All-time high operating revenue of S$12 billion and net profit of S$4.5 billion for the year For the quarter, encouraging trends in Singapore, continued margin expansion in Australia

Singapore Telecommunications Limited (SingTel) today announced its audited results for the quarter and the year ended 31 March 2004.

Results for the year ended 31 March 2004

Operating revenue for the SingTel Group was a record S$12.0 billion, a 17 per cent year on year increase. Net profit after tax more than tripled to S$4.49 billion, another all-time high. On a pre-goodwill basis, it rose 2.5 times to S$5.14 billion.

The robust results were boosted by a S$2.03 billion gain – pre-tax and pre-minority interests – on SingTel's disposal of its entire shareholding in Belgacom. Even excluding exceptional items, the Group's net profit (pre-goodwill) was still a record at S$2.85 billion, a 32 per cent increase compared to last year. Operational EBITDA grew a healthy 15 per cent.

Mr Lee Hsien Yang, SingTel's President and CEO, said: "This has been an exceptional year for the SingTel Group. Our successful strategy to achieve geographical diversification of our business has contributed to the Group continuing its strong financial performance. I am delighted to report a set of results that has exceeded all of our key objectives at the beginning of the financial year.

"The Singapore business generated very strong cash flow and despite very difficult market conditions – including the Sars outbreak – we still managed to maintain a very healthy operational EBITDA margin.

"In Australia, SingTel Optus is now making a healthy contribution to the Group's earnings and cash flows. A year ago, we had set a medium term target of 30 per cent operational EBITDA margin. Optus achieved this in the final quarter of this year.

"Our regional mobile associates continued their rapid growth, increasing their combined subscriber base by 42 per cent and raising the contributions from their ordinary operations to the Group's earnings by 70 per cent."

Reflecting the growing importance of the Group's international business, proportionate revenues from outside Singapore accounted for 75 per cent of the Group's enlarged revenue (FY03: 65 per cent), while 66 per cent of proportionate EBITDA came from overseas (FY03: 51 per cent).

Results for the quarter ended 31 March 2004

The Group's revenue for the quarter rose a strong 16 per cent to S$3.16 billion. Operational EBITDA also increased by 16 per cent to S$1.11 billion. Substantial improvements in Optus' margins and the impact of a stronger Australian dollar mitigated margin declines in the Singapore business.

Contributions from the ordinary operations of the Group's associates amounted to S$385 million, an increase of 53 per cent compared to the same quarter last year.

Exceptional tax credits of $83 million were recognised, comprising S$52 million relating to the reduction in Singapore’s corporate tax rate to 20 per cent and a S$31 million credit recorded by Optus following an increase in the tax base of its depreciable assets. Net profit for the quarter rose sharply, by more than six times, to S$1.96 billion as a result of significant gains recognised upon the disposal of the Group's stake in Belgacom. This was partially offset by a S$261 million impairment charge for the cable network assets of subsidiary C2C.

Excluding exceptional items and goodwill, net profit still rose by a healthy 14 per cent to S$701 million.

Operating results in Singapore

The Singapore business generated free cash flow of S$1.93 billion for the year, about 25 per cent ahead of its target. As a result of tight cost controls, operational EBITDA margins were maintained at 50 per cent.

Operating revenue for the fourth quarter was S$1.03 billion, a dip of 4.8 per cent year on year, excluding revenue from SingPost and Yellow Pages last year. This was a smaller contraction compared to the 8.4 per cent decline in the preceding quarter. While revenue contributions from data, Internet and mobile services improved, those from international telephone and IT & engineering services continued to weaken.

Compared to the preceding quarter, revenue grew 5.3 per cent as revenues from data and mobile services were stable and IT revenues enjoyed a seasonal rebound. Excluding IT services, the operational EBITDA margin for the quarter was 51 per cent.

For the quarter, revenue from data and Internet services increased by 1.9 per cent to S$279 million, reversing the trend of revenue declines seen in the preceding quarters. International leased circuits revenue dropped compared to the same quarter last year but was stable compared to the preceding quarter.

