Moody's: SingTel's full-year results in line with expectation

SingTel's robust performance earned company stable Aa2 rating from the credit rating company.

Moody's Investors Service says that Singapore Telecommunications Limited's (SingTel) full-year 2010 results to 31st March, 2010 were generally in line with the agency's expectation and had no impact on the company's Aa2 rating. The rating outlook is stable, according to Moody's report.

"SingTel's strong Q4 and full-year 2010 results, which were positively impacted by a strengthening in the Australian Dollar, came in the wake of continued growth in mobile services across the group, as well as healthy growth in the company's IT and engineering segments," says Laura Acres, a Moody's Vice President and Senior Credit Officer.

"The unabated rise in popularity of ARPU-accretive postpaid smart phones and mobile broadband continue to drive SingTel's organic growth in Singapore and Australia," says Acres, also lead analyst for SingTel, adding "the latter of which has registered six consecutive quarters of double-digit mobile service revenue growth and the largest quarterly increase in mobile subscribers in 5 years."

Excluding the impact of currency fluctuations, SingTel's consolidated revenue and EBITDA improved 7.9% and 9.2%, from last year respectively. The company's total debt increased slightly from a quarter ago, mainly attributable to the translation impact of the Australian dollar, and higher mark-to-market hedging liabilities. However financial metrics remained strong, with adjusted leverage of 1.31x debt/EBITDA, and interest coverage, as measured by EBITDA-capex/interest, of 10.8x, on a trailing twelve-month basis. Moody's notes that if EBITDA was calculated on a cash basis, giving credit only for dividends received from associates, as opposed to a proportionate share of net earnings, leverage and interest coverage credit metrics would be marginally weaker.

Furthermore, 2010 saw SingTel further expanding its global footprint through associate Bharti Telecom Group's (Bharti) entrance into Africa -- with the acquisition of Mobile Telecommunications Company KSC's (Zain) African mobile services operations, Zain Africa B.V.

"Bharti's acquisition will give SingTel indirect access to an under-penetrated African market with prospects for rapid growth, albeit with a high degree of emerging market risk," says Acres.

As SingTel continues to invest abroad for growth opportunities, and receives an increasing contribution of dividends and earnings from overseas, SingTel can no longer be viewed solely in the context of Singapore and Australia. To incorporate this, Moody's also considers SingTel's metrics on a pro-rata consolidated basis, consolidating SingTel's associates proportionally for the company's ownership. As Bharti's acquisition of Zain assets is largely debt financed, Moody's expects SingTel's proportionally consolidated leverage, pro forma for the transaction, to rise closer to 2.0x debt / EBITDA. While this is high for the rating level, Moody's gains comfort in SingTel's strong market positions in Singapore and Australia both of which provide a high degree of stability to underlying earnings.

The principal methodology used in rating SingTel was the Global Telecommunications Industry methodology dated December 2007 and available on www.moodys.com in the Ratings Methodologies sub-directory, under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating SingTel can also be found in the Rating Methodologies sub-directory on Moody's website.

The last rating action on SingTel was on 30th March, 2010 when Moody's assigned a Aa2 rating with a stable outlook, to SingTel Group Treasury Pte. Ltd.'s S$600 million senior unsecured notes.

SingTel is the leading integrated communications services provider in Singapore, and, through its wholly owned subsidiary SingTel Optus, is the second largest integrated telecommunications operator in Australia. SingTel also has a number of investments in cellular operators throughout the region which give it a regional footprint in 8 countries and more than 292 million mobile subscribers.

SingTel is 55% owned by Temasek Holdings (Pte) Limited (Temasek) - itself rated Aaa - which in turn is 100% owned by the Singaporean government.