Maybank Securities expects Singapore telco&rsquo s stock to remain range-bound, despite potential setbacks

 

[SINGAPORE] A string of crises encountered by Singtel&rsquo s Australian unit Optus could derail planned price hikes and increase operational costs, warned analysts.

 

The cautionary note follows a challenging week for Optus, after an emergency call outage on Sep 18 led to three deaths in Australia.

 

Adding to its woes was the A$100 million (S$84.6 million) fine it was served by the country&rsquo s federal court on Wednesday (Sep 24) for selling phones and contracts to disadvantaged consumers. 

 

This follows a string of reputational setbacks to the second-largest telco in Australia, including a similar 2023 outage &ndash for which it was fined A$12 million &ndash and a data breach in 2022, noted Bloomberg Intelligence analyst Chris Muckensturm.

 

Maybank Securities analyst Hussaini Saifee told The Business Times that Optus may encounter some near-term risks, including the inability to raise prices. He added that Australia has been seeing inflation-linked upward price adjustments every year.

 

Hussaini said that another risk Optus might face is rising capital and operating expenditure, since it has to invest more in network resiliency and redundancy as well as security.

 

Muckensturm noted that the probe of Optus&rsquo network outage might weaken turnaround efforts and keep Singtel from reaching its &ldquo high-single-digit&rdquo earnings before interest and tax growth target this year.

 

She added that Optus will now face the risk of losing subscribers. 

 

Hussaini also noted that Optus&rsquo brand reputation will take a hit, since the company has had more frequent outage issues. The Sep 18 disruption might create bigger concerns, since it involved multiple fatalities.

 

Muckensturm said the outage might offset average revenue per user gains from rational pricing, and could raise compliance costs as Singtel leans on Optus to achieve its ST28 plan.

 

Launched in 2024, the ST28 plan refers to Singtel&rsquo s new initiative which emphasises active capital management with the aim of delivering continued growth and even higher dividends.

 

Despite these potential setbacks, Hussaini expects Singtel&rsquo s stock to remain &ldquo range-bound&rdquo .

 

&ldquo Australia only accounts for approximately 17 per cent of Singtel&rsquo s sum-of-the-parts, while other businesses and associates are unaffected,&rdquo he said.

 

He added that the ongoing S$2 billion buyback programme also provides downside protection.

 

In a Maybank Securities report on Wednesday, Hussaini said: &ldquo (Singtel) should also benefit from domestic consolidation while leveraging multiple structural tailwinds across its data centre and artificial intelligence-as-a-service units.&rdquo

 

He maintained a &ldquo buy&rdquo call on Singtel with a target price of S$4.75.

 

All eyes on Australia

Hussaini said that investors should be watching out for the regulatory outcomes in Australia. Singtel group chief executive officer Yuen Kuan Moon will be arriving in Australia on Sep 29 for an Optus board meeting, noted the Australian Financial Review.

 

The Australian Communications Minister Anika Wells also summoned Singtel to a meeting following the fatal outage.

 

Hussaini added that Optus will be seeking to recover its reputation, although it will be difficult to quantify the extent of the damage incurred to its name.

 

He pointed out that investors should also take note of the execution on Optus&rsquo network investments.

The telco sold phones and contracts to over 400 such consumers, including those with mental disabilities and learning difficulties, or who were in financial hardship

 

[SINGAPORE] Australian telecommunications company Optus Mobile was served a A$100 million (S$85.1 million) fine by the country&rsquo s federal court on Wednesday (Sep 24) for selling phones and contracts to disadvantaged consumers. 

 

Justice Patrick O&rsquo Sullivan said in his ruling that the company&rsquo s conduct was &ldquo clearly unconscionable and can only be described as appalling. It is, by any measure, extremely serious&rdquo .

