Singtel embarks on new strategy after profit decline

Singtel embarks on new strategy after profit decline

singtel ceo appointment.jpg

Singtel has unveiled a "strategic reset" that will focus on 5G, new growth opportunities in digital services and monetising infrastructure assets.

Singtel said its plan, announced Thursday, comes in response to Covid-driven digitalisation, however, it also coincided with the latest financial results from the telco, which group CEO Yuen Kuan Moon called "disappointing".

Factoring in net exceptional charges of S$1.18 billion for the full year, the results confirmed a net profit decline of 49% to S$554 million, including non-cash impairment charges for investments in Amobee and Trustwave.

The financial results also confirmed a 5% decline in operating revenue for the full year to S$15.64 billion. Singtel attributed this to three developments: NBN migration revenue tapering off for Optus’ fixed business as migrations neared completion; the ongoing impact from Covid-19; and continued carriage erosion.

Underlying net profit declined 30% year-on-year to S$1.73 billion "due to continued industry and Covid-19 headwinds".

Moon said in a statement: “This year’s results are disappointing given unprecedented headwinds from Covid-19 and ongoing structural challenges. The one-time exceptional charge also weighed on our bottom-line number.

"That said, NCS and our data centre services proved to be bright spots, showing strong growth as enterprises rushed to digitalise and transform their businesses. We will be capitalising on this mass digitalisation with plans for a strategic reset to drive recovery and growth.”

The group maintained its financial position remains healthy. Net debt was stable at S$12.4 billion from a year ago. Free cash flow was S$3.4 billion, down 10% on lower operating cash flow and higher capital expenditure.

In April 2021, Singtel priced S$1 billion of subordinated perpetual securities with initial rate of distribution of 3.3% per annum and launched its first sustainability-linked revolving credit facility of S$750 million for general corporate purposes.

The regional associates’ pre-tax profit contribution was up 4% to S$1.71 billion despite the challenges brought about by the pandemic. While Telkomsel, AIS and Globe showed declines in contributions, Airtel saw an improvement in its operating performance, boosted by strong growth in both India and Africa.

Moon said: “We’re encouraged by Airtel’s strong performances in India and Africa although a resurgence of the pandemic continues to cast a shadow. Our associates’ investments in network and digital assets have been critical to keeping customers connected. The accelerated adoption of digital services across the region is a shift that is here to stay and our associates are well positioned to capture this growth.”

In its outlook, Singtel expected dividends from regional associates to be approximately S$1.3 billion and capex, including 5G networks, to reach S$2.4 billion. This would comprise A$1.5 billion for Optus and S$800 million for the rest of the group.

New strategy

While Singtel's 5G ambitions drove the headlines, the meat of its new strategy was focused on its multinational subsidiary, NCS, and unlocking the "latent value" of infrastructure assets.

After seven years of positive revenue growth – mostly derived from public sector contracts – NCS will now reposition to become a "B2B digital services champion in Asia Pacific".

NCS became an independent business unit earlier this year and will now establish two strategic business units to focus on the key sectors of government and telecoms. There is also focus on healthcare and transport, communications, technology and media, as well as financial services, in Singapore, Australia and Greater China. 

Moon said: "There will be no letting up in the e-government side of the business, but this is a major turning point for NCS – we are growing our capabilities and repositioning ourselves to capture new business from the private sector which should provide a growth uplift from the ongoing digital race.”

On infrastructure, Singtel highlighted the upcoming auction of its tower assets in Australia. It holds tower, satellite, subsea and data centre assets across the region and is "exploring options to leverage its infrastructure assets to unlock latent value and drive growth".

Moon said: "Given the disruptions of the past year and the massive pivot online, demand for such assets have surged and made valuations very compelling.

“The quality of our infrastructure assets are the result of years of sustained capital investment and innovations. Given the importance of the digital economy to Singapore and its economic recovery, it is also important that we unlock the value of these assets so that we can continue to reinvest in world-class infrastructure.”

On 5G, Singtel launched Singapore's first 5G standalone network this month and while consumer innovations will remain key B2B will come into closer focus. Efforts here will be directed to growing 5G enterprise and cloud solutions in Singapore, Australia and across the regional associates.


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