RPT-SingTel Q3 seen lower, eyes C&W Optus
Singapore Telecommunications
Ltd is expected to feel the effects of increased competition on
its third quarter results but a huge cash pile gives it an edge
for ambitious regional acquisition plans, analysts say.
Asia's eighth largest telecoms firm is seen posting third
quarter net profit of around S$500 million ($286 million) on
Tuesday, compared with S$688 million in the second quarter, as
revenues from international calls fall.
But nine months after the local telecom market was completely
opened, analysts said fast-growing data and Internet services
could help compensate for some of the long distance losses.
While analysts were expecting little surprise in the results,
hopes were building for SingTel's bid to take control of Cable &
Wireless Optus's mobile phone business in Australia as
part of a regional expansion drive.
Alexandra Connor, regional telecoms analyst at Indosuez W.I.
Carr, said it should prove relatively easy for SingTel to grow
overseas because of decreasing competition from other players.
"A lot of the global telecom companies don't have money and
some of them are withdrawing from Asia. I think SingTel will find
it easier making investments than it has in the past," she said.
SingTel shares, two cents higher at S$2.87 in Monday trade,
have crept up lately as news of its bid for C&W Optus filtered
through. For the month, SingTel has risen about six percent
versus a one percent dip in the Straits Times Index .
CASH IS KING
Tjandra Kartika, telecom analyst at G.K. Goh Securities, was
forecasting S$505 million in third quarter net profit, while
Michael Millar of SG Securities expected about S$495 million.
No comparable figures are available from the same quarter
last year because the company, Singapore's largest by market
capitalisation, began quarterly reporting in the financial year
beginning April 2000.
Although SingTel beat market forecasts in the previous two
quarters, it is expected to feel more heat from liberalisation of
the Singapore market in the second half of the 2000/2001 year.
But analysts were positive on the company and its prospects.
Millar, who has a 12-month price target of S$3.25, said its
shares were fairly valued based on ratios such as enterprise
value to earnings before interest, taxes and depreciation.
"The upside is the cash pile," he said. "This year I think
there is a change in the mind-set of the company to be more
aggressive...to expand."
Millar said SingTel's war chest -- estimated at around US$3.8
billion -- could be boosted to $10 billion if needed. SingTel has
already indicated it could be geared up for acquisitions.
SingTel has been under pressure to grow outside Singapore
because of the small local market. But its plans hit snags twice
last year as bids for stakes in Hong Kong's C&W HKT and
Malaysia's Time Engineering fell through.
C&W OPTUS A POSSIBLE BOOST
C&W Optus, 52.5 percent by Britain's Cable & Wireless, has
said that SingTel, Vodafone Pacific Group and Telecom NZ
were interested in acquiring its mobile phone assets.
A spokesman for SingTel declined to confirm its interest, but
Australian media have reported the three firms have lodged
non-binding offers with C&W Optus to start due diligence.
Paul Zaman of ING Barings, calling for a buy on SingTel
shares with a 12-month target of S$3.83, said in a recent report
that market sentiment was expected to improve towards the firm
should it win a major acquisitions in Asia such as C&W Optus.
"Winning the C&W Optus deal would advance SingTel's offshore
strategy in Asia in our view. However, we believe that there are
other opportunities in Asia and, as such, this is not a 'do or
die' deal," Zaman said.
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