Singtel Profit Slumps to 27-Year Low on Overseas Charges

(Bloomberg) -- Singapore Telecommunications Ltd. cut its expected dividend after profit slumped to the lowest since 1993. The carrier booked a charge for costs related to its investment in an India-based carrier and said the coronavirus pandemic crimped mobile service revenue. Its shares fell in early trading Thursday.

Net income plunged 65% to S$1.08 billion ($761 million) in the year ended March, the company said Thursday in a statement before trading hours. That compares with the S$1.28 billion average of analyst estimates. The carrier will pay a 12.25 Singapore cents a share dividend for the year, compared with the company’s previous outlook for 17.5 Singapore cents a share.

Key Insights

• Singtel, which gets more than half its revenue outside Singapore, has been facing intensifying competition in overseas markets where it has invested in operators including Bharti Airtel in India and Australia-based Optus.
• The Singapore-based carrier on Thursday said it took a net exceptional charge of S$302 million for costs related to Bharti Airtel’s spectrum fees. The India-based carrier has faced airwave and license fees after the country’s operators lost a court case.
• “Adverse regulatory outcomes in India and the onset of COVID-19 in the fourth quarter,” resulted in a challenging fiscal year, Singtel Group Chief Executive Officer Chua Sock Koong said in the statement.
• The lower dividend “is a negative surprise for the street,” Arthur Pineda and Hussaini Saifee, analysts at Citigroup Global Markets Inc., wrote in a note to clients.
• Singtel has hired advisers for its planned sale of tower assets in Australia, Chief Financial Officer Lim Cheng Cheng told reporters Thursday on a teleconference to discuss earnings.
• The carrier is also upgrading to fifth-generation wireless technology in Singapore, where it expects to debut the network in January 2021.

Market Reaction

• Singtel shares dropped as much as 4.2% in Singapore, the biggest drop since May 4. The stock is down about 25% this year, compared with the 22% decline in the Straits Times Index.

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• Underlying net profit fell 13% to S$2.46 billion for year ended March, mainly because of weakness in Australia.
• Fourth quarter net income: S$574.4 million, a 26% drop from year earlier

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