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Singtel posts first ever quarterly loss of SGD 668 million on Bharti Airtel provision

Lee Kah Whye | Updated: Nov 18, 2019 13:37 IST

By Lee Kah Whye
Singapore, Nov 18 (ANI): Singapore's dominant telecommunications operator, Singtel shocked investors when reporting their second-quarter results last week posting a historic loss of SGD 668 million (USD 491 million or INR 35.2 billion). This is mainly due to a one-time charge affecting associate Bharti Airtel due to Supreme Court of India's ruling on how the tax on revenue is assessed.
Singtel has a 35.2 per cent stake in Airtel and its financial year started on the 1st of April. Singtel's major shareholder is Singapore government investment firm Temasek Holdings which holds 52.5 per cent of its shares.
For the same quarter last year, it ran up profits of SGD 667 million and for Q1 of the current financial year, profits stood at SGD 541 million. Overall, for the half-year ended September 30, Singtel reported a net loss of SGD 127 million against a profit of SGD 1.5 billion for the comparable period last year.
Excluding Airtel, Q2 2019 profit would have been up 4 per cent. Operating revenue for the quarter was stable in constant currency terms at SGD4.15 billion. Singtel cited "resilient performance by the consumer business across Singapore and Australia" as the reason.
EBITDA rose to SGD1.16 billion and was up 7 percent in constant currency terms, lifted by Australia NBN migration revenue and cost management. Regional mobile subsidiaries AIS (Thailand) and Globe (Philippines) delivered robust performances, with pre-tax profit contributions from regional associates increasing 36 percent to SGD 414 million while underlying net profit rose 3 percent to SGD 737 million.
The Supreme Court decision on how telecom companies are taxed has resulted in Singtel having to make an exceptional provision of SGD1.93 billion which is its pre-tax share of the SGD 5.49 billion owed to the government by its associate, Airtel.
On October 24, concluding a 20-year dispute between the government and the carriers, the apex court sided with the former and decided that telecom operators must include their non-core revenues in assessing the fees they need to pay the government. Till now mobile carriers have been paying the Department of Telecommunications (DoT)adjusted gross revenue (AGR) based on core services for spectrum usage charges and license fees.
However, some market watchers feel that the Supreme Court judgement may be positive in the longer term for Airtel as well as Reliance Jio, should it force Vodafone Idea out of the market. Reliance Jio is not as severely impacted by the ruling as the other two commercial carriers because it has been in operation for a shorter period.
In a statement following the release of the results, Chua Sock Koong, Singtel Group CEO, said, "Notwithstanding the court ruling, Airtel has made positive strides in the wake of the recent industry consolidation, gaining market share, and increasing mobile service revenue for a third straight quarter."
She added, "The weak global economic environment has affected the industry although on a positive note, our diversified earnings base and our cost management have lifted our performance. We remain focused on delivering better customer experience and deepening customer engagement. While we expect current challenging conditions to continue into 2020, we will invest to strengthen our market position, enhance our core networks and build strategic capabilities to capture growth, and be 5G-ready."
"Our regional associates have continued to execute well, with increased contributions from Thailand and the Philippines, as well as market stability in Indonesia. As leading players in their respective markets, our associates will continue to benefit from the growing demand for digital content, products and services," Chua continued.
Singtel plans to maintain its earlier guidance of paying a dividend of 17.5 (Singapore) cents per share for the financial year ending 31 March 2020. The Board has approved a stable interim dividend at 6.8 cents per share for the half-year ended 30 September 2019.
For the current financial year ending 31 March 2020, Singtel's told investors that it expects consolidated revenue and EBITA for the Group to be stable, free cash flow to be around SGD2.4 billion, and dividends from regional associates to come in at around SGD 1.2 billion. Capital expenditure is estimated to be around SGD 2.1 billion.
In March this year, Singapore's Government Investment Corporation (GIC) invested SGD 972 million (USD700 million) in Bharti Airtel for a 4.4 percent stake in the company.
The day after the results announcement, Friday, Singtel lost about SGD1.9 billion of its SGD 53.8 billion market value with shares ending the day 3.64 per cent lower at SGD 3.18. (ANI)