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Nikkei Markets

Singtel to persevere in India despite massive loss

Singapore telco makes S$1.4-billion provision related to Bharti Airtel

Singtel reported a net loss of 668 million Singapore dollars ($491.3 million) for the three months ended September, its first-ever loss on a quarterly basis.   © Reuters

SINGAPORE (Nikkei Markets) -- Singapore Telecommunications remained optimistic about prospects in India and said it is prepared to invest more money there, even as it reported a whopping quarterly loss due to the problems faced by its Indian associate.

Singtel, which owns Optus in Australia and has large stakes in several mobile operators in Asia, reported a net loss of 668 million Singapore dollars ($491.3 million) for the three months ended September, its first-ever loss on a quarterly basis.

Although underlying net profit rose 3% from a year ago to S$737 million, the Singapore telco was forced to make a provision of S$1.4 billion to reflect its share of what Indian associate Bharti Airtel will have to pay the government following an adverse court ruling.

The shock loss sent Singtel's share price tumbling as much as 3.9% on Friday even as the broader market rose slightly.

Outside of India, Singtel owns stakes in Indonesia's Telkomsel, Thailand's AIS and Intouch, and Globe in the Philippines, all of which reported higher earnings for the quarter.

While the company's exposure to various markets and operating environments has provided a buffer against the saturated mobile market at home, it has also heightened risks.

In Australia, corporate spending weakened.

"The weak global economic environment has affected the industry...We expect current challenging conditions to continue into 2020," Singtel group CEO Chua Sock Koong said.

In the wake of the quarterly results, several retail investors were concerned about prospects, with SG wealth builder, a popular blog, warning that the company also faces potential liabilities from commercial disputes in Thailand.

According to Singtel's quarterly report, Thailand's state-owned telecom group TOT is claiming as much as $7 billion from its associate AIS.

India represents the company's largest foreign investment after Australia. To date, Singtel has invested some S$5.1 billion in Bharti Airtel and owns 35.2% of it. Despite the latest setback, the Singapore company's stake in Bharti Airtel is still worth around S$12 billion based on the latest share price, CEO Chua said at a briefing late Thursday.

"Notwithstanding the court ruling, Airtel has made positive strides in the wake of the recent industry consolidation, gaining market share, and increasing mobile service revenue for a third straight quarter," Chua said.

When asked if Singtel would continue to invest in the country, she cited the large population and digitally savvy youth and said, "We believe in digital India (and) we certainly believe in the market potential."

Bharti Airtel, which also reported quarterly earnings on Thursday, set aside about $4 billion as provisions after India's Supreme Court last month upheld a demand that mobile operators pay the government some $13 billion in overdue levies and interest.

Chua added that Bharti Airtel and Indian rivals such as Vodafone Idea could get some relief from the government as early as two weeks from now when a high-level committee responds to representations made by the industry.

Stockbroker UOB Kay Hian described Singtel's quarterly results as good, citing the higher contributions from associates and cost controls, but warned the share price would be influenced by developments in India in the near term.

Looking ahead, Singtel said it now expects revenues and earnings before interest, tax, depreciation and amortization to be flat, citing tough market conditions, particularly in Australia. It had previously forecast a mid-single-digit increase in revenue and a high-single-digit rise in EBITDA.

-- Kevin Lim

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