THE SINGTEL GROUP'S RESULTS FOR THE FOURTH QUARTER AND YEAR ENDED 31 MARCH 2005

Record operating revenue of S$12.6 billion. Underlying net profit grew 22 per cent to S$3.06 billion for the year. For the quarter, positive trends in Singapore, continued margin expansion in Australia and rapidly growing regional mobile business. Singapore, 5 May 2005 – Singapore Telecommunications Limited (SingTel) today announced its audited results for the quarter and the year ended 31 March 2005. Highlights:

Results for the year ended 31 March 2005

The SingTel Group’s full-year operating revenue rose 5.2 per cent to a record S$12.6 billion. Operational EBITDA grew by 8.7 per cent to S$4.66 billion.

Underlying net profit after tax was S$3.06 billion, an increase of 22 per cent. Underlying earnings per share grew 26 per cent to 17.8 cents partly due to a smaller capital base following the completion of the capital reduction exercise in September 2004. Net profit after tax was lower by 27 per cent at S$3.27 billion mainly due to exceptional gains recorded in the divestment of Belgacom in the previous financial year.

Mr Lee Hsien Yang, SingTel’s President and CEO, said: “I am delighted to report that our financial results for the year have exceeded the targets that we set a year ago.

“With strong profit and cash flow, the Board is recommending an ordinary dividend of 8.0 cents per share, 25 per cent higher than the previous year. In addition, we will be seeking approval for a special dividend of 5.0 cents per share. The combined gross dividend of 13 cents per share, or a gross payout of S$2.16 billion, represents a yield of over 5 per cent.

“While the Singapore business returned to growth and continues to generate robust cash flow, the strong performance of the Group is driven mainly by international expansion. Operations outside Singapore accounted for over 70 per cent of the Group’s revenue and 66 per cent of EBITDA.

“In Australia, Optus has executed a dramatic turnaround over the last three years. EBITDA margins have expanded to 31 per cent. It has delivered underlying NPAT of A$648 million and is now making a healthy contribution to the Group’s earnings and cash flows.

“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 28 per cent.”

Results for the quarter ended 31 March 2005

The Group’s revenue for the quarter rose 2.6 per cent to S$3.25 billion. Operational EBITDA increased by 8.2 per cent to S$1.20 billion.

Underlying earnings per share increased by 50 per cent to 5.30 cents due to improved operating performance. The increase was also partly due to a 7 per cent decline in average shares on issue after the September 2004 capital reduction exercise.

Contributions from the ordinary operations of the Group’s associates amounted to S$317 million, an increase of 18 per cent compared to the same quarter last year after adjusting for Belgacom.

The Group’s underlying net profit was S$881 million, an increase of 40 per cent.

Operating results in Singapore

The Singapore business has generally met or exceeded its targets for the year. Operating revenue of S$4.05 billion was in line with the previous year’s revenue and free cash flow generated of S$1.53 billion exceeded the S$1.4 billion target. As a result of careful cost controls, operational EBITDA margins were maintained at 49 per cent. Excluding IT services, the operational EBITDA margin for the year was 56 per cent.

Operating revenue for the fourth quarter was S$1.06 billion, an increase of 3.7 per cent year-on-year mainly from strong growth in data and IT services.

For the quarter, revenue from data and Internet services increased by 7.1 per cent to S$299 million mainly due to a 19 per cent increase in broadband revenue.

SingTel maintained its position as the market leader in broadband. Demand for broadband remained strong, rising 16 per cent or 41,000 lines, to hit 299,000 lines from a year ago. Broadband revenue increased 19 per cent to S$78 million while the number of dial-up customers declined by 27 per cent or 41,000.

In mobile communications, SingTel launched its new ‘3loGy’(read as trilogy) initiative, providing more than 5,000 3G customers with video services across mobile, fixed line and broadband platforms. Revenue contribution from 3G is expected to grow steadily and more significantly when the new technology gains wider acceptance and as more attractive handset offers are introduced.

Increased marketing activities also sustained the momentum of acquiring new mobile customers. As at 31 March 2005, there were 1.57 million customers, an increase of 3.3 per cent. This represents a 43 per cent share of the postpaid market. In the quarter, mobile customer base grew by more than 27,000. Postpaid churn rate in the quarter continued to be low at 1.1 per cent and data usage was 21 per cent of ARPU, both at best-in-class levels. Revenue from mobile communications was stable year-on-year and similar to the preceding quarter.

Revenue from international telephone services declined 12 per cent for the quarter to S$158 million as international outgoing minutes fell 9.4 per cent. Outpayment expense fell significantly by 35 per cent and gross margins improved to 70 per cent as compared to 60 per cent in the same quarter last year.

