8 November 2002

SingTel proves a quaint little learner

Analysis by Eric Ellis

"OUR international investments have transformed SingTel's financial profile." So said Singapore Telecommunications executive president Lee Hsien Yang yesterday.
And rarely has Brigadier General Lee, youngest son of Singapore's political strongman Lee Kuan Yew, uttered a truer word.
Twenty months ago, before SingTel began its $20 billion Australia-led expansion, SingTel rang in earnings of $S2.3 billion ($2.5 billion).
There was little debt, the telecom sector was roaring and SingTel's price was touching $3.
Today, its major offshore investment, profitless Optus, struggles to justify the $15 billion SingTel paid for it.
In India, Bharti Televentures, the private carrier SingTel-Optus invested $1.2 billion in, will be hard pressed to turn a profit before 2004.
And, as for the $2.5 billion invested in Indonesia's Telkomsel, who knows where Indonesia is heading after Bali. SingTel now owes around $S11 billion.
And yesterday's second-quarter net profit of $S415 million was down 25 per cent on a year ago.
With the $377 million of first-quarter profits, that suggests its 2002-03 profit will be around $S1.4 billion to $S1.5 billion.
And what about that share price? Its trading about 55 per cent lower than its 2001 high.
All of which would seem to prove the adage of one of Singapore Inc's most trusted hands, Koh Boon Hwee, who was SingTel chairman when it did the Optus deal and now steers Singapore Airlines.
When asked about SingTel's poor performance, he said: "I would never let the share price be the determinant of the company's strategy." Remarks like that betray the role companies play in Singapore, where the Government controls as much as 60 per cent of the economy. Yes, Singapore's leaders would like their charges to make money.
But they also want coddled companies offshore and out of the tight-knit economy, where profits have been virtually guaranteed.
Years of control have sapped the collective ability to think outside the business box.
That is why, as the world telecoms sector has tanked, SingTel has been unique as standing in the global market picking up stray assets. For Singapore, offshore investments like Optus bear virtual trainer wheels for Singapore's cadet entrepreneurs as they are exhorted to go offshore and multiply.
If they are able.
But if you are an Optus shareholder you probably didn't realise when you were exchanging your stock for SingTel scrip you were part of a national experiment.