SingTel at a cross-road
The gloves are off as SingTel engages in a battle with Australian rival, TPG Telecom. In late last year, TPG Telecom won the rights to become Singapore’s fourth telco operator. In early April this year, TPG shocked the market by winning the rights to become Australia fourth mobile operator in Australia.
It is still early days to assess the impact of the heightened competition from TPG but SingTel is at a cross-road as it has to compete with TPG in both the Singapore and Australia market. While the impact of a fourth telco in Singapore would have minimal impact on SingTel, the same cannot be said for the entry of a new competitor in Australia. This is because the Australia market is very important to SingTel, which traditionally derived the bulk of its earnings from the regional businesses.
In the fourth quarter ending 31 March 2017, EBITDA from Optus, SingTel’s subsidiary in Australia, was A$741 million, more than half of the Group’s EBITDA of S$1.31 billion. This is not surprising given that the Australia market is so much bigger than Singapore. Net profit was up 1% to A$250 million while operating revenue rose 1.6% to A$2.11 billion.
Against the backdrop of increased competition, Optus continued to enhance the competitiveness of its network – with A$1.5 billion in capital expenditure. At the end of March 2017, Optus’ 4G network reached 96.1% of Australians. Through the deployment of significant spectrum holdings and innovative technologies such as 4.5G and native Voice over WiFi, Optus is improving network coverage and download speeds for customers.
Despite the challenging outlook, SingTel reported strong core revenue and earnings. Year-on-year for 4QFY17, operating revenue grew 5% to $4.3 billion and EBITDA increased 4% to $1.31 billion. Among its overseas joint ventures, Telkomsel’s pre-tax profit contribution rose 17% as it continued to deliver robust growth across voice, data and digital services. Profit before tax from Telkomsel in the quarter was an impressive $371 million. In years to come, contribution from the Indonesia market is expected to eclipse that of its Australia market.
Free cash flow was $3 billion, an increased of 12% from last year. With this huge war chest, SingTel is [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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