SINGAPORE (Nov 14): Singapore Telecommunications saw a slight drop in revenues for 2QFY2020, but recorded a loss of $668 million, as it made provision for a huge licence fee and spectrum usage charges levied on the entire India mobile industry by its regulator.

Bharti Airtel, Singtel’s associate in India, was slapped with a fee and charges of US$3 billion ($5.5 billion). This is slightly less than Vodafone’s Indian unit, which was charged US$4 billion. The license fee and spectrum usage charges come following the telcos' long-running dispute with India's Department of Telecommunications over the definition of “adjusted gross revenue”.

Singtel’s share of Airtel's fee and charges amounts to some $1.9 billion. Without the provision, its earnings would have risen 3% y-o-y to $737 million, says Chua Sock Koong, Singtel’s group CEO at a late evening results briefing on Thursday. For more than a decade, Singtel had held its earnings briefing before the stock market opened for trading.

According to Chua, the judgement from India’s Supreme Court came as a surprise. To be sure, the case has dragged on for 14 years in the Courts. At each juncture, the telcos were found in favour – until the most recent verdict announced on Oct 24. “The final outcome was different from all the previous outcomes,” she says.

Chua adds that Airtel will continue to make representations to the Indian government for relief and seek further clarifications on the definition of “adjusted gross revenue” for India's telco industry.

To be sure, Singtel’s business in India has been a drag on the group in recent years as price-competition put a squeeze on margins. In March, Singtel, itself majority-owned by the Singapore government, sought help from sovereign wealth fund GIC to help fund a US$3.5 billion rights issue at Bharti, or risk its stake being diluted. Back then, Singtel and GIC paid US$525 million and US$700 million respectively. It is not clear if further capital raising is required by Bharti.

For now, Singtel is guiding that the group will remain profitable for FY2020. To signal its healthy cashflow, Singtel plans to keep its interim dividend payout of 6.8 cents per share. It is also guiding for a total full-year payout of 17.5 cents – unchanged from last year. “There is a difference between recurring performance and an exceptional item. In this case, it is a provision we made for a court decision,” says Chua.

For the three months to Sept 30, Singtel reported 3% y-o-y dip in revenue to $4.15 billion, as its consumer businesses in the two main markets Singapore and Australia remained resilient in the face of tough competition. In constant currency terms, the topline remained unchanged. 

5G licence and upstart TPG

Singapore is holding a 5G licence auction soon. Along with hefty licencing charges, operators need to prepare for significant capital expenditure as well. With all three main telcos under financial strain of varying levels, there has been speculation they might be keen to share the same network.

On the 5G licence, Singtel’s executives have not provided any clarity on whether they are going ahead alone or jointly with partners. Similarly, Chua is vague as to whether the group is gunning for a digital banking licence. Chua says there are many suitors making overtures to her company. One such potential partner is Oversea-Chinese Banking Corporation which is reportedly keen to join Singtel in bidding for the licence.

Chua has also brushed aside TPG’s entry as the fourth telco in Singapore. In a bid to win market share quickly, TPG has offered free trial services. Yuen Kuan Moon, Singtel’s CEO for its Singapore consumer unit, has a different view though.

“Whenever a telco offers a commercial service beyond the free trial, it is good for the industry, because then you know exactly what they are offering to the end user, and how much the end user is willing to pay for that service and network quality. But at the moment, it is hard to gauge [the market] when everything is free,” says Yuen.