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SingTel misses earnings forecast; stronger currency blamed

SingTel misses earnings forecast; stronger currency blamed
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First Published: Tue, Aug 12 2008. 09 16 PM IST
Updated: Wed, Aug 13 2008. 01 30 PM IST
Singapore: South-East Asia’s largest telecom firm, Singapore Telecommunications Ltd, missed forecasts with flat quarterly earnings after a strong Singapore dollar crimped contributions from its Asian mobile businesses, sending its shares to a four-week low.
The state-controlled telecom firm, known as SingTel, which generates about three-quarters of its group sales abroad, cut its guidance for earnings contributions from foreign operations and warned a strong Singapore dollar would hurt its performance.
“The major disappointment came from regional associates’ contribution,” said Morgan Stanley analyst Navin Killa.
“While Singapore and (Australian unit) Optus have shown steady growth in revenues, both businesses face margin pressure due to rising competition.”
SingTel shares sank as much as 3.6% on Tuesday. They closed 1.7% down at S$3.52 (Rs105.42) while Singapore’s benchmark Straits Times Index fell 0.3% to close at 2,816.82.
Killa, who rates SingTel “equal-weight”, recommends investors switch to rival StarHub Ltd for exposure to Singapore, and invest directly in SingTel’s affiliates—India’s Bharti Airtel Ltd, Indonesia’s Telekomunikasi Selular, or Telkomsel, and Advanced Info Service in Thailand.
The Singapore dollar has risen an average of 7% against the Indonesian rupiah, the Philippine peso, the Thai baht and the Indian rupee in the June quarter from the March quarter, according to analyst estimates.
“The pre-tax earnings contributions from the regional mobile associates are expected to grow at low double-digit level and at a pace slower than the past two years,” chief executive Chua Sock Koong said at a media briefing.
SingTel, Singapore’s largest listed firm valued at more than $40 billion (Rs1.7 trillion), made April-June underlying net profit, before goodwill and exceptionals, of S$865 million, versus S$868 million a year ago, and missing an average forecast of S$930.3 million. First quarter attributable net profit was S$878 million, down 5.3% from last year.
Facing a domestic market of just 4.6 million people where virtually everyone has a mobile phone, the firm has spent S$18 billion in recent years buying stakes in operators in high-growth Asian countries such as India and in Australia.
Christopher Wong, fund manager at Aberdeen Asset Management, said SingTel was still a superior cash-generating company despite its slower earnings growth. “At a time when companies are facing pressure on their margins and working capital, having strong cash flows is quite a bonus.”
SingTel reported a free cash flow of S$553 million for the quarter, flat from a year ago.
Chua said the group was still looking for acquisitions, and was monitoring developments in Vietnam and China closely.
“Our investment focus remains in Asia, but we are trying to learn about new markets in the Middle East and Central Asia. That is in the early stages.”
SingTel, which confirmed it will launch Apple Inc.’s third generation iPhone in Singapore on 22 August, reported group operating revenue rose 5.9% to S$3.78 billion.
Optus, SingTel’s single-biggest revenue and profit generator, posted flat net profit of A$122 million (Rs457 crore) after depreciation charges.
SingTel also owns big stakes in six emerging market mobile operators, including India’s Bharti Airtel.
Pre-tax profit from mobile associates fell 11% to S$582 million, hit by the strong Singapore currency, lower earnings from Telkomsel, and losses from Pakistan’s Warid Telecom.
Charmian Kok contributed to this story.
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First Published: Tue, Aug 12 2008. 09 16 PM IST
More Topics: SingTel | Singapore | dollar | Morgan Stanley | StarHub |