iPhone launch to hurt Q2: SingTel

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Singapore, November 4: : Shares in Singapore Telecommunications, Southeast Asia's largest telco, fell as much as 9 per cent on Tuesday after it said the launch of iPhone 3G and a stronger Singapore dollar will hurt its earnings in the September quarter.

SingTel, which owns Optus in Australia and stakes in several regional mobile phone operators, said versus the Singapore dollar so far this year, the Indian rupee and the Thai baht had both declined by about 17 per cent, while the Indonesia rupiah and Philippine peso had both declined by nearly 8 per cent.

"A stronger Singapore dollar will reduce the earnings contributions from the overseas operations," SingTel said in the statement.

SingTel is scheduled to report its fiscal second quarter earnings for the three months ended September on Nov 12.

DBS Vickers analyst Sachin Mittal said he had on Tuesday downgraded SingTel shares to "Fully Valued" from "Hold" which implies the stock would offer a negative return of more than 10 per cent over the next 12 months.

"There is downside risk to earnings if the forex situation does not improve," he said, adding that every 10 per cent decline in the Australian dollar, Indian rupee and Indonesian rupiah could shave about 2 per cent off the group's earnings each. Mittal said the stock could fall to as low as S$2.02.

"We advise investors to accumulate the shares if the price falls below that level."

SingTel shares slid 7.2 per cent to S$2.33 by 0510 GMT, versus a 1.4 per cent drop in the broader Singapore index. Its shares are still up around 20 per cent from a near-five-year low a week ago.

SingTel and its associates sold over 170,000 iPhone packages during the quarter following their launch in July and August.

The group expenses subscriber acquisition costs immediately, so the iPhone launch would dilute margins and earnings in the near term, SingTel said in a statement.

In Singapore, this will reduce earnings before interest tax, depreciation and amortisation by about S$27 million ($18.3 million) in the second quarter. In Australia, the drop in EBITDA will be approximately A$44 million ($30 million).

SingTel also said its Indonesian associate Telkomsel had on Oct 31 issue a revised outlook and is now looking at low-single-digit growth in operating revenue as well as a decline in margins by about 5 per cent.