SingTel braces for ATO battle
David Ramli
354 words
14 Nov 2014
The Age
AGEE
English
© 2014 Copyright John Fairfax Holdings Limited. Factiva.Gateway.Messages.Archive.V1_0.ELink
Takeovers - Question over Optus deal
SingTel is preparing to battle against the Australian Taxation Office over its tax bill for the takeover of Optus in 2001.
It comes as the federal government continues its campaign to raise the amount of tax paid by multinational companies as it tries to balance the budget.
Singapore Telecom Australia Investments (STAI) said the ATO sent it a tax position paper relating to the financing arrangements for the acquisition of Optus in December 2013 and answered its information requests.
SingTel bought the then-named Cable and Wireless Optus in 2001 for $17.2 billion.
"Subsequently, on October 22 2014, STAI received a statement of audit position," it said. "The statement of audit position will be further subject to an independent review within the ATO.
"STAI has received advice from external experts in relation to the matter and intends to defend its position."
Optus corporate and regulatory affairs vice-president David Epstein said the ATO was approaching a range of companies about their tax bills as the government faced revenue challenges.
"It's not a daily thing, but equally it's not an unknown occurrence," he said.
"The ATO is quite upfront about what it's been doing given the government's overall revenue challenges for the last couple of years, and its approaches to major companies."
But Optus is not being accused of the transfer pricing and tax haven usage that other multinational companies use to minimise their bills.
It has been under the ATO's microscope since 2001. It had long claimed that tax losses built up during its establishment phase meant it did not have to pay taxes for several years.
In 2005 its then chief financial officer Pat O'Sullivan said it was "unlikely" the company's treatment of accumulated tax losses would be found to be incorrect.
Optus on Thursday reported its first revenue increase in almost three years along with rising net profits despite losing 92,000 mobile subscribers over the past 12 months, the first revenue increase in almost three years.
Fairfax Media Management Pty Limited
Document AGEE000020141113eabe00044
New SingTel-Optus chief Allan Lew lines up aggressive revamp before Christmas
PUBLISHED: 14 NOV 2014 08:36:00 | UPDATED: 15 NOV 2014 02:59:34
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New SingTel-Optus chief Allan Lew lines up aggressive revamp before Christmas
SingTel-Optus’s new chief executive, Allan Lew: “Starting from Christmas we’ll be going out with very aggressive offers.” Photo: Paul Jones
DAVID RAMLI
SingTel-Optus’s new chief executive, Allan Lew, has vowed to use new content bundles and specially-trained staff to revamp its products in time for Christmas and maintain its position as Australia’s second-biggest provider of internet services.
Mr Lew told The Australian Financial Review he was not satisfied with the company’s fixed-line broadband performance. Despite the overall broadband market growing, Optus’s internet subscriber base has stayed flat at 1.003 million users amid falling revenue.
If the trend does not change, Optus could fall victim to rivals such as Perth-based iiNet – which is nipping at its heels with 950,000 broadband customers – taking its fixed-line market share and profits at a time when Telstra continues to dominate the mobile segment.
“In the past, our primary focus has been on mobile,” he said. “If you look at fixed-line market share we are still number two to Telstra.
“We are going to make sure that we never lose that position [and] we will not surrender our market share to the smaller players.”
Mr Lew said that on Friday the company would announce a new partnership in the enterprise space to try to boost its appeal in that segment and that it was a signal of intent from the telco giant.
“Starting from Christmas we’ll be going out with very aggressive offers on [cable TV and broadband network] services and next year we’ll have something very interesting that goes beyond that,” he said.
“We’ve come out with a very interesting product that bundles with TV and gives a very exciting offer at a $90 to $110 price point.”
Much of the battle will happen as the national broadband network rolls out and replaces Telstra’s copper-line network as the bedrock of Australia’s internet services.
“The NBN gives us an open platform with equal access to the homes so we are doubling up our efforts in that area,” he said. “To get success in the NBN we have to go local area marketing – house to house, street to street.”
He said the telco would announce content bundling services for mobile customers “imminently” in a similar vein to those offered by Vodafone Hutchison Australia, which gives its bigger-spending mobile customers free access to music streaming service Spotify.
