Singtel Announced Shocking S$3.1 Billion Impairment Losses!

On 29th April 2024 (Monday) before trading commences, Singtel Group just announced that it will be taking up impairment provision of approximately S$3.1 billion for its 2nd half financial year ending 31 March 2024. While these non-cash impairment does not impact current cashflow or upcoming dividends, a huge chuck of net assets per share has been wiped off. Previous CAPEX and investments have declined in valuation due to drop in fixed carriage revenue generation and the associated plunge in future cashflow. 

1. Optus main culprit

(i) The Optus Enterprise segment has been badly hit due to the prevailing Australian market. As a result, Optus reported steep declines in its fixed carriage revenue. It will be taking up <S$470Mil> impairment for its Enterprise fixed assets.

(ii) The plunge here further triggered Singtel impairment review of its goodwill in Optus. Goodwill refers to the excess over the book value of Optus during its acquisition back in 2001. Coupled with higher discount rate and softer macroeconomic outlook in Australia, a whopping <S$2 billion> is being wiped off here.

2. Other impairment hits

(iii) Singtel also took another <S$340Mil> impairment for goodwill of its Asia Pacific cyber security business due to lower corporate spending in the region.

(iv). Singtel will also take a hit of <S$280Mil> of goodwill impairment provision for its business vested in NCS Australia.

3. Some good news amidst the impairment losses shockwave-Network sharing deal with TPG

Optus announced the good news that Optus has inked an agreement with Australia TPG Telecom on network sharing by providing TPG with access to its regional radio network.

The non-exclusive network sharing agreement has an initial term of 11 years and include an option for TPG Telecom to extend the agreement for a further 5 years. Optus will receive +A$1.6 billion (S$1.4 billion) over the duration of the 11 years term.

Summary

Due to the above, Singtel will be announcing a rare loss for its 2nd half of its financial year ending 31 March 2024. Nevertheless, Singtel expects itself to be overall profitable for the whole financial year performance taking into account its 1st half results.