Singtel's dividends from associates may fall 22.58% to $1.2b in FY2020

Weakening operating performance, higher capital spending and dividend payout may hinder its growth.

Singapore Telecommunications (Singtel) is projected to see its dividends from associates to go down and weaken by 22.58% to around $1.2b for FY2020 from $1.55b in FY2019, S&P Global Ratings reported.

This, in turn, could then lead its ratio of funds from operations (FFO) to debt to plunge 40% in the next 18-24 months.

In addition, they expect its dividends to recover to $1.4b-$1.5b thereafter. The report also noted that dividends from associates have historically accounted for a substantial 20%-25% of adjusted EBITDA.

“That may happen due to weakening operating performance in core markets of Singtel and its affiliates, higher capital spending and dividend payout than we expect, and the group taking on further debt-funded acquisitions,” S&P Global Ratings said.

Last May, Singtel revealed that its FY2019 profit crashed 43.5% to $3.1b from $5.47b in 2018, driven by lower contributions from associates and losses from Airtel. Its final ordinary dividend apiece was at $0.107.

The expectations on Singtel’s dividends came at the back of Indonesia-based associate PT Telekomunikasi Selular’s (Telkomsel) performance, which was hit by price competition in 2018. Telkomsel is Singtel's largest dividend contributor, accounting for about 60% of dividends received from associates in the past three years.