Asian operator Singtel reported a slight rise in its Q4 profit, but a 40 per cent drop in equipment sales in Singapore and the weak Australian dollar led to a fall in operating revenue on a group level and in Singapore.
The regional group’s Q4 net profit was up 0.8 per cent to SGD946 million ($699 million), while operating revenue for the quarter ending 31 March slid 6 per cent to SGD4.09 billion (3 per cent in constant currency terms) due in large part to the impact of a sharp drop in handset sales in Singapore and a 15 per cent decline in mobile termination rates in Australia.
For the full fiscal year group revenue was down 1.5 per cent year-on-year to SGD17 billion, which the company attributed to the weakening Australian dollar (down 9 per cent during the year). This of course drove down the results of its Australian subsidiary Optus when converted to Singapore dollars.
In constant currency terms, group revenue grew 4.1 per cent for the year ended 31 March, with the growth driven by Optus and its subsidiaries, Amobee and Trustwave, which it acquired last year.
On a group level, mobile revenue in Q4 decreased 15.4 per cent to SGD1.49 billion and was down 7.3 per cent year-on-year to SGD6.7 billion. Data and internet revenue was up just 0.7 per cent in Q4 but down 1.2 per cent year-on-year.
Weak handset sales
A 40 per cent drop in handset sales in Singapore in Q4 led to an 8 per cent decline in consumer group revenue there. But mobile revenue was stable in the quarter at SGD323 million. For the full year, consumer revenue was down 0.2 per cent, which was due to a nearly 9 per cent decrease in equipment sales and a similar fall in IDD services.
Optus’ operating revenue for the year was up 3.7 per cent despite a decline of AUD186 million in mobile termination rates. However, in Singapore dollar terms Optus’ revenues declined 5.8 per cent.
The company’s net profit for the fiscal year increased 2 per cent to SGD3.87 billion ($2.81 billion). Its adjusted EBITDA was up slightly to SGD6.7 billion from SGD6.6 billion last year. The stability was largely attributed to tighter cost controls, especially on the selling and administrative expenses, and network costs. Operating expenses for the year fell 1.5 per cent to SGD2.87 billion, with traffic costs dropping 13 per cent.
To diversify its revenue sources, Moody’s said Singtel continued to focus on its mobile advertising and cyber security managed services subsidiaries. Although these businesses led revenue growth for FY2015-16, both companies recorded net losses for the year, with Amobee also remaining EBITDA negative.
Moody’s expects Singtel’s group revenue to grow 2-3 per cent in FY2016-17.
The agency noted that forex fluctuations will continue to temper Singtel’s earnings growth given that more than 65 per cent of its earnings are generated outside Singapore.