Airtel’s weak profits reflect in SingTel’s too, though investment is rightly defended

If one were to discount the one-off gain of S$119 million from sale of a 4 percent stake in Taiwan’s Far EasTone Telecommunications, SingTel suffered a decline in its first-quarter profits, as seen by results announced only a day ago. SingTel owns 32.25 percent in India’s largest telco Bharti Airtel, which has seen profits decline for ten quarters in a row (see http://www.businessandmarket.net/2012/08/5-steps-that-could-bolster-airtels.html).

A SingTel release stated that Airtel’s overall pre-tax contribution declined 38 percent to S$95 million, partly due to the weaker Indian Rupee, which depreciated 18 per cent against the Singapore Dollar. That’s only part of the whole picture though, as the release also showed AirTel’s contribution came down by 27 percent year-on-year in local currency terms too.

Helped by the Far EasTone stake sale, SingTel managed to post a Q1 profit of S$945, up 3.2 percent over a profit of S$916 in the year-ago quarter. “Excluding the exceptional items, underlying net profit declined 3 percent to S$850 million. The weaker Australian Dollar and regional currencies adversely affected results this quarter,” the SingTel release noted.

The SingTel management however, seemingly defended (and rightly so) the Airtel investment, noting in a related document (see http://info.singtel.com/sites/default/files/fr_invrel/Q1FY13_MDA.pdf) that Airtel’s EBITDA in India declined 5% due to higher network related costs on “planned accelerated investments” as well as higher selling expenses resulting from increased market participation to grow customer base.