Core Viewpoint - Singapore Telecommunications Limited (Singtel) announced that a fund managed by private equity firm KKR will invest SGD 1.1 billion in cash to acquire a 20% stake in Singtel's regional data center business, with the transaction expected to close in Q4 of this year [1] Group 1 - KKR has the option to increase its stake to 25% by 2027 based on a pre-agreed valuation [1] - This investment raises the enterprise value of Singtel's regional data center business to SGD 5.5 billion [1] - The transaction is not expected to have a material impact on Singtel for the fiscal year ending March 31, 2024 [1] Group 2 - The funds will be used to accelerate the expansion of regional data center operations in ASEAN markets such as Singapore, Indonesia, and Thailand, while also exploring opportunities in other markets like Malaysia [1]

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Singapore Telecommunications Limited (Singtel) has divested approximately 0.8% of their direct investment in their regional associate, Airtel. The sale generated SGD 1.5 billion, marking an important step in Singtel’s ongoing plan to streamline operations via asset recycling. The transaction was conducted through a private placement to institutional investors, a move that demonstrates significant market demand and confidence in Airtel. It is anticipated that the sale will yield profits of around SGD 1.1 bil ...

Core Insights - Singapore telecom companies, including Singtel and Starhub, are transitioning from traditional telecom services to digital infrastructure and enterprise solutions as their growth in mobile and broadband has stagnated [1][3][14] Telecom Industry Overview - Mobile subscriptions in Singapore are projected to grow at a compound annual growth rate (CAGR) of 4.3% from 2021 to 2025, but average revenue per user (ARPU) has declined by 30% from 2018 to 2023 [2] - Despite the decline in ARPU, Singtel and Starhub are expected to invest a total of S$1.93 billion in capital expenditures for 5G [2] Singtel Financial Performance - In Q1 FY2026, Singtel's revenue remained stable at S$3.4 billion, with underlying net profit increasing by 14% year-on-year to S$686 million, driven by strong profit growth from regional businesses [5] - Singtel's capital expenditure plans include S$1.7 billion for core business and an additional S$0.8 billion for new initiatives by 2028 [7] - Singtel's recent core dividend of S$0.123 per share represents an 82% payout ratio and a dividend yield of approximately 2.9% [7] Starhub Financial Performance - Starhub's revenue for the first half of 2025 was stable at S$1.1 billion, but net profit dropped 42% year-on-year to S$47.9 million due to a one-time penalty [9][10] - Starhub's enterprise segment grew by 6.8% year-on-year, supported by strong cybersecurity services [10] - Starhub is guiding for a dividend of at least S$0.06 per share for 2025, with a current dividend yield of 5.2% [11] Challenges and Investment Considerations - The Singapore telecom industry faces intense competition, and 5G monetization is not expected to yield significant returns in the near term [12] - Singtel's capital expenditure is projected to be around 12% of total revenue, while Starhub's is expected to be 10% [12] - Singtel's current price-to-earnings (P/E) ratio is approximately 22 times, lower than its three-year average of 27.6 times, while Starhub's P/E is around 16.8 times compared to its three-year average of 17.2 times [13]

Core Viewpoint - The article emphasizes the importance of defensive stocks such as Singapore Exchange (SGX), Singapore Technologies Engineering (STE), and Singapore Telecommunications (Singtel) for income investors during periods of market volatility, highlighting their stable earnings and dividends [1][17]. Singapore Exchange (SGX) - SGX is the sole stock exchange operator in Singapore, benefiting from strong recurring income from derivatives and clearing services, and high trading volumes even in volatile markets [2]. - In FY2025, SGX reported its highest revenue and net profit since listing, with net revenue growing 11.7% year on year to S$1.3 billion, driven by growth in equities, currencies, and commodities [3][4]. - The Equities – Cash segment saw a nearly 19% increase in net revenue YoY, while Equities – Derivatives and FICC segments grew by 13.8% and 8.6% respectively [4]. - Total dividend for FY2025 rose by 8.7% YoY to S$0.375 per share, with plans to enhance dividends by S$0.0025 each quarter until FY2028 [5][6]. Singapore Technologies Engineering (STE) - STE's share price reached all-time highs in August 2025, with revenue in 1H2025 growing 7% YoY to S$5.9 billion and net profit increasing nearly 20% to S$403 million [7]. - The order book reached a new high of S$31.2 billion as of 30 June 2025, supported by S$9.1 billion in new contracts secured in the first half of 2025 [8][9]. - STE declared an interim dividend of S$0.08 per share for 1H2025, with plans for a total dividend of S$0.18 per share for 2025 and a new policy to pay out about one-third of year-on-year net profit increases as incremental dividends [10]. Singapore Telecommunications (Singtel) - Singtel's financial performance for FY2025 showed group revenue steady at S$14.15 billion, while underlying net profit rose 9.3% to S$2.47 billion [11]. - A significant one-time gain from the partial divestment of its Comcentre headquarters led to a net profit surge of over 400% to S$4.02 billion [12]. - Total capital expenditure is projected at S$2.5 billion for FY2026, with S$0.8 billion allocated for investments in data centers, AI, digitalization, and satellites [14]. - Singtel proposed a total ordinary dividend of S$0.17 per share for FY2025, a 13.3% increase from the previous year, and aims to pay out a core dividend of 70% to 90% of its underlying net profit [14][15].

