SingTel to Spend S$2 Billion on Acquisitions as Profit Drops (2)

Singapore Telecommunications Ltd. (ST),

Southeast Asia’s biggest phone company, plans to spend S$2

billion ($1.6 billion) within three years on acquisitions to

boost growth after posting a drop in profit.

The company will focus on digital operations, including

mobile advertising, and may increase stakes in regional

associates, SingTel said in a filing. Net income fell 33 percent

to S$868 million in the fourth quarter ended March, after the

carrier took a loss on a stake sale and paid higher taxes.

SingTel’s expansion into Southeast Asian mobile-phone

markets, including a stake in Thailand’s Advance Info (ADVANC) Service

Pcl, is limiting the effect of slowing growth at Indian

associate Bharti Airtel Ltd. (BHARTI) and its Optus unit in Australia.

Excluding one-time items, profit fell 2 percent to S$1 billion

in the quarter, the Singapore-based company said.

“SingTel has exposure to Indonesia, Thailand and

Philippines; these are all growing markets,” said Kelvin Goh,

an analyst at CIMB Securities Sdn in Kuala Lumpur. “There’s no

guaranteed returns to the huge investment in the digital

business. There could be startup losses.”

The carrier owns stakes in Indonesia’s PT Telekomunikasi

Selular and Globe Telecom Inc. (GLO) in the Philippines.

Group revenue this year will be little changed while

earnings before interest, tax, depreciation and amortization

will rise by a “low single-digit level,” SingTel said. The

company has also been investing to improve its core business and

to create the next growth engine in the digital space.

Startup Losses

SingTel shares closed unchanged at S$3.99 in Singapore. The

stock has climbed 21 percent this year, compared with an 8.7

percent advance in the benchmark Straits Times Index.

The company spent about $400 million last year on

acquisitions in the digital business, Chief Executive Officer

Chua Sock Koong said. In March 2012, SingTel agreed to buy

Amobee Inc. for $321 million to expand into mobile advertising.

“In this investment phase, we would expect to see startup

losses,” Chua told a briefing today. “We’re going to see the

business grow very strongly.”

The carrier made or completed 13 acquisitions valued at

about $665 million in 2012, almost double the $344 million spent

in 2011, according to data compiled by Bloomberg. SingTel’s

largest ever deal is the 2001 purchase of Optus from Cable

Wireless Plc for $9.7 billion. SingTel had cash and near-cash of

S$911 million as of March 31, the company said today.

Increased Dividend

Singapore’s biggest mobile phone operator raised its final

dividend by 11 percent to 10 cents a share as it targets a

payout range between 60 percent and 75 percent, SingTel said.

SingTel in March completed the sale of its 30 percent stake

in Warid Telecom (Private) Ltd. for $150 million and will

receive a 7.5 percent share of the net proceeds from any future

sale, public offering or merger. It took a loss of S$225 million

from the deal.

The company had a one-time tax credit of S$270 million last

year from recognizing an increase in the value of an asset

transferred to an associate.

Australian Sales

Fourth-quarter Ebitda at Optus, Australia’s second-largest

phone company, rose 3.4 percent to A$700 million ($692 million).

Revenue fell 5.4 percent. The unit agreed to pay A$649 million

for an allocation of airwaves to build up its wireless network

to attract more customers from Telstra Corp. (TLS) and other

competitors.

SingTel made 62 percent of its sales in Australia during

the quarter.

The earnings contribution from regional associates rose 3.2

percent to S$540 million in the quarter as strong results from

Indonesia and Thailand limited the effect of weaker results at

Bharti, the company said.

The pretax earnings contribution from Bharti slumped 31

percent to S$96 million. Bharti on May 2 reported earnings that

missed analyst estimates after a weaker rupee increased interest

payments and network equipment costs.

SingTel owns all of its Singapore and Australian phone

businesses in addition to minority stakes in five other mobile

operators with 468 million customers in countries in Asia and

Africa. That excludes those from Warid since it was sold.

The company and its partners were among 12 applicants that

will be able to submit bids by June 3 for two telecommunications

licenses in Myanmar. The winners will be announced by June 27,

according to the Myanmar government.

Morgan Stanley and Credit Suisse Group AG will offer a

highly-leveraged debt package to help sell Optus’s satellite

division, according to three people familiar with the matter.

The banks, which were hired in March to study options for

the unit, are prepared to lend buyers more than six times Optus

Satellite’s Ebitda, two of the people said. The sale could fetch

A$2 billion, according to Nomura Holdings Inc.

To contact the reporter on this story:

Kyunghee Park in Singapore at

kpark3@bloomberg.net

To contact the editor responsible for this story:

Michael Tighe at

mtighe4@bloomberg.net

SingTel to Spend S$2 Billion on Acquisitions as Profit Drops (2)