National telephone revenues fell 6.0 per cent during the quarter. With lower usage on the fixed line, coupled with one of the lowest tariffs in the world (local residential tariff is only US$8 per month), there has been limited competition in fixed line services. SingTel continues to maintain more than 99 per cent market share.

For the quarter, revenue from IT & engineering services grew strongly by 26 per cent to S$212 million. This increase was due mainly to strong product reselling and robust demand for communications engineering services in Singapore and increased systems integration projects in key overseas markets. For the financial year ended 31 March 2005, revenue grew by 16 per cent from S$536 million to S$620 million.

SingTel continued to manage its operating expenses very carefully. Operating expenses increased by just 1.0 per cent in the fourth quarter.

Staff costs declined by 1.0 per cent in the quarter. Staff numbers fell 1.2 per cent and revenue per employee increased 5.0 per cent year-on-year.
In the quarter, selling and administrative expenses were flat with higher subscriber acquisition and retention costs partially offset by the write back for provisions for doubtful debts no longer required of S$14 million.

Traffic expenses decreased by 19 per cent and this was mainly due to lower outpayment rates. Cost of sales increased by 21 per cent. This increase was due mainly to the increase in IT hardware sales and sale of equipment.

The Singapore business continued to be the cash flow engine for the Group. Free cash flow generated for the year was S$1.53 billion. This was lower as compared to the previous year largely due to receipt of S$381 million of one-off dividends from Belgacom and SingPost in 2004.

For the year, SingTel’s capital expenditure was $331 million or 10 per cent of operating revenue.

Operating results in Australia (SingTel Optus)

The financial year ended 31 March 2005 was another strong year for Optus.

Paul O’Sullivan, Optus Chief Executive said the company met most of the financial targets it set 12 months ago, despite intense competition in the mobile and corporate segments.

“This year, we grew revenue faster than the market as a whole, achieved double digit operational EBITDA growth, expanded our EBITDA margin and achieved free cash flow exceeding A$1.2 billion.

“Underlying net profit after tax for the year was A$648 million, up 39 per cent, a record for the company,” Mr O’Sullivan said.
Excluding the previous year’s C1 Defence contract, revenue for the year grew by 8.9 per cent to A$6.9 billion. Operational EBITDA grew 16 per cent excluding C1 to A$2.2 billion and the EBITDA margin continued to expand to 31.1 per cent.

Free cash flow grew by 12 per cent to A$1.2 billion reflecting strong profit growth and careful capital expenditure management. Cash capital expenditure for the year was A$811 million in line with recent guidance. The capex to revenue ratio was 12 per cent.

In the quarter ended 31 March 2005, Optus revenues grew by 4.2 per cent. This was lower than the 7.7 per cent growth rate achieved in the December quarter due to market trends and matters specific to Optus. Revenue growth for the quarter would have been 5.6 per cent, down 2.2 percentage points on the December quarter’s growth rate, if mobile termination rates had not been reduced from 21 cents to 18 cents.

“Optus is facing a changing market. The introduction of mobile caps, the declining usage of fixed lines and unfavourable regulatory outcomes, including the reduction of mobile termination rates, impacted our top line,” Mr O’Sullivan said.

“Optus is now entering a phase of investment which is designed to deliver long term improvements in revenue and margin growth. Investments in 3G and broadband networks and a range of innovative data and content products over our 2.5G and 3G networks will return us to stronger growth in subsequent years,” he said.

In the quarter, Optus Mobile’s operating revenue grew by 6.9 per cent to A$948 million and operational EBITDA was very strong, increasing 19 per cent to A$401 million, when compared to the same quarter last year. Margins improved to 42 per cent.

The overall customer base increased by 6.6 per cent to 5.92 million with Optus adding 88,000 new mobile customers in the quarter. Subscriber growth for the quarter was impacted by lower results in prepaid mobile and a 369,000 adjustment to remove non-active prepaid subscribers from the base.

Business mobile revenues grew by 7.6 per cent which represented an increase in market share while data revenues grew to 17 per cent of service revenue in the quarter.

Last week, Optus unveiled its 3G network in Canberra ahead of a commercial launch in other major cities later in 2005.

“Optus will continue to strike a balance between subscriber growth and profitability in the consumer mobile segment. Conditions are challenging in the Australian mobile market but the power of the Optus consumer franchise and the hard won benefits of scale will drive long term success,” Mr O’Sullivan said.

Optus Business & Wholesale continued to gain market share and win customers. Overall revenues grew 1.0 per cent and given difficult market conditions, these were credible results from both Optus Business and Wholesale.