‘THERE IS A LEVEL OF INTENSITY IN THE MARKET HERE’
“The partnerships... will have to be very, very local, which means it’ll have to have information about what is happening in Australia within the cities and towns where we focus the service,” he said.
Optus is also following Telstra into areas such as the bundling of home security services with telecommunications products. Telstra spent between $40 million and $60 million to invest in SNP Security’s back-to-base alarm and security camera business in June.
“I think [watching your home security cameras via mobile] is something reasonably simple to do and we’ve got very affordable video cameras we can mount all over your house while using 4G networks to access them,” he said.
“But that’s something we can do and we don’t think we need to make an investment in a company to do that.”
However, Optus customer managing director Vicki Brady warned that mobile competition was fiercely rising in the Australian market as Telstra and Vodafone Australia matched its offers.
“There is a level of intensity in the market here, though we do differentiate with our data sharing offering,” she said.
“In the prepaid market there is very high intensity competition and as we launch new plans into market we have seen Vodafone react to match those and we’ve seen some reaction from Telstra.
“But in our lead-up to Christmas we see ourselves as well-positioned against our competitors.”
On Thursday, Optus announced net profits for the three months ending September 30 rose 5.4 per cent to $230 million and revenue for the same period rose to $2.15 billion. Earnings before interest, taxation, depreciation and amortisation (EBITDA) grew by 1.2 per cent, to $652 million.
But mobile subscribers fell from 9.49 million users on September 30, last year to 9.4 million at the same point this year.
The losses all came from the mobile broadband division as 207,000 users left over the past 12 months. In contrast, Optus’s prepaid and postpaid mobile units both reported an extra 115,000 subscribers over the same period.
Optus chief executive Allan Lew said the company had expected the fall and that it was largely caused by the introduction of new plans that allowed users to add multiple devices onto a single plan.
“We were fully cognisant it would have an impact on the mobile broadband sims that we have,” he said. “Basically we looked at it from a customer perspective because at the end of the day customers want the ability to have the flexibility to buy one plan across multiple devices.”
“We’re happy with the way it’s going.”
The Australian Financial Review
BY DAVID RAMLI
David covers telecommunications from our Sydney newsroom.
Optus kicks off $400m billing and customer care overhaul project
THE AUSTRALIAN NOVEMBER 18, 2014 12:00AM
OPTUS will spend about $400 million on a massive IT transformation project that would see the No 2 telco undertake a radical overhaul of its billing and customer care systems.
The Australian understands that the SingTel-owned telco has enlisted IT systems integrator Amdocs to help with the two-year project which, in addition to internal staffing costs, would cost between $300m and $400m.
The project — known inside Optus as BCC, for Billing and Customer Care — would see the telco untangle its snake’s nest of billing systems, shut down scores of legacy IT systems and unify its customer care functions across its mobile, fixed-line and HFC cable networks.
“We’re undertaking a huge transformation of our core IT systems over the next two years which will use the same platform across Singapore and Australia,” Optus chairman Paul O’Sullivan told The Australian.
“It’s designed to allow us to take things to the next level. It will give us the ability to deliver one or two-click functionality on the screen, the ability to apply analytics to do smart things. So if for example a (person) uses X amount of data when travelling overseas we can automatically recommend a pack that has that much data.”
If successful, the project would migrate Optus’s retail, business, enterprise and government customers and services across the telco’s various networks onto a single platform. This would provide the telco with a single customer view and generate cost savings as hundreds of legacy systems are switched off.
“We want to redesign the core processes in an Apple type of way so our customers get a wow factor when dealing with us. We are working to (see) how we automate and how we digitise it,” Mr O’Sullivan said.
The project, however, will come with huge risks and Optus management will be watching closely to ensure it does not follow Telstra’s botched rollout of its multi-billion-dollar Siebel billing system, which suffered regular crashes and led to case of double billing when first implemented.
Telstra’s technology transformation ultimately blew its budget by more than $1 billion, and caused problems for staff who had to deal with frequent software crashes and error provisioning.