 

Catriona Lowe, deputy chair of the Australian Competition and Consumer Commission (ACCC), said: &ldquo Optus&rsquo conduct in this case was truly appalling, and we welcome the substantial penalty imposed by the court and the deterrence message that it will send.&rdquo  

 

Optus admitted in June to unconscionable conduct after court action brought against it by ACCC, and agreed to the fine quantum for having broken Australia&rsquo s consumer laws. 

 

The company admitted to selling phones and contracts to more than 400 disadvantaged consumers in 16 of its stores between August 2019 and July 2023.

 

ACCC said in a statement: &ldquo In many instances, the consumers did not want or need, could not use or could not afford what they were sold, and in some cases, consumers were pursued for debts resulting from these sales.&rdquo

 

Optus is a wholly-owned subsidiary of   Singtel   : Z74 -0.23% and Australia&rsquo s second-largest telco after Telstra. It is now under intense pressure after the Sep18 outages of its emergency hotline services led to at least three deaths. 

 

&lsquo Significant emotional distress and fear&rsquo  

ACCC said that many of the affected individuals were particularly vulnerable or disadvantaged in that they had mental disabilities, diminished cognitive capacity, learning difficulties, limited financial literacy, or were unemployed, or did not use English as a first language.    

 

Some of those affected were also First Nations Australians residing in remote areas of the country. 

 

Optus staff are said to have, for example, put pressure on those affected to buy large numbers of products, failed to explain relevant terms and conditions, disregarded actual Optus coverage in the areas where the buyers lived, and misled consumers on the free items included. 

 

ACCC&rsquo s Lowe said: &ldquo Many of these consumers who were vulnerable or experiencing disadvantage also experienced significant financial harm. They accrued thousands of dollars of unexpected debt, and some were pursued by debt collectors, in some instances, for years.&rdquo  

 

The company also engaged debt collectors to pursue the affected consumers, even after internal investigations had been launched into the unethical sales conduct, noted Lowe. 

 

&ldquo It is not surprising, and indeed could and should have been anticipated, that this conduct caused many of these people significant emotional distress and fear,&rdquo she said. 

 

Justice O&rsquo Sullivan added that the senior Optus management &ldquo knew or ought to have known of system failures&rdquo within the company &ndash including its chief executive officer. 

 

The current chief executive officer, Stephen Rue, was appointed in May 2024, succeeding Kelly Bayer Rosmarin, who was appointed in 2020 and stepped down in 2024 following a nation-wide service outage. 

 

In a statement, Optus said that it has &ldquo fully remediated&rdquo most of the customers identified, and that it was working with financial-counsellor services to identify and support affected customers. 

 

The company has also entered into an enforceable undertaking to &ldquo improve (its) sales practices and better support customers, particularly those who are vulnerable&rdquo .

 

In addition, it has also set up a programme to address its commitments, including making coverage and credit checks, enhancing code-of-conduct training, and changing its sales-incentive programmes.  

 

In May 2021, Telstra was fined A$50 million for engaging in similar sale tactics against more than 100 consumers. 

 

[SYDNEY] Singtel faces a fresh crisis at its Australian division Optus after the government started an investigation into an emergency call outage that resulted in multiple deaths.

 

Last week&rsquo s network failure follows an Australia-wide outage at Optus in November 2023 that affected millions of customers &ndash including some who were unable to make emergency calls. That blunder cost the job of Optus&rsquo then-boss, Kelly Bayer Rosmarin.

 

The latest incident at Australia&rsquo s second-biggest phone company, so soon after the last, now threatens the position of Rosmarin&rsquo s successor as chief executive officer, Stephen Rue. 

 

And there is potentially worse fallout to come. At a press conference on Monday (Sep 22), Australian Communications Minister Anika Wells said she will consider any required regulatory or legislative changes once the probe into Optus&rsquo botched network upgrade is complete.

 

Wells said she had spoken to Rue to express her &ldquo unbelievable disappointment that we should be here again so soon.&rdquo

 

Optus accounts for about half of Singtel&rsquo s annual revenue. 

 

Singtel shares were down 1.1 per cent in early trading at Monday&rsquo s open in Singapore, trimming the company&rsquo s market value to S$72 billion.

