Singapore Telecommunications Ltd forecast its first drop in annual revenue in 14 years after it posted a weaker-than-expected quarterly profit, hit by tough competition in its key Australian market.
SingTel, Southeast Asia's largest telecommunications firm by market value, relies on Australian unit Optus for two-thirds of its revenue, but competition with the likes of Telstra has grown increasingly fierce amid slowing growth in that country's mobile market.
SingTel said on Wednesday that it now expects a mid-single digit percentage decline in Australian operating revenue for the financial year ending March 2013, a reversal from its earlier forecast for a low-single-digit increase.
With the revised revenue outlook for Australia, the consolidated revenue of the group is expected to decline by a low-single digit level, SingTel said in a statement. SingTel last reported a fall in annual revenue in 1998/99, Thomson Reuters data shows.
SingTel, however, expects earnings before interest, tax, depreciation and amortisation (EBITDA) at the group level to be stable, in line with earlier guidance.
For its July-September quarter, SingTel, which also owns large stakes in several mobile operators including India's Bharti Airtel and Indonesia's Telkomsel, had an underlying net profit of S$886 million ($725 million). That was up only slightly from S$885 million a year earlier and undershot the S$896 million average estimate of six analysts polled by Reuters.
The main issue is with Australia. It's really in the pricing, on bundles offered on fixed line products that is impacting top-line revenue, said Michael Wu, an equities analyst with Morningstar in Sydney.
We were expecting EBITDA to decline ... but they did match their declining revenue with declining costs, so EBITDA is stable. That's encouraging, he added.
Nomura Securities said revenue and operational trends at Optus were weak, noting Telstra had gained market share in Australia's mobile market after discounting the gains in subscriber numbers following Optus's purchase of Vivid Wireless earlier this year.
Optus, Australia's No.2 telecom after Telstra, saw revenue drop 4 percent to A$2.24 billion ($2.34 billion) during the quarter from a year earlier, due to price competition in mobile phones and a mandated reduction in mobile termination rates.
SingTel shares have risen about 2 percent this year, underperforming a 13 percent gain in the broader Straits Times Index. The stock was down 0.6 percent at 0452 GMT, in line with the decline in the broader index.
SingTel fared better in its home market, where revenue rose 4 percent from a year earlier to S$1.67