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Results for the nine months ended 31 December 2001
08 Feb 2002

Operating margins in Singapore maintained despite slowing economy Revenues in Australia growing faster than industry average

Singapore, 8 February 2002 - Singapore Telecommunications Limited (SingTel) today announced its results for the first three quarters of FY 2001/02. The results of SingTel Optus Pty Limited (Optus), for the third quarter, are consolidated for the first time.

For the nine months ended 31 December 2001, operating revenue for the Group rose 34.2 per cent to S$4.91 billion, with Optus contributing S$1.21 billion. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 7.8 per cent to S$2.73 billion. Reflecting the impact of depreciation, goodwill and interest charges, the Group's profit after tax declined 24.7 per cent to S$1.45 billion.

Lee Hsien Yang, SingTel's President & CEO, said: "In Singapore, we continued to outperform a slowing economy by growing our core businesses, especially data, and managing our operating costs. In Australia, Optus remains the strongest challenger and is well placed to benefit from industry consolidation."

Operating results in Singapore

Despite continuing weakness in the local economic environment, the core businesses in Singapore continued to show resilience. SingTel's revenue increased 1.2 per cent to S$3.71 billion, sustained by strong growth in revenue from data and Internet services.

Through careful cost control, operational EBITDA margin was maintained at 53.1 per cent, still one of the highest among industry peers.

Data and Internet services remained SingTel's largest revenue contributor (25.2 per cent). Revenue grew 20.8 per cent to S$935.3 million year-on-year. This is consistent with earlier guidance given of growth in the high teens for the full year.

Revenue from local and international leased circuits increased by 27.6 and 25.4 per cent respectively, driven by robust demand for high bandwidth circuits.

With the successful completion of the US$2.1 billion C2C submarine cable network, SingTel will have access to low cost bandwidth and redundancy to grow the profitability of its regional data business. The network is fully funded and does not require further financial commitment. SingTel believes the market outlook will improve for C2C in 2002 as regional economies strengthen and as consolidation removes weaker players.

SingTel's cellular revenue increased by 4.2 per cent year-on-year to S$564.1 million. Compared to the preceding quarter, revenue grew 6.0 per cent, reflecting faster subscriber growth.

There was a significant increase of 20.0 per cent in the number of postpaid subscribers to 1.05 million from a year ago. SingTel Mobile's average churn rate has also improved to an all-time low of 1.9 per cent per month for the nine month period.

Following the termination of inactive prepaid accounts, the adjusted prepaid average revenue per user (ARPU) has increased to S$17 per month for December 2001. Among postpaid customers, ARPU was S$75 per month.

International outgoing minutes (excluding Malaysia) increased by 7.5 per cent year-on-year. However, revenue from international telephone services fell 8.1 per cent to S$839.1 million. SingTel continued to maintain its share of the total international telephone services market at 87.1 per cent.

SingTel's effort at managing costs continued to bear results. Operating expenses were up 0.9 per cent, less than revenue growth of 1.2 per cent, to S$1.76 billion. Traffic expenses increased by 1.9 per cent despite much higher traffic volumes. Costs of sales, and selling and administrative expenses fell by 7.7 and 6.7 per cent respectively.

Staff costs, SingTel's largest cost component (30.5 per cent), was up 9.3 per cent mainly due to the increase in employers' Central Provident Fund contribution rate, from 12 to 16 per cent, implemented in January 2001.

Operating results in Australia - According to Singapore GAAP

In the nine months to December 2001, Optus sustained its 'challenger' performance, growing revenue by 6 per cent to A$3.7 billion.

A continued focus on cost management saw operational EBITDA increase 23 per cent to A$794 million with the operational EBITDA margin improving to 21 per cent from 18 per cent.

Chris Anderson, Chief Executive of Optus, said these are solid results in a tough year.

"This is undoubtedly the toughest trading environment that Optus has faced in its 10 year history. However, the company is performing well - revenue growth is twice the industry average and we are continuing to take significant market share from our competitors."

As flagged at the half-year results in September, the bottom line was affected by changes in accounting policy (to comply with Singapore GAAP), higher depreciation schedules and one-off write-downs such as One.Tel and strategic review costs. All these issues affected the bottom line.

The Singapore GAAP adjusted profit after tax was a loss for the nine months of A$213 million. The loss at the half year was A$174 million.