 

Australian Prime Minister Anthony Albanese said he would be surprised if Rue is not considering stepping down.

 

&ldquo Optus&rsquo behaviour is completely unacceptable,&rdquo Albanese told the Australian Broadcasting Corp on Monday. &ldquo Optus has obligations, as do other communications companies, and quite clearly they haven&rsquo t fulfilled the obligations that they have.&rdquo

 

A spokesperson for Optus declined to comment.

 

According to Optus, a standard network upgrade on Sep 18 led to a technical failure that impacted emergency calls in South Australia, the Northern Territory and Western Australia. Optus said it did not receive any alarms that some emergency calls were not making it through, and that three people died. 

 

The Australian Communications and Media Authority (ACMA) said on Monday that it had started an investigation into Optus&rsquo compliance with emergency call regulations.

 

&lsquo Fundamental responsibility&rsquo

&ldquo Australians must be able to contact emergency services whenever they need help,&rdquo ACMA said in a statement. &ldquo This is the most fundamental responsibility every telco provider has to the public.&rdquo

 

Phone companies must also check up on callers who made unsuccessful emergency calls during a network outage, the same rule Optus broke in 2023. Optus was fined A$12 million (S$10.2 million) for those breaches.    

 

CEO Rue said on Sunday that Optus would appoint an outside expert to lead an independent review into last week&rsquo s failure, and that the facts will be made public.

 

&ldquo We will get recommendations of what to do and I&rsquo m determined that we will implement those,&rdquo he said in a televised news conference. 

 

One of the tasks of the internal review will be to look at the effectiveness of the changes Optus put in place after the 2023 outage, he added. 

 

Optus has begun monitoring so-called triple zero call volumes and failure rates state-by-state, 24 hours a day, Rue said. It has also halted any network system changes. The company continues to investigate why it took 13 hours before it became aware of the failure, he said.

 

Rue also disclosed that as many as five calls were made to the Optus contact centre raising concerns about the triple zero service early on Sep 18, but that they hadn&rsquo t been passed on internally.

 

&ldquo This is clearly not good enough and we are implementing a compulsory escalation process following any customer reports of triple zero outages,&rdquo he said. 

On Aug 14, Singtel independent non-executive director Yong Ying-I acquired 100,000 shares at an average price of S$4.05 a share. This raised her direct interest to 310,000 shares. 

 

Her preceding acquisition was on Jun 5, with 150,000 shares bought at S$3.87 apiece. 

 

On Aug 13, Singtel posted a 14 per cent year-on-year rise in its Q1 FY2026 underlying net profit to S$686 million. The S$2.88 billion net profit for the period was boosted by exceptional gains, as well as resilient operating metrics despite currency headwinds, driven by strong contributions from subsidiaries Optus, NCS, Airtel and AIS.

 

Credit Bureau Asia

Between Aug 8 and 12, Credit Bureau Asia executive chairman and CEO Kevin Koo acquired 172,100 shares at an average price of S$1.33 apiece. This raised his total interest to 64.12 per cent from 63.97 per cent. 

 

Koo, who founded the credit information business in 1993, has been pivotal to its success and expansion. With more than 30 years of industry experience, he played a key role in shaping its growth.

 

On Aug 7, Credit Bureau Asia reported H1 FY2025 revenue of S$30.2 million, up 2 per cent from that in H1 FY2024, while net profit before tax declined 3 per cent to S$15.4 million. 

 

Despite ongoing US trade policy uncertainties, the group highlighted that it maintained a net profit margin above 50 per cent. Koo also noted back in April that, having grown organically since the 1990s, the company continues to explore strategic acquisitions across the Asia-Pacific, in areas aligned with its core business. 

 

He added that Credit Bureau Asia is actively evaluating several opportunities with a prudent approach, focusing only on deals that offer strong long-term value at the right price.

