SingTel beats profit forecasts

SingTel has dialed up a 25.2 per cent rise in net third-quarter profits.

By Nic Hopkins
CNN.com Writer

SINGAPORE (CNN) -- Singapore Telecom has beaten third-quarter profit forecasts, booking a 25.2 per cent rise in net income to $S645.6 million ($349 million).

Asia's eighth-largest telecom took its profits for the nine months to December 31 to $S1.89 billion ($1.03 billion), up from $S1.48 billion the nine-months. Group revenues to rose $S70 million to $S3.67 billion.

The improvement came despite a downturn in international call revenues and an increase in competition. However, the company is warning of a downturn in the final quarter, ending March 31, as economic activity slows.

Analysts forecasts for the third-quarter profit ranged between $S500 million and $S570 million. The announcement was made after the close of trading on Singapore's stock exchange.

SingTel plans to use its warchest of more than $S5 billion in cash to ward off the effects of a slowing global economy by acquiring additional telecom assets in the Asia-Pacific region.

Still circling C&W Optus

It is thought to be preparing a bid for Australia's second-ranked carrier Cable & Wireless Optus, which is being sold by its 52.5 percent shareholder, U.K.-based Cable & Wireless Plc.

A bid for Optus would cost as much as $A13 billion, but SingTel has little debt and could raise the funds needed to go ahead with the acquisition.

Paul Zaman, a telecom analyst with ING Barings, said in a recent report on SingTel that buying C&W Optus would advance SingTel's strategy in becoming a player in the pan-Asian telecom market.

"However, we believe that there are other opportunities in Asia and, as such, this is not a "do or die" deal," he said.

Pressure to expand

SingTel has been under pressure to expand beyond its home market because of the limited income available from Singapore's small population and because of encroaching competition.

Bids last year for stakes in Hong Kong's Cable & Wireless Telecom and Malaysia's Time Engineering fell through. Richard Li's Pacific Century CyberWorks subsequently acquired Cable & Wireless HKT.

However, both British Telecom and Cable & Wireless are both seeking to divest their interests in telecom assets outside their home markets to pay for recently acquired third-generation (3G) spectrum licenses.

Analysts say, therefore, that SingTel will find plenty of acquisition opportunities in the year ahead.

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