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SingTel pays record dividend as acquisition avenues dim

Singapore Telecommunications (SingTel) set a surprise record dividend payment, signalling Southeast Asia’s biggest telecoms company was struggling to find growth avenues through acquisitions.

And in a sign that it could return more capital to shareholders, Singapore’s most valuable company said it was setting up a business trust to transfer some of its infrastructure assets. Trusts usually pass on most of their income to their unitholders as dividends.

“In the near term they probably just have to return more cash to the shareholders. They have said they will keep looking for other opportunities but I think in the short term it is going to be difficult,” Credit Suisse analyst Sean Quek said.

SingTel bought stakes in mobile operators in high-growth Asian countries such as India, Indonesia and Thailand about a decade ago to boost growth and reduce its reliance on the mature Singapore and Australian markets.

But with business in some of these emerging markets maturing and competition intensifying, the profits of some of these units have come under pressure.

A steep fall in contribution from its Indian unit Bharti Airtel drove a 2.3 percent drop in SingTel’s fourth-quarter net profit on Thursday.

The company set a final ordinary dividend of 9 Singapore cents and a special dividend of 10 Singapore cents, bringing the annual dividend to a record 25.8 cents per share, or a yield of 8 percent based on its recent share price.

“Since we have not made significant acquisitions in the last few years, in an attempt to get into the optimum capital structure, we proposed this special dividend,” SingTel’s CEO Chua Sock Koong said at a media briefing on the results.

“And it does not inhibit our ability to make acquisitions going forward,” she added.

SingTel said it was setting up a business trust to hold some of its assets such as manholes, ducts and central offices that will form part of Singapore’s net generation nationwide broadband network.

It will reduce its stake in the trust to less than 25 percent by April 2014, which may mean more payouts for shareholders in the future.

The dividend news helped SingTel shares rise as much as 1.3 percent on Thursday. By afternoon, they were up 0.6 percent, bucking the 1.1 percent decline in the broader Singapore market .


SingTel reported an attributable net profit of S$991.7 million ($802 million) for January-March, down from S$1.02 billion a year ago, and in line with the average forecast of S$991 million from four analysts polled by Reuters.

Revenue for the company, which has a market value of $40 billion, rose 3.8 percent to S$4.6 billion.

Bharti posted a bigger-than-expected 31.5 percent fall in its quarterly net profit and said its loss-making operation in Africa, which it bought last year from Kuwait’s Zain for $9 billion, is expected to dent near-term earnings. [ID:nL3E7G40KL]

Contributions from Bharti, India’s top mobile phone carrier in which SingTel has around a 32 percent stake, fell by 29 percent in Singapore dollar terms to S$173 million.

SingTel CEO Chua said in November the Indian unit will take at least another two quarters to restructure the African operation. [ID:nSGE6A80EA]

PT Telekomunikasi Indonesia (Telkomsel), which has become the biggest contributor outside Singapore and Australia, has seen its margins fall due to tougher competition in the world’s fourth most populous nation.

Weakness in regional currencies against the Singapore dollar also weighed on SingTel’s quarterly profits.

SingTel said revenue for its Singapore and Australia operations was expected to grow in the low single-digit level for the year ending March 2012. Earnings before interest, tax, depreciation and amortisation is expected to be stable for the Singapore operation and grow at low single-digit levels for Australia, it said.

SingTel also said it is eyeing opportunities arising from the introduction of high-speed broadband networks in Singapore and Australia.

Singapore state investor Temasek Holdings controls 55 percent of SingTel, which competes with StarHub and MobileOne in mobile phone services, high-speed Internet and pay-TV in the city-state. ($1 = 1.236 Singapore Dollars) (Additional reporting by Adrian Bathgate in Wellington; Editing by Muralikumar Anantharaman)

Adapted from Reuters.

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