Like Optus, Telstra’s IT transformation was designed to simplify its system architecture and product platform to improve customer experience. But in reality, deadlines slipped, costs increased and the platform did not deliver the full scope of what was expected.
Optus’s IT overhaul will face similar risks as the telco looks to decommission old billing systems and hundreds of legacy mobile and broadband plans that are no longer sold in the market.
“These projects are easy to talk about but they are a nightmare to execute,” said an Optus source with knowledge of the project but who asked to remain anonymous.
“There’s always a big risk with these projects that as you shut down legacy systems you might leave customers without service. This will be one of Optus’s top three operational risks over the next five years.”
The BCC project is part of Optus’s “Future Back” strategy, a plan to elevate the telco as the best customer service company in the nation. The Future Back strategy is supported by three pillars: the transformation of its back end IT systems; improved customer service; and moves to more subscription-based pricing plans for its services.
Telstra v SingTel: how numbers add up
PUBLISHED: 8 HOURS 16 MINUTES AGO | UPDATE: 3 HOURS 36 MINUTES AGO
With the increasing digitisation of modern life, and the resulting demand for connectivity and data, the telecommunications industry has delivered good growth over the past 12 months, outperforming most sectors.
However, some people query whether this growth is sustainable. With this in mind, Smart Investor has focused on two of Australia’s biggest telcos, Telstra (TLS) and Singapore Telecommunications (SGT), owner of Optus, to determine which offers the best investment case.
COMPANY OVERVIEWS
Telstra is a diversified telecommunications services provider, offering an array of services, including mobile, broadband and fixed-line, primarily in Australia. As a former government-owned enterprise, it was heir to comprehensive infrastructure and the most extensive network coverage of the domestic players. It is still the number one provider in many of its offerings.
With a market cap of about $67 billion, the company has invested heavily in improving its already dominant network capabilities, and has seen great recent growth in its mobile phone business as consumers flock to hand-held devices. Its stable dividend policy ensures it remains beloved by yield-seekers.
SingTel, on the other hand, is the national telecommunications carrier in Singapore and operates in the Australian market under the Optus brand. SingTel offers a similar consumer services range in Australia, including mobile, broadband and data. Optus also offers enterprise services, though it probably provides a less comprehensive suite than Telstra’s offering. SingTel trades with a market capitalisation of $52 billion, including its Singapore listing.
SingTel has made a big investment in its network in Australia to try to match coverage capability with its larger competitor and to address Telstra’s growing share in the lucrative mobile phones market.
FINANCIAL HEALTH
Telstra is a highly profitable business and generates robust cash flows from operations, resulting in a strong financial health rating from Lincoln Indicators. Telstra has demonstrated a steady financial health rating since listing in the 1990s and has been able to maintain it consistently, with its stable, healthy balance sheet.
Telstra will enter a period of investment as the company prepares for the final decisions surrounding the Vertigan review and NBN rollout. Nonetheless, the business remains focused on its core operations and, in our view, remains well placed to continue extracting value from its lucrative mobile, data and international businesses.
SingTel has also exhibited strength in its profits and cash flow since listing in the late ’90s. Good profitability, cash generation and a solid balance sheet have resulted in the company demonstrating a strong position of financial health for the past 10 years.
Winner: Tie. Both businesses are in strong positions and generate robust profits and cash flow, representing exposure to acceptable levels of financial risk.
MANAGEMENT ASSESSMENT
Telstra’s 2014 annual financial report was very strong. Management delivered attractive fundamental metrics, with return on assets of 16.5 per cent, return on equity of 46.5 per cent and earnings per share growth in excess of 21 per cent.
While revenue lifted only modestly by about 2.6 per cent over the previous year, the company amplified earnings by much more than its headline revenue growth. Management is doing a great job of generating returns for shareholders from the assets at the business’s disposal.
Singapore Telecommunications’ recent report was also sound, although in the major metrics it continues to lag Telstra’s record. The results show solid improvement, but don’t quite match up when compared with Telstra. SingTel exhibited slightly lower return on assets of 10.8 per cent, return on equity of 17.7 per cent and earnings per share growth of about 9 per cent, in comparison with Telstra.