Core Viewpoint - Shares of Singapore Telecommunications fell over 2% following a technical failure at its subsidiary Optus, which disrupted emergency call services for 13 hours and has been linked to four fatalities [1] Company Impact - The technical failure at Optus, Australia's second-largest telecom carrier, has raised significant concerns regarding service reliability and safety [1] - The incident has led to a direct impact on the stock performance of Singapore Telecommunications, indicating potential investor apprehension [1] Industry Context - The disruption of emergency services highlights vulnerabilities within the telecommunications sector, particularly in crisis management and operational resilience [1] - The incident may prompt regulatory scrutiny and calls for improved infrastructure and service protocols within the telecom industry [1]

Core Viewpoint - Singtel has experienced a significant increase in its share price in 2025, outperforming the Straits Times Index, raising questions about potential upside as an interest rate cut is anticipated [1] Financial Performance - In the first quarter of FY26, Singtel reported a 14% year-on-year increase in underlying net profit, driven by strong EBIT from Optus and NCS, along with higher contributions from regional associates Airtel and AIS [2] - The net profit reached nearly S$2.9 billion, largely due to S$2.2 billion in exceptional gains from the partial sale of its Airtel stake and the Intouch-Gulf Energy merger [3] Growth Drivers - Optus saw a 4% year-on-year revenue increase to approximately A$2 billion, with EBIT rising 36% year-on-year to A$133 million, attributed to higher mobile ARPU and effective cost control [4] - NCS's revenue increased by 4% year-on-year to S$733 million, with EBIT up 22% year-on-year, supported by stronger margins and a healthy project pipeline, securing S$0.7 billion in bookings in 1Q FY26 [4] - Airtel India's profit after tax more than doubled due to a mobile price increase, while AIS experienced strong growth in mobile and fixed broadband [5] Challenges - Domestic revenue in Singapore remained flat, with mobile service revenue declining by 11% year-on-year due to weakened roaming and voice services [6] - Optus continues to face challenges in reputation recovery following a data breach incident in 2022, and competition in the Australian telecom market remains intense [6] Valuation Concerns - Analysts suggest that Singtel's shares may be overvalued, with Morningstar estimating a fair value of S$3.67 per share, while the stock traded at S$4.39 per share recently, indicating a valuation close to 1.2 times its fair value [7] Dividend and Capital Management - Singtel has committed to a dividend payout ratio of 70% to 90% of its underlying net profit after tax, with plans to enhance payouts through a "value realisation dividend" [8] - The company has raised its asset recycling target to S$9 billion, allocating S$2 billion for share buybacks to enhance shareholder value [9] Investment Outlook - The bullish case for Singtel includes strong growth from associates, potential recovery of Optus, execution of NCS projects, active capital recycling, and a sustainable dividend payout [10] - However, the recent share price increase may indicate overstretched valuation, coupled with headwinds in the Singapore mobile business and ongoing risks associated with Optus [10]

Financial Data and Key Metrics Changes - Group revenue rose by 2% in constant currency terms, driven by growth in equipment sales, digital services, and higher NBN migration revenue [4] - Free cash flow declined by 17% due to lower associates' dividends and higher capital expenditure [8] - Net debt increased to SGD 11.8 billion from a year ago, influenced by the subscription of Airtel's rights shares and the inclusion of approximately SGD 2.3 billion worth of lease liabilities under new accounting standards [8] Business Line Data and Key Metrics Changes - Trustwave and Amobee delivered strong revenue growth, contributing positively to the group's growth engines [3] - Group Enterprise revenue declined by 5% due to continued pressure in carriage, with a stable performance excluding Optus business [12] - Group Digital Life revenue rose by 17% driven by growth in Amobee's programmatic platform business and the acquisition of Videology [12] Market Data and Key Metrics Changes - Contributions from Telkomsel rose by 18% due to robust data and digital growth [5] - The Indian mobile market experienced pricing stability, while the Indonesian market saw strong earnings growth for Telkomsel [4][10] - The weaker Australian dollar impacted the group's revenue and EBITDA, but foreign currency movements had minimal impact on underlying net profit [5] Company Strategy and Development Direction - The company continues to invest in network, content, and technology to create competitive advantages and extend market leadership in telecom and ICT services [2] - Expansion of VIA, the mobile payment alliance, aims to grow its addressable market from 26 million to 50 million wallets and over 2 million merchants [3] - New services and conveniences are being introduced to enrich customer lifestyles and create new revenue streams, such as the use of Dash for payments at hawker centers [6] Management's Comments on Operating Environment and Future Outlook - Management noted intense competition in Singapore and Australia, particularly in the Enterprise segment, and cautious business sentiment affecting performance [4] - The outlook for the financial year ending March 2020 has been affirmed, with updated guidance for EBITDA and free cash flow reflecting changes in lease accounting standards [13] Other Important Information - The company invested SGD 274 million to enhance its mobile network, including Optus' 5G fixed wireless rollout [2] - Amobee has developed a unified advertising platform for TV, social, and digital, which is expected to accelerate growth in programmatic advertising [8] - HOOQ revenue increased strongly due to growth from a higher-paying subscriber base in Southeast Asia and India [13] Q&A Session Summary Question: What are the impacts of the new accounting standards on financial results? - The financial impact on the group's net income is not material, with lower operating expenses offsetting increases in depreciation and finance expense [1]