Growth at Optus Mobile has recovered from the One.Tel collapse. Revenue increased 14 per cent while its customer base grew 18 per cent year-on-year to 4.0 million as at December 2001. Optus maintained its mobile market share of about 33 per cent.

Optus Business recorded revenue growth of 12 per cent from data and IP services despite weakness in the wholesale markets. The division will benefit from leveraging SingTel's extensive corporate relationships and regional products, services and network.

The Consumer division delivered encouraging revenue growth of 6 per cent, excluding discontinued operations. Revenue from broadband services increased 24 per cent driven by a 17 per cent increase in customer numbers and higher ARPUs.

Optus' cost re-alignment programme, 'Operation Win Through', will deliver savings at the high end of the A$75 million to A$100 million range announced earlier, with full impact from the fourth quarter.

For the period under review, operating expenses edged up 1 per cent, slower than revenue growth. Capital expenditure was A$1.4 billion with full year commitment expected to be within the A$1.6 billion originally forecast.

Associates and joint ventures

For the nine months to 31 December 2001, contributions from associates and joint ventures accounted for 12.7 per cent of the Group's profit before tax, compared to 11.5 per cent a year ago.

Excluding the results of Optus, the total share of results from associates and joint ventures fell by 11.3 per cent to S$255.1 million due to lower contributions from Belgacom and losses in new investments. This was however offset by improved earnings contributions from Advanced Info Service (AIS) and Globe Telecom.

AIS grew its customer base by 163.1 per cent to 5.2 million as at December 2001, with a record of 400,000 new customers in December. For the nine month period ended 31 December 2001, SingTel's share of earnings from AIS increased 19.7 per cent year-on-year.

Globe Telecom's mobile customer base increased by 79 per cent to 4.6 million as at December 2001. EBITDA rose 65 per cent in the fourth quarter of 2001 while underlying contributions to SingTel (excluding foreign exchange losses) more than doubled.

Bharti Tele-Ventures has completed its Initial Public Offering, the first in India using an international bookbuild. The company, which is investing heavily to create a nationwide footprint, is EBITDA positive in existing licence circles.

In December 2001, SingTel concluded its acquisition of a 22.3 per cent stake in Telkomsel, Indonesia's leading mobile operator with more than 3.2 million subscribers as at December 2001. SingTel has two representatives on the Telkomsel Board and has provided two members of the senior management team. Telkomsel is expected to contribute to SingTel's earnings from the next financial year.

The SingTel Group now has almost 20 million total mobile subscribers across the region, the largest of any operator outside of China and Japan. This provides economies of scale that can be leveraged for lower unit costs.

Financial position

SingTel has one of the strongest credit ratings among telcos in Asia. In November 2001, it successfully raised US$2.3 billion in its debut global bond offering, locking in long term funding at competitive rates.

The Group's net debt reached S$9.48 billion as at 31 December 2001 giving a net gearing of 39.4 per cent. This includes the impact of the Telkomsel acquisition and further construction payments for the C2C cable network. C2C is expected to draw down most, if not all, of its bank loans by the end of this financial year.

Balance sheet strength and cash flow generation are priority areas for SingTel. With the successful completion of recent major investments, the Group is focused on steadily improving cash returns across its core businesses.


Mr Lee said: "SingTel has successfully transformed its business profile. Revenue from mobile, data and Internet services now account for about 50 per cent of the Group's total revenue, one of the highest proportions among the major telcos.

"Our primary focus now is on maximising the value of our existing core businesses and deploying surplus cashflow to pay dividends and reduce debt.

"We are pleased with the progress of our regional mobile businesses. Optus, AIS, Globe, Telkomsel and Bharti are all in strong competitive positions in their respective markets and will grow their contribution to our bottom line over time.

"As we look forward to our full year results, we are maintaining the guidance we gave at the half year - that the Group's profit after tax and exceptional items is expected to be consistent with last year's, excluding the impact of goodwill charges. This assumes no further deterioration in economic conditions for the rest of the financial year."

Please refer to the respective Management Discussion and Analysis documents for more details on the results of SingTel and Optus.

Media contacts

Ivan Tan
Phone: +65-838 2007 or +65-9635 9765
E-mail: ivantan@singtel.com

Stephen Woodhill
Phone: +61-2-9342 7850 or +61-2-413 318 455
E-mail: stephen.woodhill@optus.com.au