This result is an improvement on the recent past, as SingTel finally turns around some earnings per share declines in the previous year. It follows a lacklustre period of performance with flat return on assets and earnings per share growth, as Telstra really dominated the mobile sphere. The flatness in top-line and mobiles revenue remains a concern for SingTel.
Winner: Telstra. It has a strong track record of growth, and management is doing a good job generating high returns on the assets of the business on behalf of shareholders.
OUTLOOK AND FORECAST
Telstra is entering a phase of consolidation, as it tries to retain mobile customers won at the expense of competitors and perceived problems with network coverage. On top of that, the quality of its network for a marginal cost difference has fuelled further growth for Telstra. Whether this advantage can be sustained remains to be seen, though management exhibits very stable and sure hands. We expect that Telstra is well placed to continue to deliver consistency, growth in earnings and therefore shareholder returns.
The company’s recent capital management exercise was welcomed, with local shareholders able to take part in franking credits amassed by the company. Telstra had tendered a buyback of shares at a 14 per cent discount to the market price.
Looking forward, its dividend yield is one of the most stable in the domestic market, with management offering two dividend increases in the past two consecutive reports. Telstra’s latest financial reports show that some momentum has been gained in terms of growth, and expectations are building that 2014-15 will be another solid year.
SingTel’s management has been struggling, with flat revenue and challenges in the main battleground for mobiles in Australia. This is likely to persist as competition intensifies. Currency trouble for its Optus business presents a risk in the near term, as the dollar falls. A rapid turnaround of Optus’s fortunes will help SingTel’s performance, but the upcoming report catalyst will present an update on whether increased brand visibility and advertising will stimulate revenue.
Winner: Telstra. It has recently divested its highly performing Hong Kong mobiles business so future growth won’t be as easy to come by. However, management’s commitment to single-digit growth in earnings before interest, taxes, depreciation, and amortisation (EBITDA) is potentially underplaying its hand. Singapore Telecommunications, however, is now trying to revive a flat business and turn around a soft Optus business. Both companies have relatively stable dividend outlooks, with Telstra also edging out SingTel in this regard.
SHARE PRICE VALUE
Telstra is considered a strong income prospect and is covered by Lincoln Indicators as a “Star Income Stock” (defined as a business that in Lincoln’s view has a sustainable earnings and income outlook in the next 12 months). With the current low-yield environment, the stock’s price has been well supported by investors who are seeking more income from a relatively stable large-cap stock. As at October 17, Telstra traded at $5.38, a 2.48 per cent premium to our $5.25 Lincoln valuation and a 4.09 per cent discount to the consensus target of $5.60.
Telstra’s price-earnings ratio is slightly under 14 times based on 2013-14 earnings and appears attractive when compared with an industry average of 17.0 times (2013-14 earnings). We calculate the company’s forecast P/E ratio as 16.2 times, based on expectations for earnings per share growth in the coming 12 months.
SingTel’s price-earnings ratio is 16.5 times, based on 2013-14 earnings and is only slightly under the industry average of 16.8 times (2013-14 earnings at March 2014). A forecast P/E of 15.6 times better reflects the challenges facing the company, with Telstra rightly commanding a slight premium to forward earnings, given its much stronger recent performance.
Winner: Telstra. We believe that Telstra’s ability to maintain single-digit EBITDA growth is far more sustainable over the coming year in light of its recent track record of performance. Neither company is a screaming “buy” on the basis of value investing, but Telstra might offer the promise of a slightly better return.
TOTAL RETURNS
Telstra has delivered total returns including dividends of 15.31 per cent over the past year, when compared with the 9.89 per cent from SingTel. Over three years, Telstra returned 28.23 per cent a year in total returns to investors, while SingTel returned 15.60 per cent a year.
Over a five-year horizon, Telstra has again performed better, having returned 20.58 per cent a year, while SingTel returned 13.16 per cent annually.
Telstra and SingTel are companies that suit investors focused on income and capital maintenance, as they are focused on providing investors with yields from the profits the businesses generate. In addition, Telstra offers a fully franked dividend with franking credits which Singapore Telecommunications cannot.
