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  • Singapore Telecom Projects Slower Growth for 1998/99
  • December 1, 1998 (SINGAPORE) -- Singapore Telecommunications Ltd., which will lose its monopoly on basic services by April 2000, said that the economic slowdown has stalled its growth but that it will implement various cost-cutting measures to generate steady profits.
    In announcing the company's first half results, chairman Koh Boon Hwee said that the slowing of its international telephone business has caused a "significant slowdown" in the group's growth.

    The government-linked company said its net profit grew 3.4 percent to S$997.6 million (US$602 million) for the six months ended September. Group revenues grew 4.6 percent to S$2.49 billion in the interim period. SingTel typically registered annual profit growth of about 12 percent-13 percent in recent years.

    "It is still our goal for the full-year results to be flat or just slightly negative," Koh said.

    The executives said that a sharp rise was seen in contributions from the company's key European subsidiary Belgacom. Income derived from associated companies amounted to S$126.7 million, compared with a previous loss of S$48.7 million.

    The Belgacom investment generated S$64.9 million in profits, Koh said. Also, the company's investment in Globe Telecom of the Philippines was profitable, but the company declined to release further details.

    However, other regional investments saw sales decline due to the economic slump.

    "As a result of the Asian economic turmoil, investment losses were incurred and part of the group's short-term regional equity investments were liquidated at a loss," Koh noted.

    Also, the company said it made a provision of S$53.3 million for certain long-term investments. The company has operations in China and Indonesia, among other countries.

    Company executives said the mobile communications business, which accounted for 18 percent of group sales, registered a marginal drop in sales per subscriber. The number of subscribers added every month fell to 50,000, from an earlier level of 110,000, bringing the total customer base to 695,000 at the end of September, the company said.

    Looking ahead, SingTel said its international direct dialing rate cuts announced recently will have a negative impact on the company's results in the year through March and later.

    As part of the government's S$10.5 billion cost-cutting package, SingTel said IDD rates would be reduced by as much as 40 percent from Jan. 1. The cuts apply to calls to Singapore's major trading partners including Indonesia, Hong Kong, China, Japan, Australia, the U.K. and the United States.

    SingTel said its rate reductions as well as volume and term discounts will result in customer savings of S$340 million a year.

    "The downward trend in the key business drivers, specifically international telephone traffic, new mobile subscribers and business lines, is expected to continue in view of the poor economic outlook in Singapore and the region," the company said.

    SingTel expects the results for the second half to be weaker despite the larger contributions from overseas investments.

    (Joseph Rajendran, Asia BizTech Correspondent)

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    Updated: Mon Nov 30 17:23:24 1998 PDT