Singtel warns of loss after $2.3B in writedowns

Singtel has forecast a second-half loss after announcing 3.1 billion Singapore dollars (US$2.3 billion) in write-downs, mostly relating to its Australian unit, Optus.

But a network sharing deal struck by Optus with TPG Telecom will help offset the impact, stipulating net payments to Optus of 1.17 billion Australian dollars (US$768 million) over 11 years.

News of the impairment provisions drove down the Singtel stock by 2.49% on the Singapore exchange Monday. Singtel said the biggest impairment provision was a SG$2 billion ($1.47 billion) goodwill writedown against Optus, whose recovery value "was assessed to be below its carrying value."

"This reflected a range of factors including weaker prospects in the enterprise market, increased cost of capital and the softer macroeconomic outlook in Australia," it said in a filing.

The news also reflects Optus's reputation-shredding recent past, having suffered what has been called one of Australia's biggest ever customer data breaches, as well as a massive nationwide network outage in the space of a little more than a year.

The incidents led to a surge in churn and the departure of CEO Kelly Bayer Rosmarin. Optus has been headed by interim CEO Michael Venter since November while an executive search is underway.

Steep revenue decline

Singtel also recorded a AU$470 million ($308 million) non-cash impairment on Optus's fixed access network assets in its enterprise business, which had been reporting steep declines in revenue due to churn and price erosion.

It wrote down a further SG$340 million ($249.8 million) against its Asia Pacific cyber security business, which had been hit by weaker corporate spending, and another SG$280 million ($205.8 million) for the Australian arm of IT services NCS due to the higher cost of capital.

Singtel said the impairments would not impact its dividend and that underlying net profit for the year ended March 31 was on track.

The network sharing deal with TPG comes nearly a year after TPG's earlier attempt at a similar scheme with Telstra were struck down by a court last year.

Under the new deal, TPG will gain access to 2,444 Optus mobile sites in regional Australia, while Optus will license some of TPG's spectrum.

TPG said the partnership would extend its 4G coverage from around 400,000 square km to 1 million square km, reaching 98.4% of the population.

It said the new network sharing scheme would likely come into effect next year, subject to regulatory approval. TPG enjoyed a 5.3% share price gain on news of the deal.