Singtel set to record lowest annual profit in 16 years due to robust competition in telco industry

Come Wed (15 May), Singapore Telecommunications (Singtel) will be marking its lowest annual profit in 16 years as a result of falling local demand due to customers seeking less expensive data plans, in addition to facing stiff competition in overseas markets.

Reuters reported analysts as saying that Singtel is currently facing immense pressure to slash its costs and to find new streams of revenue in the wake of retrenchments and mergers seen in other local telcos such as StarHub’s downsizing of around 12 per cent of its staff and M1’s privatisation by its stakeholders.

An average estimate by 12 Refinitiv analysts have shown that Singtel is likely to record a net income of S$3.08 bil ($2.3 billion) for the fiscal year ending Mar this year, which is its lowest headline profit since its 2003 fiscal year.

Competition with Reliance Jio Infocomm Ltd will also likely affect Singtel’s India associate Bharti Airtel’s profits after Singtel had invested around $525mil worth of capital in Bharti Airtel earlier this year.

Measures being taken by Singtel to mitigate the effects of its plummeting profits include venturing into other areas of technology such as cyber-security, digital marketing, mobile payments and online gaming.

Daiwa analyst Ramakrishna Maruvada told Reuters that such measures “don’t move the needle because relative to the business, these are very incremental initiatives”, adding that Singtel ought to cut its operational costs to raise its profit margins.

Despite the falling profits, Singtel shares have gone up 7 percent so far this year, although the rise is 30 per cent lower than their peak in early 2015, Reuters observed.

The telco had also projected cost savings of around S$500mil in the last financial year.