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SingTel reports unexpected drop in profit on regional units

Singapore Telecommunications, Southeast Asia’s biggest phone company, reported an unexpected drop in first-quarter profit as costs cut earnings at home and currency gains crimped income from regional businesses.

Net income fell 2.9% to $916.2 million, or 5.7 cents a share, in the three months ended in June from $943.2 million, or 5.9 cents, a year earlier, SingTel said in a statement today. Analysts had expected profit would rise to $991 million, according to the average of three estimates compiled by Bloomberg.

Six consecutive quarters of lower earnings at affiliate Bharti Airtel, India’s biggest mobile-phone operator, and the Singapore dollar’s appreciation against nine major Asian currencies this year are crimping overseas income. Earnings from the Optus unit in Australia are rising, boosted by currency gains and customers won from rivals, while program content costs at its mioTV Internet protocol service cut profit at home.

“The currency is destroying all the fun and clearly the risk of translating those earnings is going up,” said Theo Maas, who holds SingTel stock among the $5.4 billion he helps manage at Arnhem Investment Management Pty. in Sydney. “We’ve been seeing those trends for mioTV for three of four quarters now and the margins in Singapore were disappointing.”

SingTel declined 2% to US$2.89 as of 11:04 a.m. on the Singapore exchange, poised for their lowest close in almost five months. The stock was the third-biggest contributor to the 1.6% drop in the Straits Times Index today. The shares have fallen 1.9% this year, compared with a 13% decline in the benchmark.

AUSTRALIAN GAINS

International associates such as Bharti in India and Africa, Telkomsel in Indonesia, Advanced Info Service Pcl in Thailand and Globe in the Philippines, contributed $472 million to earnings, down 10% from a year earlier.

Earnings before interest, tax, depreciation and amortization from Singapore operations fell 4% to $567 million on mioTV costs. Revenue rose 2%.

Income at Sydney-based Optus, Australia’s second-largest phone company, rose 1% to A$560 million ($696 million) after the company added mobile customers.

Optus and larger rival Telstra Corp. are both winning customers from third-ranked Vodafone Hutchison Australia, which last week reported the loss of 375,000 users in the six months to June amid a rise in dropped calls and complaints.

Telstra, Australia’s largest telephone company, today reported second-half earnings that beat analysts’ estimates after winning more mobile-phone customers and cutting costs.

TELSTRA EARNINGS

Net income was A$2.04 billion in the six months ended June, compared with the A$1.81 billion average forecast in a Bloomberg survey of three analysts’ estimates, as the Melbourne-based company added customers at a faster pace than Optus.

Telstra added 1.66 million new users in the past 12 months, compared with 408,000 new mobile customers at Optus.

Telstra shares rose as much as 5.7%, the biggest gain on an intraday basis since Nov. 25 and were trading 5% higher at A$2.97 as of 12:47 p.m. in Sydney.

SingTel, which owns minority stakes in six operators with businesses across 25 countries, has 416 million mobile phone customers, the company said in the statement.

In addition to its wholly owned units in Australia and Singapore, the company has stakes in operators in India, Pakistan, Bangladesh, Thailand, the Philippines, and Indonesia.

“Our Singapore and Australian businesses continue to perform well, especially in the mobile segments,” Chief Executive Officer Chua Sock Koong said in the statement. “Geographical diversity helped reduce the impact of foreign exchange volatility.”

New Delhi-based Bharti, of which SingTel owns a stake, last week reported a 27% drop in quarterly profit amid higher borrowing costs and the start of new services.

Earnings from PT Telekomunikasi Selular Tbk in Indonesia, dropped 4.8% in Singapore dollars even as profit in local currency terms rose 1.1%.

Adapted from i3investor.com & Bloomberg.

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