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Edited Transcript of Z74.SI earnings conference call or presentation 8-Aug-19 12:30am GMT

Q1 2020 Singapore Telecommunications Ltd Earnings Presentation (Pre-recorded)

Comcentre Aug 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Singapore Telecommunications Ltd earnings conference call or presentation Thursday, August 8, 2019 at 12:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Sock Koong Chua

Singapore Telecommunications Limited - Group CEO, Executive & Non-Independent Director and Member of Optus Advisory Committee

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Presentation

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Sock Koong Chua, Singapore Telecommunications Limited - Group CEO, Executive & Non-Independent Director and Member of Optus Advisory Committee [1]

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Thank you for joining us for Singtel's Results for the First Quarter ended 30th June 2019.

Before getting into the results, I'd like to highlight that with effect from the 1st of April 2019, the group has adopted the new Singapore Financial Reporting Standards (International) for leases. The financial impact on the group's net income is not material with lower operating expenses offsetting increases in depreciation and finance expense. Details are provided in our MD&A.

We continue to invest in network, content and technology to create competitive advantages and extend our market leadership in telecom and ICT services. In the quarter, we invested SGD 274 million to enhance our mobile network including Optus' 5G fixed wireless rollout targeted to reach 1,200 sites by March 2020. We added 86,000 postpaid customers across Singapore and Australia. NCS's order book remains robust as we help enterprises and governments in their digital transformation.

We continue to build competencies and scale in the group's growth engines, Trustwave and Amobee delivered strong revenue growth. VIA, our mobile payment alliance, now covers Singapore, Thailand and Japan and, shortly, Malaysia and Indonesia. The expansion will grow VIA's addressable market from 26 million to 50 million wallets and over 2 million merchants.

We're also leveraging technology to drive service innovation, simplify processes and bring greater convenience to customers and staff. Customers are increasingly transacting and interacting with us via online channels. Our apps attract more than 4 million active users every month. These digital initiatives help us raise our productivity and transform our cost structure. Cost savings for the quarter amounted to SGD 132 million.

Our results reflect intense competition in Singapore and Australia particularly in the Enterprise segment. The Indian mobile market saw pricing stability. In Indonesia, market recovery drove strong earnings growth for Telkomsel.

Group revenue rose 2% in constant currency terms underpinned by growth in equipment sales, digital services and higher NBN migration revenue. The Consumer businesses in Singapore and Australia were impacted by lower voice usage and data competition. In the Enterprise segment, performance was affected by cautious business sentiment and the impact of price reduction in major government contracts. EBITDA declined due to an increased mix of lower-margin equipment and ICT services.

Contributions from Telkomsel rose 18% on the back of robust data and digital growth. Airtel recorded a second straight quarter of mobile service revenue growth, but its earnings were impacted by higher network costs, depreciation and finance charges. This led to a decline in regional associates' earnings and underlying net profit. Excluding Airtel, associates' contributions would have risen by 10%, while underlying net profit would have declined 3%.

The weaker Australian dollar impacted the group's revenue and EBITDA. On an overall basis, foreign currency movements had minimal impact on underlying net profit.

We continue to introduce new services and conveniences to enrich customer lifestyles and create new revenue streams. In Singapore, Dash can now be used for payment at hawker centers and for bus and train rides. Customers making mobile remittances or prepaid top-ups can also enjoy free insurance coverage.

We launched UNBOXED, an unmanned 24/7 pop-up retail store. It is modular and can be easily deployed at high-traffic locations.

Optus continues to drive engagement amongst its 700,000 strong Optus Sport customer base, leveraging strong content on Premier League, Champions League Final and the FIFA Women's World Cup. Optus' exclusive partnership with Apple Music will further boost its content suite and increase engagement with customers.

In partnership with government agencies and corporates, Group Enterprise is leveraging 5G to develop innovative applications in the advanced manufacturing and maritime industries. We also invested in the INDIGO subsea cable system to enhance connectivity between Australia and Southeast Asia.

Amobee now has a unified advertising platform for TV, social and digital and will accelerate its growth in programmatic advertising.