Telstra announced a fully franked 29.5¢ a share in dividends in 2013-14 and is forecast to pay a similar amount in 2014-15. This puts the company on a dividend yield of 5.48 per cent. Until the past year, Telstra had paid a fully franked 28.0¢ a share dividend. The recent dividend increase is a welcome break from this routine.
SingTel paid a 14.7¢ unfranked dividend in 2013-14, placing it on a dividend yield of 4.48 per cent. Because the company mostly operates out of Singapore, it doesn’t pay enough Australian tax to be able to offer franking credits, making it less attractive.
Telstra’s longer-term performance has been sound, generating strong capital appreciation for shareholders over the long term. Investors with an appetite for more risk might see the potential for an Optus turnaround as a reason to invest in SingTel.
Winner: Telstra. It has exhibited stronger capital and income returns over the one-year, three-year and five-year investment horizons. For investors after income, both companies offer reasonable yields, but Telstra edges out SingTel with a stronger gross dividend yield and franking credits to benefit most investors.
VERDICT
Telecommunications services providers are profitable and stable businesses, but competition is tough and is expected to ramp up in the next 12 months, especially in mobiles, data and broadband, before the final cost-benefit analysis of the NBN.
Telstra has the benefit of incumbency as the leader in many service provisions, with the accompanying network effect of strong infrastructure coverage and capability. To an extent, its competitors are playing catch-up when it comes to network investment and perceptions as to the quality of its coverage.
Telstra management is positively trying to extract value from its core operations, while Singapore Telecommunications has to contend with flat revenue and volatile earnings growth. The company is trying to increase visibility and turn around a history of weak operating growth to derive greater returns for shareholders.
Overall, Telstra is the clear winner for investors looking to derive some income while maintaining capital. It is a successful behemoth exhibiting strong return metrics with a sniff of growth to complement the primary purpose for investing in Telstra: income.
The Australian Financial Review
SingTel is beefing up the cloud offering in Australia...
SingTel broadens enterprise cloud capabilities with A$13 million acquisition of Ensyst
SINGAPORE (Dec 19): SingTel ( Financial Dashboard) said it has acquired Australia-based Ensyst, an IT professional and managed services company, for A$13 million ($14 million).
Established in 2001, Ensyst provides cloud-based professional and managed services in Australia.
Ensyst’s areas of expertise include cloud architecture, cloud migration and unified communications systems.
It has an extensive customer base across financial services, education, government, health, construction and mining, manufacturing and services sectors.
It has offices in Sydney and Melbourne with 80 employees.
While the deal is still subject to approvals, SingTel said acquisition will be paid in cash.
SingTel closed 1.02% lower at $3.87 yesterday.
http://www.theedgemarkets.com/sg/article...ion-ensyst
Advance 4G has just deployed, and 5G is coming.
Singtel recent re-branding isn't just marketing, I do see real changes that benefit its customers...
(not vested)
Singtel, Ericsson to study how 5G can be used for consumers and businesses
SINGAPORE — With 5G speeds estimated to be between 20 to 30 times faster than current 4G speeds — based on lab trials — a self-driving car could be made even safer as it could brake faster, while a 400 mbps movie could download in six seconds as compared to one minute now.
In a step closer to Singapore’s vision of a smart nation, Singtel has sign a Memorandum of Understanding (MoU) with Ericsson to study the future of 5G networks and the possible applications for consumers and enterprises.
Singtel’s Group Chief Technology Officer Tay Soo Meng said that commercial trials will start around 2020.
...
http://www.todayonline.com/singapore/sin...businesses
It is a gradual shift of licensing model from content providers. Singtel has leveraged on its regional networks, to win the OTT game. May be the reason for recent surge in share price...
Singtel in video joint venture with Sony Pictures, Warner Bros
SINGAPORE (Jan 30): Singtel ( Financial Dashboard) has formed a joint venture with Sony Pictures Television and Warner Bros Entertainment to offer movies and TV series in Asia.