Demand for SingTel's ADSL lines remained strong, rising 59 per cent year on year to hit 258,000 lines. Broadband revenue increased 85 per cent to S$65 million, more than offsetting the 25 per cent decline in dial-up services which generate lower average revenue per user (ARPU).

Revenue from mobile communications services improved 2.7 per cent for the quarter to S$209 million. ARPU from postpaid subscribers increased by S$2 compared to a year ago partly due to higher minutes of use which increased about 8 per cent year on year and the retention of higher value customers.

The postpaid churn per month rose to 2.0 per cent for the quarter following the one-time termination of 20,000 inactive subscribers on the expiry of a promotion scheme. As a result, the number of subscribers on SingTel's mobile networks slipped slightly to 1.52 million.

Revenue from international telephone services declined 12 per cent for the quarter to S$180 million. The number of international outgoing minutes was higher compared to the last corresponding and the preceding quarters but this was not sufficient to offset the declines in collection rates and inpayments.

For the quarter, revenue from IT & engineering services fell 13 per cent year on year to S$168 million. While IT revenues in Singapore were stable, the contribution from China declined sharply. Compared to the preceding quarter, IT revenue grew strongly by 49 per cent as the fourth quarter is traditionally a strong quarter for this segment.

SingTel continued to manage its operating expenses and capital expenditure very carefully. Excluding SingPost and Yellow Pages, operating expenses for the quarter fell 1.4 per cent year on year.

Staff costs increased by 2.0 per cent due to accruals for the new performance share plan even though headcount was lower and there was a reduction in CPF contributions. Selling and admin expenses fell 4.3 per cent due to lower expenses for bad and doubtful debts and lower advertising expenses.

For the year, capital expenditure at S$293 million was just 7 per cent of operating revenue.

Operating results in Australia

Optus delivered another impressive set of financial results – reporting strong growth in net profit, revenue and cash flow. And increased market share in all divisions.

Net profit (before exceptional tax items) for the year was A$440 million, up A$412 million compared to the previous year's A$28 million.

Revenue for the year was up 15 per cent to A$6.36 billion (excluding the C1 Defence contract). Operational EBITDA grew 38 per cent to A$1.86 billion and margins expanded to 29.3 per cent, up 4.9 percentage points.

Free cash flow for the year was A$1.11 billion, up 101 per cent compared to A$551 million for last year. Two years ago there was a A$612 million cash flow deficit.

This year, Optus had a A$1 billion capex target and comfortably met this with cash capex spend at A$833 million. The capex to revenue ratio was 13 per cent.

"Optus committed at the beginning of the year to maintain our double-digit growth, increase margins and take market share," Optus Chief Executive, Mr Chris Anderson said. "We have exceeded all these targets – with net profit and revenue growth, margin expansion and increases in market share across all divisions.

"We are strongly cash flow positive and growing at three times the market," Mr Anderson said.

"All Optus divisions reported stronger margins than the same quarter last year.

Optus Mobile continues to contribute the majority of Optus' operational EBITDA, but margin improvements in Optus Business and Wholesale, and Consumer and Multimedia resulted in each division making a healthy contribution." Optus Mobile delivered another quarter of profitable growth with total revenues for the quarter up 12 per cent to A$887 million including mobile service revenues up 15 per cent to A$816 million. Mobile's operational EBITDA margin improved to 38 per cent for the quarter. Mobile customer numbers increased 18 per cent to 5.6 million with postpaid minutes of use up by 5.8 per cent.

Data revenues and total SMS volumes both grew by more than 20 per cent. Data revenues grew to 15 per cent of service revenue. Postpaid ARPU was up 4.1 per cent for the quarter.

Mobile capital expenditure for the year was A$278 million. Optus continued its extensive base station rollout program, adding 381 base stations throughout the year with many in regional areas.

