Singtel reports double-digit drop in profit mainly on account of Airtel

Bharti Airtel subscribers comprise almost 58% of Singtel's global subscriber reach

Singaporean telecom operator Singtel reported a double-digit drop in profit and weak revenue growth for its fiscal Q3, with financials negatively impacted by decline in profit contribution from regional units, particularly Bharti Airtel. However, Singtel sounded positive on the scope for market stabilisation as guided by Airtel following Q3 results. 

The telecom operator saw third-quarter operating revenue grow 4 per cent in constant currency terms to SGD 4.63 billion. Intense competition in India, higher depreciation and amortisation from network and spectrum investments by the regional associates, the increased shift from voice to data, margin erosion in traditional carriage services and lower migration revenue in Australia impacted the group's results, said the company in a statement. Net profit declined 14 per cent to SGD 823 million and would have been down 12 per cent YoY in constant currency terms.

Compared to a PAT of SGD 25 million from the Airtel group in Q3 FY18, Singtel incurred a loss of SGD 86 million in Q3 FY19. Singtel Group has a roughly 39 per cent stake in Bharti Airtel. Bharti Airtel accounts for 57 per cent of Singtel's global subscriber reach. 

Bharti Airtel reported a surprise profit of Rs 86 crore in the October-December quarter (Q3), helped by robust customer additions and expansion in mobile data volume. Consolidated revenues came in at Rs 20,519 crore growing 1.9 per cent on-year. India revenues stood at Rs 14,768 crore, having declined by 2.3 per cent on-year.

Airtel's reported customer churn has jumped from 4 per cent to 7.3 per cent QoQ following the company's focus on weeding out low-value subscribers. The push towards voice and data bundled services increased data user base by a massive 8 per cent QoQ to 37.9 per cent. The company has been investing heavily towards rapid 4G rollout in India and higher network costs.

"Our long-term view on our regional associates remains positive as they continue to ride the growth in data and execute well against the challenges and competition. We expect the regional markets to revert to more sustainable market structures and deliver long-term profitable growth. Meanwhile, we are working closely with them to build a regional ecosystem of digital services that leverages the group's strengths and unlocks the value of our joint mobile customer base of over 675 million," said Chua Sock Koong, Singtel Group CEO. 

Bharti Airtel reported capex of Rs 6,570 crore and consolidated net debt of Rs 1.06 trillion, which decreased due to Airtel Africa equity issuance.
 

"The pain is expected to remain amid a leveraged balance sheet and continued fall in India Ebitda. The Africa business remains steady, with improvement in both revenues and Ebitda, and is expected to remain steady going forward too. After the recent fund raising, impending IPO, and potential fund raise at the consolidated level should reduce leverage, while continued capex spends and slow rebound in Ebitda will lead to continued cash burn," noted Naval Sheth, analyst, Emkay Global, following Bharti Airtel Q3 results. 

In November last year, Airtel's Africa unit had raised $1.25 billion, or about Rs 9,200 crore, through a placement of shares to six global investors, including Warburg Pincus, Temasek, Singtel and SoftBank Group International, in the run-up to an Airtel Africa IPO, which is likely to be announced around June this year, through which the telco plans to raise an additional $1.5-1.6 billion.

Bharti Airtel shares took a 3 per cent hit on Thursday to close at Rs 301.5.