Could Optus’s cybersecurity attack become another Bharti Airtel for Singtel? In November 2019, Singtel posted its first quarterly loss due to the $1.93 billion pre-tax share of Bharti Airtel’s one-off charge in India. That India saga saw Singtel share price (SGX: Z74) plunging from $3.40 in late 2019 to a low of $2.00 in October 2020. The turmoil also saw the departure of former CEO, Chua Sock Koong in December 2020. Against this backdrop, investors must be holding their breath on the unfolding class action suit against its wholly-owned subsidiary, Optus.
On 21 April 2023, Singtel announced that “a class action against six (6) Australian Optus entities was filed in the Federal Court of Australia”. According to a Straits Times article, it was alleged that more than 100,000 current and former customers had joined in the class action suit. In my opinion, given the severity of the incident and the scale of the cybersecurity victims, the potential costs and fines may be at least US$1 billion based on Bharti Airtel saga. Of course, this is just my personal opinion and I could be wrong.
Last year, several analysts had predicted that the data breach could cost Singtel hefty costs of about US$500 million, to which Singtel had rubbished as “speculative”. However, I do not think that the Australian government would let Singtel off the hook so easily. After all, the data breach had caused a spate of cybersecurity attacks in Australia, leading to the government to set up a new cybersecurity body and revamp its rules in which the Minister for Home Affairs and Cyber Security has blasted as “bloody useless”. Looking at the uproar among the victims and the tone from the government officials, I would be amazed that the total costs would amount to just $142 million (this was the provision made by Singtel before the notification of the lawsuit).
To recap, in 22 September 2022, Singtel revealed that its Optus customers’ data were leaked following a cybersecurity attack. Then in October 2022, the telco announced that about 1.2 million of the Australian customers were affected. Apparently, some of the customers’ passport numbers were exposed by the perpetrators.
To make matters worse, a few weeks after Optus’ data breach, another unit of Singtel, Dialog faced cyberattack that compromised personal data of its employees and clients. The double whammy sent Singtel share price (SGX: Z74) straight to the bin as the counter tumbled to a low of $2.38 on 22 October 2022. Nevertheless, the slump did not last long as Singtel share price (SGX: Z74) stormed back in style with the announcement of a special dividend per share of 5.0 cents in two tranches of 2.5 cents.
To illustrate just how important Optus is to Singtel: Optus is the wholly-owned subsidiary of Singtel whereas Bharti Airtel is just a regional associate in which Singtel has a majority stake (about 55.3%). In FY2022, Optus was Singtel’s champion revenue and profit contributor – with revenue at A$6.6 billion and EBITDA at A$1.933 billion. In that period, profit contribution from Bharti Airtel amounted to just $432 million. So yes, Singtel will fight to the very end to protect its interest in Optus but cloud of uncertainties would likely to engulf Singtel share price (SGX: Z74) until the cybersecurity issue is fully addressed.
The reason as to why Singtel share price (SGX: Z74) has not collapsed may be attributed to the fact that most investors should be holding out for the special dividend and final dividend. Following the ex-dividends, Singtel share price (SGX: Z74) could be in no man’s land.Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in Singtel before. Whether Singtel share price (SGX: Z74) will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
Singtel share price (SGX: Z74) not doomed
Notwithstanding the Optus’ data breach mess, it is not all doom and gloom for Singtel share price (SGX: Z74). To divert investors’ attention, Singtel recently announced [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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