 

SINGAPORE - Telco consolidation made headlines last week, with StarHub fully acquiring MyRepublic Broadband and Keppel selling M1&rsquo s telecoms operations.

 

Keppel is divesting its 83.9 per cent stake in M1&rsquo s telecoms business to Simba Telecom, a unit of Australia-listed company Tuas, in a $1.43 billion deal.

 

Shares of the global asset manager and operator fell after the Aug 11 announcement, with some observers noting that it booked an accounting loss, or loss on paper, for the sale. The stock declined 1.52 per cent from last week&rsquo s close to $8.45 on Aug 15.

 

The estimated $222 million accounting loss for Keppel stems from goodwill and intangible assets tied to the telco business. Keppel first invested in M1 in 1994 and was later involved in its privatisation in 2019.

 

At a media briefing, Keppel chief executive Loh Chin Hua said that the company has been making an effort to divest non-core assets.

 

&ldquo Our narrative is that we&rsquo re going to create an asset-light &lsquo New Keppel&rsquo . This particular business is no longer core to us. Being able to monetise it is probably the most important point,&rdquo he added.

 

The other telco consolidation came on Aug 12, the day after the Keppel announcement.

 

StarHub, which already held a 50.1 per cent stake in MyRepublic Broadband, said it acquired the remaining 49.9 per cent share in a roughly $105 million deal, in a move aimed at strengthening StarHub&rsquo s strategy in the broadband market.

 

StarHub CEO Nikhil Eapen said: &ldquo We&rsquo re in a phase of consolidation, and we&rsquo re not just watching it unfold, we&rsquo re shaping it.&rdquo

 

He added: &ldquo As the market shifts, scale, quality and resilience matter more than ever. Smaller players may find it harder to sustain, especially without robust platforms.&rdquo

 

Singapore telcos post mixed results

Analysts noted that the industry consolidation could benefit Singapore&rsquo s two listed telcos &ndash StarHub and Singtel &ndash by helping to ease intense price competition in an overcrowded market.

 

For StarHub, the deal also comes amid weakening performance.

 

Singapore&rsquo s second-largest telco on Aug 14 posted a 41.7 per cent year-on-year fall in first-half earnings to $47.9 million.

 

The lower profit was partly due to a one-off forfeiture payment of $14.1 million for the return of certain spectrum rights.

 

Excluding this sum, net profit rose to $62 million, though this still works out to a 23 per cent drop year on year.

 

Mr Eapen said the telco intends &ldquo to remain aggressive across brands and segments in the domestic consumer market to position for eventual market recovery&rdquo .

 

StarHub shares closed at $1.18 on Aug 15, down 3.28 per cent from last week&rsquo s close.

 

In contrast, Singtel ended the week higher after an initial fall following Keppel&rsquo s Aug 11 announcement.

 

Its stock rose 3 per cent from Aug 8 to close at $4.10 on Aug 15.

 

The telco on Aug 13 announced that its underlying first-quarter net profit rose 13.9 per cent year on year to $686 million, driven by higher earnings from its Australian unit Optus and contributions from regional associates, including India&rsquo s Bharti Airtel.

 

Singtel CEO Yuen Kuan Moon expects the telecom operator&rsquo s data centre business to be a &ldquo bright spot&rdquo in the current financial year as its data centres in Singapore and Thailand near completion.

 

Shares of real estate-related companies mostly rose last week on robust earnings.

 

Real estate services provider PropNex jumped more than 30 per cent in the past week to $2.03, while its peer Apac Realty was up 13 per cent from Aug 8 to close at 72 cents on Aug 15, driven by higher home sales.

 

PropNex on Aug 12 posted record net profit of $42.3 million for its first half-year, a 122.4 per cent increase from the year before and surpassing analysts&rsquo estimates. Apac Realty&rsquo s net profit more than doubled to $11.3 million in the same period, the company said on Aug 8.

 

Analysts said that sales momentum could remain strong, supported by a pipeline of upcoming launches.