The start-up, called HOOQ, will enable customers to download and stream content on their smartphones or other preferred platforms, the telco said today in a joint statement with the two media groups.
The service will be rolled out in SingTel's Asian markets, including Indonesia, the Philippines, Thailand and India, this quarter.
More than 10,000 movies and TV series will be available when the service is launched.
Peter G. Bithos, a former chief operating adviser at Singtel's Philippine associate Globe Telecom, has been named CEO of HOOQ, which will have a share capital of US$27.6 million ($36.4 million).
Singtel has a 65% stake in HOOQ, while Sony Pictures and Warner Bros each owns 17.5%.
“Demand for OTT (over-the-top) video has been growing and is poised for higher growth in these markets, fuelled by better data networks and the growing supply of affordable devices," Jonathan Auerbach, CEO of SingTel's digital business, said in the statement.
"This is a more than S$1-billion opportunity in our markets," he added.
http://www.theedgemarkets.com/sg/article...arner-bros
Singtel has been doing right things lately, either for its Singapore, Australia, and global businesses...
Singtel to buy US cyber security firm Trustwave for S$1.1 billion
SINGAPORE — Singtel said today (April 8) it will buy a 98 per cent stake in US-based cyber security firm Trustwave for US$810 million (S$1.1 billion) in a bid to strengthen its presence in this area.
The deal will give Singtel control of Trustwave’s businesses in North America, Europe and Asia Pacific, the telco said in a statement.
The remaining 2 per cent stake in Trustwave will be held by its chairman and chief executive Robert J McCullen. Singtel also said the cyber security firm will continue to operate as a standalone business unit post-acquisition.
Singtel’s chief executive Chua Sock Koong said the acquisition will allow the telco to “capture global opportunities in the cyber security space.”
http://www.todayonline.com/singapore/sin...11-billion
(08-04-2015, 09:51 AM)CityFarmer Wrote: [ -> ]Singtel has been doing right things lately, either for its Singapore, Australia, and global businesses...
Singtel to buy US cyber security firm Trustwave for S$1.1 billion
SINGAPORE — Singtel said today (April 8) it will buy a 98 per cent stake in US-based cyber security firm Trustwave for US$810 million (S$1.1 billion) in a bid to strengthen its presence in this area.
The deal will give Singtel control of Trustwave’s businesses in North America, Europe and Asia Pacific, the telco said in a statement.
The remaining 2 per cent stake in Trustwave will be held by its chairman and chief executive Robert J McCullen. Singtel also said the cyber security firm will continue to operate as a standalone business unit post-acquisition.
Singtel’s chief executive Chua Sock Koong said the acquisition will allow the telco to “capture global opportunities in the cyber security space.”
http://www.todayonline.com/singapore/sin...11-billion
Yes indeed. Like u mentioned before, Singtel does have a larger vision than Starhub and M1.
IMO, Singtel is becoming less of a pure telco play.
(08-04-2015, 11:11 PM)Dividend Warrior Wrote: [ -> ] (08-04-2015, 09:51 AM)CityFarmer Wrote: [ -> ]Singtel has been doing right things lately, either for its Singapore, Australia, and global businesses...
Singtel to buy US cyber security firm Trustwave for S$1.1 billion
SINGAPORE — Singtel said today (April 8) it will buy a 98 per cent stake in US-based cyber security firm Trustwave for US$810 million (S$1.1 billion) in a bid to strengthen its presence in this area.
The deal will give Singtel control of Trustwave’s businesses in North America, Europe and Asia Pacific, the telco said in a statement.
The remaining 2 per cent stake in Trustwave will be held by its chairman and chief executive Robert J McCullen. Singtel also said the cyber security firm will continue to operate as a standalone business unit post-acquisition.
Singtel’s chief executive Chua Sock Koong said the acquisition will allow the telco to “capture global opportunities in the cyber security space.”
http://www.todayonline.com/singapore/sin...11-billion
Yes indeed. Like u mentioned before, Singtel does have a larger vision than Starhub and M1.
IMO, Singtel is becoming less of a pure telco play.
Singtel is a global telco play, while Starhub and M1 are local telco plays. The battle fields are different.
(not vested)