Optus Business revenue increased by 5.7 per cent (excluding the C1 Defence contract) and was marginally positive, excluding revenue associated with the Uecomm acquisition.

Voice minutes were flat, mostly due to the impact of Easter falling in March. Given that total fixed voice minutes have been declining across the market, this result shows that Optus continues to take market share. However, voice revenue fell by 11 per cent to A$103 million due to continued aggressive price pressure.

Data and IP revenue was strong despite price competition and increased by 23 per cent (or 4.9 per cent excluding Uecomm) to A$104 million.

Satellite revenue increased by 4.8 per cent to A$55 million with a full contribution from C1 in both quarters.

New contract wins and major re-signs for Optus Business over the last 12 months included: IBM, the Health Insurance Commission, Hills Industries, Queensland Department of Transport, St George Bank, Suncorp-Metway, Affinity Health, Fosters, Air Services Australia, WA Government, NSW Health, BP, Toll Holdings, PMP, Medibank, CSC, Mayne, Nestle and components of Tranche 1 and 2 of the Victorian Government’s TPAMS project.

Optus Wholesale revenue fell by 9.4 per cent after the completion of some one-off low margin business. However, Wholesale data and IP revenue recorded strong growth of 36 per cent.

Combined Optus Business and Wholesale EBITDA margin in the current quarter fell slightly to 27 per cent reflecting the impact of continued price competition in these two markets.

Optus Consumer and Multimedia broadband revenues grew 68 per cent and the broadband customer base grew to 355,000 with the addition of 63,000 new customers in the quarter. Optus’ retail broadband market share now exceeds 20 per cent.

Overall, fourth quarter revenues were flat with strong broadband growth offset by declines in traditional products, including dial-up revenues which fell 23 per cent, partly reflecting success in migrating customers to broadband.

Bundling rates continued to improve with almost 70 per cent of HFC telephony customers and nearly 50 per cent of local call resale customers taking more than one Optus product.

Operational EBITDA margin for the quarter was 13 per cent, marginally down on the same quarter last year as Optus aggressively pursued off net, low margin broadband growth. Once regulatory negotiations are complete, Optus plans to use unbundled local loop to carry more traffic on its own network. This has the potential to improve off net margins in the medium term.

Optus Consumer and Multimedia achieved free cash flow of A$119 million for the year as a whole, up 17 per cent.

Associated companies

SingTel’s overseas investments continued to report very strong results. For the year, the Group’s share of underlying pre-tax earnings from the ordinary operations of its associates was S$1.25 billion, an increase of 29 per cent compared to last year. The main driver of this was regional mobile with share of pre-tax earnings of S$1.19 billion, an increase of 28 per cent year-on-year. Excluding Belgacom, post-tax earnings from associates grew 44 per cent to S$945 million.

For the quarter, SingTel’s four regional mobile associates contributed S$300 million of ordinary profits, an increase of 16 per cent. Telkomsel, with S$141 million, was the largest contributor, followed by AIS with S$71 million.

The number of mobile customers served by SingTel, Optus and the regional mobile associates increased 37 per cent during the year to 65 million, the biggest subscriber base in Asia outside of China. As at 31 March 2005, Telkomsel had 17.9 million subscribers, the largest customer base; AIS had 15.5 million; Globe had 13.0 million. Bharti, with 11.0 million subscribers, is fast catching up from its base of 6.5 million subscribers a year ago. In these markets, analysts expect more than 230 million new mobile customers over the next five years driven mainly by growth in India and Indonesia.

The Group continued to receive an increasing portion of profits from its associates in dividends. During the year, it received a total of S$355 million in cash dividends from its associates. Dividends from its regional mobile associates were S$303 million, an increase of 36 per cent.

Conclusion

Mr Lee said: “Dividends are up and we are making generous distributions to our shareholders. Our medium term target is to grow underlying earnings at double digits.

“The Singapore business should continue to generate strong free cash flow. In Australia, we target revenue growth in Optus to exceed overall market growth.

“The success of the Group’s international expansion strategy has helped to drive double digit earnings growth. Our regional mobile associates are expected to continue to deliver double digit earnings growth, driving similar growth in the overall contributions from associates.

“SingTel is well positioned in the region as a blue chip growth stock. We are delighted that many respected independent parties have recognised this commitment to create value for our shareholders.”

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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¹Excluding the pre-tax contribution of Belgacom, which ceased to be equity accounted from 1 April 2004.
²Underlying net profit is defined as net profit before goodwill, exceptionals, Belgacom’s net contribution and exchange difference on loan to Optus, net of hedging.