SingTel: Downbeat Update

SingTel issued an update on its performance yesterday, a week before it is due to release its
second quarter financial results. It touched on a few areas, including the impact of iPhone and the
strengthening S$.
iPhone 3G update. The Group first launched the iPhone 3G in Australia on 11 Jul 08, before
rolling out in Singapore, India and the Philippines on 22 Aug 08. All in, there were more than
170,000 iPhone activations for the Group and its associates. It managed to win over new
subscribers with its new service. Some 30% of the subscribers who signed up with SingTel were
new customers. For Optus, new sign-ons were as high as 55% of total activations.
Given that mobile subscriber acquisition and retention costs are expensed immediately upon
activation, the telco warns that iPhone initiative will actually have a "dilutive impact on earnings
and margins in the near term" despite a successful launch. Thus, the launch of iPhone is expected
to hit EBITDA by S$27m in Singapore and A$44m in Australia.
Telekomsel lowers guidance. Its Indonesia business Telekomsel is also facing some challenges,
with operating revenue expected to grow at low single digit and margins to decline around 5%.
This is largely within expectations.
Strengthening S$ a drag. SingTel derives two-thirds of its income from overseas and hence a
strengthening S$ has an adverse impact on the company’s bottom line. This is particularly true for the A$, which has fallen from 1.3 in Jul 08 to 0.99 currently against the S$. Based on
sensitivity analysis, a 1% fall in A$ vis-à-vis the S$ will result in a 0.2% fall in Group earnings.

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