Singapore Telecommunications Ltd. (Z74.SG) Tuesday said its fiscal third-quarter net profit fell 16% due to adverse foreign exchange rates and deteriorating market conditions.

SingTel, in a filing with the Singapore Exchange, said net profit for the three months ended Dec. 31 was S$798.9 million, compared with S$952.2 million a year earlier. But the figure was better than the S$774 million tipped by a Dow Jones poll of eight analysts.

"The global economic slowdown has started to impact the group," said SingTel Chief Executive Chua Sock Koong in a statement. "With the current economic uncertainties, the group will continue to be vigilant and disciplined in our business decisions and leverage our vast experience to improve business performance."

Chua said at a press briefing that the company would make further cost cuts through measures like pay reduction if conditions worsen, but reiterated that jobs cuts would be a last resort.

"Roughly 25% of our compensation is in the form of variable bonus, which is tied to performance, which lends room for us to make adjustments," she said.

Asked if SingTel was considering a rights issue to boost it capital base, Chief Executive Officer Jeann Low said the firm's cash position remains strong, without elaborating.

SingTel said the strength of the Singapore dollar against the Australian dollar and major regional currencies weighed on its results. The Australian dollar's depreciation will negatively impact the company's consolidated revenue and operational earnings before interest, tax, depreciation and amortization for the fiscal year to March 31, it added.

SingTel, Southeast Asia's largest telecommunications firm by revenue, holds significant stakes in six foreign mobile operators: India's Bharti Airtel Ltd. (532453.BY), Indonesia's PT Telkomsel, Thailand's Advanced Info Service PCL (ADVANC.TH), Pakistan's Warid Telecom, the Philippines' Globe Telecom Inc. (GLO.PH) and Pacific Bangladesh Telecom. The company operates in Singapore and in Australia through its unit, Optus.

Pretax earnings from the regional mobile associates, a key driver for SingTel's bottomline growth in recent years, fell 27.4% to S$462 million from S$636 million a year earlier due to the stronger Singapore dollar, weaker performance from Telkomsel, Globe and Warid, and foreign-exchange related charges.

Net profit from Optus was flat at A$143 million while operating revenue rose 10.2% from a year earlier to about A$2.20 billion from about A$2.0 billion. But in Singapore dollar terms, net profit from the unit fell 22.7% to S$142 million from S$184 million while operating revenue fell 14.9% to S$2.19 billion from S$2.58 billion.

SingTel's overall operating revenue for the quarter fell 3.2% to S$3.70 billion, compared with S$3.83 billion a year earlier. The Dow Jones poll expected S$3.34 billion in revenue for the quarter.

CIMB said in a report that SingTel's aggressive subscriber acquisition efforts in previous quarters are "bearing fruits," after noting stronger-than-expected performance from Singapore and Australia.

The company reiterated its forecasts made in the second quarter, predicting that operating revenue for its Singapore business, excluding the impact from the recently acquired Singapore Computer Systems Ltd., will grow at mid single-digit level for the financial year and EBITDA margin is expected to be about 40%. Operating revenue for Optus will grow at a single-digit level for the year.

"SingTel maintained its guidance, which we view positively as it signals no further deterioration in outlook," CIMB said.

Still Looking For Acquisitions

Analysts have said that SingTel management is under pressure to make an acquisition that will boost its earnings growth as the economic slowdown takes its toll and with its mobile associates facing increased competition in their markets.

SingTel said overall pretax earnings contributions from the mobile associates for the fiscal year will be lower than that of the previous year. Pretax earnings from the companies in the three quarters of the fiscal year fell 22.7% to S$1.45 billion from S$1.88 billion a year earlier.

SingTel executives reiterated during the press briefing that that the company remains on the lookout.

"If there are good opportunities, we will be prepared to look at them, but clearly we are not in a big rush to make acquisitions given the global uncertainties," Chua said after noting that SingTel's strong balance sheet puts it in a good position for buying opportunities.

People familiar with the situation have said that SingTel has been in discussions about acquiring a stake in Vietnam's MobiFone.

Executives also said the company would consider assisting its associates in acquisitions of competitors and increasing its stake in current associates.

Australia Market Consolidation Welcome

CEO Chua told reporters that a decision Monday by Vodafone Group PLC (VOD) and Hutchison Whampoa Ltd. (0013.HK) to merge their Australian mobile telecommunications businesses in an equal joint venture means more competition for Optus "but is not something to worry about."

"Clearly any forms of market consolidation that leads to a more rational industry structure is welcome by all players, Optus included," she said. "During the transition to the merged entity we would expect that there be some level of uncertainty...and Optus will certainly capitalize on this."

-By Se Young Lee, Dow Jones Newswires; 65 6415 4155; vincent.lee@dowjones.com

(Costas Paris in Singapore contributed to this report.)

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