revenue growth and concerted cost optimization efforts, EBITDA also showed a notable improvement of growth of 6.6%. NCS reported strong bookings of S$691 million, with a pipeline of projects across various sectors.
4) Digital InfraCo:
Digital InfraCo achieved remarkable revenue growth of 17%, driven primarily by its data center business, which benefited from price uplifts, pass-through of utilities, and fees earned from satellite procurement and related services. Although this impressive growth was partly offset by higher maintenance, staff, and administrative costs, EBITDA still showed a solid increase of 11%.
5) Group exceptional items:
The company recorded a significant net exceptional loss primarily attributed to Airtel, as it recorded significant losses resulting from a sharp devaluation of the Nigerian Naira against the US Dollar (S$62 million), coupled with a fair value loss from its foreign currency convertible bonds (S$52 million).
"Going forward, we expect the integration of our core consumer and enterprise businesses which is underway in both Singapore and Australia, as the next step in our strategic reset, to optimise synergies, help deliver cost benefits and drive growth. We also believe Optus will have more certainty in regional Australia following Telstra and TPG’s decision not to appeal the Australian Competition Tribunal and Australian Competition and Consumer Commission's rulings against the network sharing deal," SingTel's CEO Yuen Kuan Moon added.
Source: Singtel
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