Singtel profit to contract 9% in FY 2020: analyst

Revenue in the enterprise segment is tipped to fall 3% by FY20.

Singtel’s net profit is projected to contract 9% on FY 2020 as the telco continues to struggle against intense competition in its key markets, UOB Kay Hian reported. Overall, three-year net profit is expected to grow at a CAGR of 6% in FY19-22 as its subsidiary, Airtel, boosts earnings.

Also read: Singtel to receive boost as contributions from associates recover: analyst

Competition is also expected to remain intense in Singapore given the potential entry of another one or two mobile virtual network operators (MVNOs) in the near future.

“The recent Circles.Life’s “S$5 for 2GB” plan – on the surface suggests bite-sized offerings but our recent meetings with telcos seem to suggest that prices have stabilised in Singapore at around the S$18-20/month range without massive data discounting practices. Instead, telcos are finding niche opportunities like bite-sized offerings for low data users and segmented target packages,” analyst Chong Lee Len said in a report.

Revenue in the enterprise segment is also expected to decline 3% YoY due to renegotiation of public contracts in Singapore and weak enterprise business in Australia, particularly in the financial sector. With Australian banks pouring resources into beefing up compliance vs traditional IT capabilities, Optus’ enterprise business continues to suffer a structural decline.

Also read: Singtel Q1 profits crashed 35% to $541.1m in Q1

Its post-paid average revenue per user (ARPU) also fell 13% YoY to $40 per month in Q1, partly attributed to the entry of SIM-only post-paid plans from MVNOs. For Q4, ARPU is expected to fall 12% YoY to $36 per month.

Singtel is expected to focus on defending its market share in both Singapore and Australia. The firm has added 35,000 post-paid subscribers in Q1 FY 2020 with the inclusion of its mobile plan GOMO’s SIM-only offering.

The telco is expected to see higher equipment sales in Q3 after the launch of its new mobile plans for iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max.

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