Revenue for Optus Business and Wholesale grew 13 per cent to A$398 million this quarter (excluding the C1 Defence contract) with both divisions announcing important customer wins including the Queensland Government - SmartNet, Amatek, Commonwealth Bank of Australia (CBA), Health Insurance Commission and Sky New Zealand. The combined margin increased to 28 per cent, driven by EBITDA growth of over 45 per cent.

Optus Business continues to make gains in the competitive corporate market with revenue growth of 15 percent – this was the highest quarterly growth rate since December 2002. Business voice revenues increased by 18 per cent compared to the same quarter last year. Satellite revenues increased by 19 per cent with a full quarter's contribution from C1 transponders leased to Foxtel.

Optus Wholesale reported a 9.1 per cent increase in revenue compared to the same quarter last year.

Consumer and Multimedia (CMM) reported another excellent quarter. Revenue growth was strong at 13 per cent, resulting in revenue of A$379 million for the quarter.

CMM delivered a record free cash flow of A$31 million for the quarter and A$102 million for the year. Two years ago, its free cash flow was a negative A$415 million.

Off network voice revenue grew by 18 per cent to A$180 million and DSL and dial up Internet revenue grew by an impressive 28 per cent to A$30 million. HFC revenue grew by 5.6 per cent reflecting a higher bundling rate and increases in ARPU.

The launch of OptusNet DSL in March has stimulated broadband growth with Optus adding 70 per cent more new cable modem and DSL customers in the fourth quarter than in the December 2003 quarter. Total Internet customers increased to 674,000, up 14 per cent on the same quarter last year.

Associated companies

SingTel's overseas investments continued to report very strong results. For the year, the Group's share of pre-tax earnings from the ordinary operations of its associates was a record S$1.44 billion, an increase of 87 per cent compared to last year. About two thirds, or S$927 million, came from AIS, Bharti, Globe and Telkomsel.

For the quarter, SingTel's four regional mobile associates contributed S$259 million of ordinary profits, an increase of 55 per cent. Telkomsel, with S$131 million, was the largest contributor, followed by AIS with S$65 million.

The number of mobile customers served by SingTel, Optus and associated companies in the region increased 37 per cent during the year to 47.3 million, the biggest subscriber base outside of China and Japan. As at 31 March 2004, AIS had 13.9 million subscribers; Telkomsel, 10.7 million; Globe, 9.1 million and Bharti, 6.5 million.

For the year, SingTel's proportionate share of revenue from its four regional mobile associates jumped 30 per cent to S$2.47 billion. The proportionate share of EBITDA rose 56 per cent to S$1.45 billion, accounting for 21 per cent of the Group's total proportionate EBITDA of S$7.06 billion.

The Group is receiving an increasing portion of profits from its associates in the form of dividends. During the year, it received a total of S$680 million in cash dividends from its associates, compared to S$272 million last year. Dividends from its regional mobile associates alone more than tripled to S$223 million.

SingTel has had an excellent track record with its overseas investments. An example of this is Belgacom, which SingTel completely divested in March. SingTel acquired a 12.15 per cent stake in Belgacom in 1996 for S$837 million. Over the years, the Group received S$520 million in dividends and another S$2.28 billion in proceeds from Belgacom's IPO as well as related share buybacks. This gives a compound annual cash return of 17 per cent for the investment.

Conclusion

Mr Lee said: "While we have reported record results with a record distribution to shareholders¹, our medium term target of double digit earnings growth remains.

"The Singapore business should continue to generate strong and reliable cash flows while in Australia, we expect Optus to maintain its strong operational momentum.

"We are extremely pleased with the success of the Group's international expansion strategy which has helped to drive double digit earnings growth. Optus has executed a dramatic turnaround in its financial performance and we expect our regional mobile associates to continue to grow strongly.

"SingTel is well placed to continue to deliver on its commitment to create value as a blue chip growth stock."

Please refer to the Group's Management Discussion and Analysis document (available at www.singtel.com/investor) for more details of the results including a full commentary on the Group's outlook for the next financial year.

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¹ Please see separate SingTel news release on a proposed capital reduction and the final dividend for FY 2004.