The group's results were impacted by declines in the carriage business and Airtel's losses. Depreciation and amortization rose primarily due to the impact of the new accounting standards for leases. Exceptional items included the group's share of Airtel's exceptional losses partly offset by a gain on dilution of Singtel's effective stake in Airtel following its rights issue.

The group's financial position remains healthy, and its credit rating's strong. Net debt increased to SGD 11.8 billion from a year ago with the subscription of Airtel's rights shares and inclusion of approximately SGD 2.3 billion worth of lease liabilities under the new accounting standards. As part of its refinancing plans, Optus recently issued EUR 500 million worth of 10-year bonds at 1% interest. Free cash flow declined 17% on lower associates' dividends and higher capital expenditure.

Moving on to the Singapore Consumer business. Mobile revenue was stable as higher equipment sales offset the decline in local and roaming voice. Postpaid customer base increased by 35,000, reflecting the traction of GOMO plans in the SIM-only market and migration of prepaid customers. Excluding revenue from the World Cup 2018 broadcast in the prior period, fixed revenue would have declined 3%. Pay TV customers rose by 1,100 on a sequential quarter basis, a turnaround from past quarters. We continue to drive cost savings through digitalization. Operating expenses fell 6% from strong cost management. Overall EBITDA declined 4% on lower voice revenue.

Consumer Australia revenue rose 8% led by growth in equipment sales and NBN migration revenue. The postpaid handset customer base rose 50,000 led by strong growth in branded postpaid customers which rose 64,000 in the quarter. Mobile service revenue declined 7% from lower ARPU due to an increasing mix of SIM-only customers and heightened data price competition. NBN migration revenue increased in line with agreed rolled-out plans. Cost of sales and traffic expenses increased due to a shift in revenue mix to equipment sales and NBN products as customers migrate from the HFC and ULL networks. EBITDA rose 9% on a reported basis primarily from higher NBN migration revenue.

Our regional associates continue to ride the growth in data. Indonesia posted strong earnings increase with market recovery and robust growth from data and digital services.

In India, Airtel recorded a second consecutive quarter of mobile service revenue growth as an improving network experience and an enhanced customer loyalty program drove customer upgrades and lifted ARPUs. However, earnings fell with higher network costs, depreciation and finance charges, reflecting Airtel's 4G network expansion plan. Airtel also strengthened its balance sheet, raising over USD 4 billion from a rights issue and an IPO of its African business during the quarter.

In Thailand, AIS's and Intouch's earnings were primarily impacted by higher staff costs due to one-off additional provisions for statutory payments under revised labor laws.

Globe saw robust data revenue growth from its mobile and broadband businesses. To capture the growing demand for data, Globe launched 5G fixed wireless broadband services, the first in Southeast Asia.

Moving on to Group Enterprise. Group Enterprise revenue declined 5% on continued pressure in carriage amid a more cautious business environment and would have been stable excluding Optus business. Optus business was impacted by weak demand from the Australian government and financial sectors as well as a large ICT contract last year. Trustwave and NCS delivered strong performances. We welcomed new leaders for Optus business and NCS, both bringing deep ICT experience which will prove invaluable as we scale up and capture opportunities in the digital economies. Overall, ICT revenue was stable. EBITDA declined 7% due to carriage erosion, higher ICT mix and the impact of price reduction of major government contracts.

Group Digital Life revenue rose 17% on continued growth in Amobee's programmatic platform business and the acquisition of Videology. Amobee continues to deliver positive EBITDA including licensing fees from ITV.

HOOQ further extended its partnership with Grab and now offers video streaming on Grab's platform in Singapore. In Indonesia, our expansion into advertising video-on-demand will deliver new revenue streams. HOOQ revenue increased strongly with growth from a higher-paying subscriber base in Southeast Asia and India.

We affirm the group's outlook for the financial year ending March 2020. We've updated the group's guidance for EBITDA and free cash flow to incorporate the change in lease accounting standards. These are shown in the supplementary information of this presentation.

And this concludes my presentation for the quarter. Thank you.