 

Developer City Developments Limited (CDL) was up 6.3 per cent to $6.73 and UOL rose more than 3 per cent over the week to close at $7.27. CDL&rsquo s first-half net income rose 3.9 per cent to $91.2 million, with revenue up 8 per cent to $1.69 billion, driven by the fully sold executive condominium project Copen Grand.

 

A special interim dividend of three cents per share was proposed, up from the two cents it paid out a year earlier.

 

CEO Sherman Kwek told a briefing on Aug 13 that CDL will try to pay one-third of its net income as dividends every year and reward shareholders when divestments are made.

 

Meanwhile, Pan Pacific and Parkroyal owner UOL&rsquo s first-half net profit increased 58 per cent to $205.5 million due to strong performance from property development and property investments, and other gains from the disposal of Parkroyal Yangon, the firm said on Aug 13.

 

CapitaLand Investment (CLI) shares fell 2.5 per cent from Aug 8, closing at $2.70 on Aug 15, on the back of weaker earnings.

 

First-half earnings dropped 13 per cent, attributed to loss of contributions from divested assets, lower fund performance and transaction fees, and absence of a one-off tax write-back.

 

CLI also attributed part of its performance to the downturn in China, where it has 18 retail and commercial properties.

 

Group CEO Lee Chee Koon urged investors to be patient with the firm&rsquo s investment returns, hinting at an improved performance in the second half of 2025 when SC Capital and Wingate are expected to deliver stronger returns.

Other market movers

Shares of CNMC Goldmine surged more than 18 per cent over last week to close at a record 64.5 cents.

 

The gold mining company posted strong earnings of US$15.8 million (S$20.3 million) for the first half, up 256.1 per cent year on year, driven by higher production and surging gold prices.

 

Investment manager Yangzijiang Financial was up 9.3 per cent to $1.06, as first-half net profit increased 28 per cent to $137.7 million. This was largely attributed to the reversal of credit loss allowances, increased contributions from maritime joint ventures and net foreign exchange gains.

 

What to look out for this week

On Aug 18, Singapore will release its non-oil domestic exports data for July. DBS chief economist Taimur Baig forecasts a 6 per cent year-on-year contraction, marking a reversal from June&rsquo s growth as an earlier boost from the front-loading of orders ahead of US tariff hikes tapers off.

 

Sats is scheduled to release its business update for the first quarter ended June 30 on Aug 20, after the market closes.

 

Boosted by a one-off gain, Singtel has reported earnings of $2.88 billion for its 1QFY2026, up 319.7% y-o-y.

 

If the exceptional gains of $2.2 billion from the partial trimming of its stake in Airtel and the merger of two related entities in Thailand are excluded, Singtel' s underlying net profit was up 16.7% y-o-y to $686 million.

 

Optus, the Australia unit, and NCS, the regional IT services subsidiary, realised further EBIT improvements year on year. Its Thailand and India-based associates AIS and Airtel lifted regional associate contributions too.

 

Operating revenue for the same quarter ended June was down 0.6% y-o-y to $3.39 billion, but up 2.9% in constant currency terms.

 

Singtel derives a big chunk of its revenue from Optus. The Australian dollar depreciated by 7% in the period. Fluctuations in other regional currencies affected the numbers reported in the Singdollar as well.

 

Group CEO Yuen Kuan Moon calls the 1QFY2026 numbers a " strong set" of results, despite ongoing macroeconomic uncertainties and currency fluctuations.

 

In line with Singtel' s ongoing capital recycling strategy, it has also trimmed a 1.2% stake in Airtel, taking advantage of a buoyant stock market in India.

 

" With our momentum in business performance and capital recycling, we are on track to deliver on our goals and accelerate growth in the second year of our Singtel28 plan.

 

This current FY2026, Yuen expects the company' s data centre business to be another bright spot with the completion of Nxera&rsquo s data centres in Thailand and Singapore.

 

" We remain focused on solid execution and operating discipline to drive sustainable growth," he says.