Singtel announced today (30 Jul) that Singtel has incurred additional charges of S$911 million from its equity share of its associate Bharti Airtel, which has been dogged by stiff competition and regulatory woes in recent years.
Currently, Singtel’s effective shareholding in Airtel is 31.9%. Other than Singtel, GIC has also invested in Airtel.
Airtel announced its results for the quarter ended 30 June 2020 yesterday (29 Jul). During the quarter, Airtel recorded exceptional charges which have adversely impacted its reported results. In total, it posted a loss of 151.9 billion rupees (S$2.79 billion) in the quarter.
Singtel explained that Airtel has recorded additional loss provisions for license fee and spectrum usage charges and related interests, amounting to 107.4 billion rupees (Singtel’s equity share: S$631 million), due to a latest court ruling in India on the Adjusted Gross Revenue matter. In addition, it also recognised 67.1 billion rupees (Singtel’s equity share: S$394 million) as exceptional tax charge arising from re-assessment of the carrying amounts of deferred tax balances as well as adjustments from resolution of certain tax disputes.
Hence, the total exceptional charges incurred by Airtel in the quarter amounted to 155 billion rupees and Singtel’s equity share of this was S$911 million. Singtel said it will disclose its share of its regional associates’ results – including Airtel’s – in August next month.
In May, Singtel reported that for the full year ended 31 March 2020, its net profit was down 65.3 per cent to $1.07 billion. This came as Singtel took a net exceptional charge of $302 million for the 4th quarter in the last financial year, mainly arising from Airtel’s provision for its losses (‘Singtel’s annual net profit down 65.3 per cent thanks to Bharti Airtel investment through CECA‘).
Singtel’s full-year profit slumped to its lowest since 1993, according to Bloomberg data.
Singapore able to invest in India thanks to CECA negotiated by Heng and team
Singtel and GIC, of course, were able to invest in Airtel, thanks to the India-Singapore Comprehensive Economic Cooperation Agreement (CECA). Under CECA, Singapore entities are able to invest in India with less restrictions. As part of CECA, investments into India are not required to seek foreign investment approval generally. Also, investors are allowed to freely transfer funds related to their investments, such as capital, profits, dividends and royalties.
CECA also formally recognised Temasek and GIC as distinct entities, and they are allowed to each own up to 10% of a listed Indian company, similar to other Foreign Institutional Investors. Under CECA, it also enables Singapore and India to trade goods freely, and allows professionals to work in each other country more easily.
One of the provisions of CECA is to enable the conclusion of more Mutual Recognition Agreements (MRAs) so as to facilitate the freer movement of professionals between Singapore and India. It helps to recognise each other’s education and professional qualifications so that Indian and Singaporean professionals would be able to practise in each other country.
Then there are clauses which permit “intra-company transferees” to easily work in each other country. An employee needs only be recruited by a company for as little as 6 months to be considered for transfer.
Deputy Prime Minister Heng Swee Keat who was then Permanent Secretary for Trade and Industry led the Singapore side to conclude CECA with India after 13 rounds of talks. Heng and his team essentially did the ground work together with their Indian counterparts before presenting their proposals to the politicians for approval.
For those Singaporean professionals who have always wanted to work in India, CECA is certainly a godsend.