Regional competition takes bite out of Singtel’s Q1 profit

A Singtel signage at their head office in Singapore is seen February 12, 2015. (Reuters pic)

SINGAPORE: Singapore Telecommunications reported a 6.6% fall in first-quarter profit, in part due to fierce competition in some of its markets and as a strong Singapore dollar crimped earnings from affiliates.

Singtel, Southeast Asia’s largest telecom operator, posted a net profit of S$832 million ($610.5 million) for the three months ended in June, compared with S$890 million a year ago.

Underlying net profit, which excludes one-time items, fell more than 19% to S$733 million. Revenue fell 0.5% to S$4.13 billion.

Competition affected India’s Bharti Airtel and Indonesia’s PT Telekomunikasi Selular, in which Singtel owns stakes, leading to a decline in its regional associates’ overall profits. Singtel is also set to face fresh competition at home with the expected arrival of a new entrant later this year.

As demand for traditional carrier services fades, the company has been looking for growth in areas such as digital marketing, cybersecurity, mobile payments and video streaming.

The company’s options to unlock value from its digital businesses, which include its digital marketing arm Amobee, could come in the form of their full or partial listing or bringing in a partner to take stake in particular entities.

Singtel wants these businesses to achieve consistent revenue and profitable growth ahead of any decision on a potential initial public offering, said Samba Natarajan, chief executive officer of the Group Digital Life segment.

“In the two-to-three year timeframe, if we see a consistent pattern of performance like this, I think we will go IPO… for our different digital businesses,” he told reporters at the company’s results briefing.

Last month, Singtel said it would partner with gaming firm Razer Inc and others to launch a regional esports league to engage with younger consumers.

“We start the year with 23% of group revenue from ICT (information and communications technology) and digital businesses, and we expect contributions from these businesses to rise further as we continue to build capabilities in these new growth areas,” CEO Chua Sock Koong said in a statement.

Singtel also affirmed its outlook for the fiscal year 2019.