SingTel saw Q4 profit drop by 14%

SingTel reported almost flat revenues and 14% decline in net profit in the quarter ending 31 December 2018, blaming negative influence from its investments in Australia and India.

In its quarterly results announcement, SingTel reported a 1% year-on-year growth in revenues to S$ 4.626 billion (1 Singapore $ = 0.74 US$), or 4% in constant currency, but 11% decline in EBITDA, and 14% decline in net profit. The first nine months of FY2019 saw revenues almost unchanged (up by 0.2%) of the same period the previous year, EBITDA down by 8%, and net profit down by 51%. The total free cash flow is still solid at S$2.5 billion although it went down by 10% from a year ago.

“We have stayed the course despite heightened competition and challenging market and economic conditions. We’ve continued to add postpaid mobile customers across our core business in both Singapore and Australia while making positive strides in the ICT and digital space,” said Chua Sock Koong, Singtel Group CEO. “We remain focused on investing in networks and building our digital capabilities – areas that are important to our customers and our future success. We will also step up on managing costs, growing revenues and driving efficiencies through increased digitalisation efforts.”

The key factor that impacted the results was the return on its investment in regional associates. The total profit before tax (PBT) in its regional associate portfolio went down by 35% to S$342 million. The worst hit was Airtel, which suffered a S$167 million decline in PBT and registered a pre-tax loss of S$129 million. When broken down to different markets, Airtel fared better in Africa but came under “continued pricing pressures” (from Jio)

In Australia, SingTel’s subsidiary Optus has delivered a healthy growth of 16% in total revenues  to A$1.64 billion (1 Australian $ = 0.71 US$). The mobile operator also switched on Australis’s first commercial 5G network in January. The slower than expected migration to NBN by broadband users, however, has brought in a 9% decline in mass market fixed revenue.

Despite lowering its outlook for the full financial year (ending 31 March) from stable EBITDA to single digital decline, SingTel was still confident in its long-term prospective. “Our long-term view on our regional associates remains positive as they continue to ride the growth in data and execute well against the challenges and competition,” added Chua, the CEO. “We expect the regional markets to revert to more sustainable market structures and deliver long-term profitable growth. Meanwhile, we are working closely with them to build a regional ecosystem of digital services that leverages the Group’s strengths and unlocks the value of our joint mobile customer base of over 675 million.”

 SingTel 3QFY2019 results

Bharti Airtel exploring acquisition of Telkom Kenya – report

Indian telco Bharti Airtel is reportedly in discussions to expand its presence in the Kenyan market through the acquisition of Telkom Kenya.

According to Reuters, the under-pressure Indian telco is meeting with Telkom Kenya executives to acquire the business, merging the number two (its own brand Airtel) and three players in the country. This is not the first time such a transaction has been discussed, though it is claimed London-based Helios Investment, which owns 60% of the business, is attempting to cash-out of the market.

While agriculture still remains the leading sector across the country, Kenya’s growth has been steady and diversifying in recent years. The country is the economic, financial, and transport hub of East Africa, and real GDP growth has averaged over 5% for the last decade, according to statistics from the CIA World Factbook. Mobile growth in the country is growing quickly, while the economy is increasingly looking mobile-first. This could be a very useful acquisition for Bharti Airtel.

In terms of market share, this is a country which is heading the right direction for Bharti Airtel. Safaricom is the market leader with a 67% share but declining, according to Ovum’s WCIS, Airtel has 23% market share and increasing while Telkom Kenya currently has 9% but is also increasing, albeit at a slower rate than Airtel. Supplementing the gathering Airtel momentum in Kenya with the Telkom Kenya footprint would certainly be a sensible business strategy to tackle the dominant Safaricom.

Another interesting factor to this deal would be the fixed line business. As it stands, Airtel does not have a fixed line offering in Kenya while Telkom Kenya does, and this is a segment which has been targeted for growth by the government. The National Broadband Strategy intends to deliver reliable fixed line broadband to as many as 30% of the Kenyan population, though you should always remember this is a mobile-first country. Fixed line might be a useful addition, but with mobile money dominating the economy (48% of Kenya’s GDP was processed over M-PESA between July 2016 and July 2017), this is very much a mobile-first society.

For Bharti Airtel, the team needs a win to report back to investors before too long. The emergence, and continued success, of Reliance Jio has been a nightmare for the former market leader, while an end to the misery seems unforeseeable right now. Profits at the firm have been impacted, subscriptions are going south, and the newly-merged Vodafone Idea business might cause more upset as it readies its own attempt at market disruption. Bharti doesn’t seem to have done much to combat the threat at home, though it does have a successful African business to bolster the numbers.

Looking at the most recent financial results, revenues across the group grew by a miserly 0.5%, though the revenue decline in India (which accounts for roughly 66% of the group total) was 3.6%. Africa on the other hand contributed 10.8% revenue growth and almost three million net additions in subscribers. The consolidated East Africa region brought in an additional 1.2 million customers over the period, while revenues in both voice and data have been steadily increasing over the last year. This is a stark contrast to the failures at home.

Bharti Airtel has lost the number one spot in India thanks to the Vodafone Idea merger, and should trends continue, it won’t hold onto number two for very long either. Catalysing the promising African market is certainly a sensible way forward, but onlookers should not be distracted from the chaos in Bharti’s domestic market.

Jio readies itself for fixed broadband assault

Reliance Jio is set to pile more misery on Bharti Airtel with the launch of a low-cost fixed broadband offering.

It’s no secret Reliance Jio is eyeing up the fixed broadband market, though Bharti Airtel executives thought they might have had a bit more time. According to the Economic Times, Reliance Jio has bought controlling stakes in Den Networks and Hathway Cable, giving it a ‘headstart’ on the potentially lucrative segment.

The worry regarding the fixed broadband market is the opportunity. This might sound like a daft thing to say, but the opportunity has been staring incumbents in the face for years. None have actually done anything about it. Like the mobile market prior to the chaos caused by Reliance Jio, it is slumbering due to inaction, but that might all be about to change. If Reliance Jio can carry the momentum from the mobile and value services segments into the broadband space as well, the misery could continue for market incumbents.

According to the lastest figures from the Telecom Regulatory Authority of India (TRAI),while mobile subscription is surging (and with still a lot of room for growth), the fixed broadband market is stagnent in most regions and actually shrinking in others. There are currently 22.2 million broadband subscriptions in the country, compared to roughly 250 million households. Just to put things in perspective, broadband would have to grow 50-fold to even come close to the same scale as mobile.

With the acquisitions of Den Networks and Hathway Cable, Reliance Jio has a starting point. It can begin to rollout its own branded service and undercutting the market in the same way it did for mobile. Over the coming months, expect to see the insurgent telco aggresively spending to expand this infrastructure. Details are thin on the ground at the moment, though the intentions were outlined in May at Light Reading Big Communications Event by Mathew Oommen, President of Reliance Jio Infocomm. Home and enterprise penetration is incredibly low; there are billions to be made for those who are willing to spend to capitalise on the opportunity.

For the traditional telcos in the market, inaction might prove to be the downfall once again. Reliance Jio has destroyed profits for challengers in mobile and the same gameplan could work for fixed broadband. With such low penetration, the opportunity has always been there, but if you are happy with the status quo you are nothing more than a sitting duck. The likes of Bharti Airtel have no-one but itself to blame for missing out on the potential cash bonanza.

One of the most tired phrases in the technology world is disrupt or be disrupted. It’s a cliche which people dread hearing, but it is incredibly true here.