Financial Performance - Singtel's operating revenue remained stable at S$4113 million[26], reflecting a 2% increase in constant currency[26] - The Group's EBITDA decreased by 2% to S$1184 million[27], but decreased by 1% in constant currency[27] - Underlying NPAT decreased by 22% to S$575 million[32], remaining consistent in constant currency[32], excluding Airtel, it was up 10%[32] - NPAT decreased by 35% to S$541 million[34], also down 35% in constant currency[34], excluding Airtel, underlying NPAT & NPAT down 3%[34] - Free cash flow decreased by 17% to S$1223 million[35] Business Unit Performance - Singapore Consumer mobile revenue stable[50], fixed revenue down 12%[51], and EBITDA down 4%[51] - Australia Consumer revenue increased by 8% to A$1938 million[53], and EBITDA increased by 9%[53] - Group Enterprise revenue down 5%[61], and EBITDA down 7%[62] - Group Digital Life Amobee revenue increased by 16%[67] Regional Associates - Regional Associates' PBT decreased by 14% to S$335 million[29], but decreased by 17% in constant currency[29], excluding Airtel, it was up 10%[57] - Telkomsel PBT increased by 18% to S$280 million[57]

Financial Data and Key Metrics Changes - The Group's underlying net profit decreased by 28%, reflecting challenges in the core business and lower contributions from associates [9] - Free cash flow fell due to lower operational performance and timing differences in dividend receipts from associates [9][28] - Revenue increased by 4% in constant currency terms, driven by higher equipment sales and growth in ICT and digital services [8] Business Line Data and Key Metrics Changes - ICT services returned to growth, albeit at lower margins, with a significant contribution from technology implementation services [7][34] - In Australia, Optus added 129,000 postpaid customers, while Singapore saw an increase of 36,000 postpaid customers [7] - The mobile revenue in Australia was impacted by a higher mix of SIM-only plans, leading to a revision in revenue guidance from low single-digit growth to stable [21][22] Market Data and Key Metrics Changes - Airtel's performance was affected by intense competition in India, although mobile revenue showed early signs of stabilization [8] - The Singapore mobile market is experiencing a shift towards SIM-only plans, which is impacting overall revenue and ARPU [66][70] Company Strategy and Development Direction - The company continues to invest in network, spectrum, and content to create competitive advantages while progressing with digital transformation [6] - There is a focus on building a best-in-class mobile network in Australia, supplemented with exclusive premium content [19] - The company is exploring various ways to unlock value from its digital businesses, including potential IPOs or strategic investments [101] Management's Comments on Operating Environment and Future Outlook - Management noted that the core business faces heightened competition and voice erosion, impacting overall performance [6] - There is cautious optimism regarding the Smart Nation contracts, with procurement activities slowly resuming [79] - The company does not foresee a multi-year decline in EBITDA, emphasizing that guidance will be updated in the next quarter [83] Other Important Information - The company reported exceptional gains due to changes in lease terms and the deconsolidation of a subsidiary [10] - The cost of sales increased significantly due to higher equipment sales and project-related ICT equipment sales [59] Q&A Session Summary Question: Insights on Singapore mobile business and TPG's free mobile service - Management indicated that the prepaid market is reducing due to fewer foreign workers, but they are monitoring TPG's impact closely [16] Question: Australian mobile business performance and revenue guidance - Management explained that the competitive landscape and promotional activities during the holiday season affected market share dynamics [18][22] Question: Free cash flow decline and future expectations - The decline was primarily due to timing differences in dividend receipts, with expectations of normalization in future quarters [28] Question: Impact of higher data bundles on churn rates - Management noted no significant increase in churn following competitor launches, as they quickly adjusted their pricing plans [29] Question: Enterprise business margins and ICT growth - The lower margins were attributed to a higher mix of lower-margin ICT business, with ongoing investments in digital services to drive future growth [32][34] Question: 5G network upgrade path and vendor concerns - Management confirmed that 5G plans are progressing without Huawei, ensuring competitive rollout costs [56][57] Question: Cost initiatives and dividend guidance - The company is on track to achieve $500 million in cost savings, with no changes to the dividend guidance of $0.175 per share [73][121]