Within the financial year ending March 2024, Singapore’s Singtel posted a internet revenue of round $589 million at present change charges. This can be a 64 p.c lower from the earlier monetary yr, when internet revenue was reported at $1.65 billion. Singtel is majority-owned by Singaporean sovereign wealth fund Temasek, and it’s a sprawling telecommunications conglomerate with operations spanning the area.
Singtel is attention-grabbing as a result of it typifies Singapore’s explicit and extremely profitable fashion of state-capitalist improvement. With state help, together with a monopoly on the home telecommunications market, by the Nineteen Nineties Singtel had grown into a big firm with substantial monetary assets. The federal government ended the monopoly in 2000, however by then Singtel had a sufficiently sturdy steadiness sheet to pivot towards worldwide acquisitions and was making inroads into numerous abroad markets. That is attribute of many huge Singaporean corporations, which initially grew quickly because of state help after which started reinvesting their collected surpluses overseas.
Along with being the biggest telecom supplier in Singapore, Singtel presently owns Australian telco Optus and holds substantial possession positions in Indonesia’s Telkomsel, the Philippines’ Globe Telecom, Thailand’s AIS, and India’s Airtel. It’s a large money generator for shareholders, together with Temasek. Regardless that the agency booked a decrease internet revenue in its most up-to-date monetary assertion, that’s principally a matter of accounting. Money generated from operations, together with dividends obtained from associates, was nonetheless $3.5 billion.
So what occurred final yr? The principle drag on Singtel’s earnings is coming from its abroad holdings. Whereas its related corporations within the Philippines, Indonesia, and Thailand proceed to pay regular dividends, Airtel Africa was liable for a big truthful worth loss in 2023. However the biggest hit got here from their wholly-owned Australian subsidiary, Optus, which accounted for a one-time non-cash impairment of almost $1.5 billion. This was partially offset by beneficial properties in different areas, however nonetheless resulted in a complete non-cash impairment for the monetary yr of simply over $1 billion.
Optus has had a tough couple of years. In November 2023 the community suffered a 12-hour outage, inflicting hundreds of thousands of consumers to lose service and prompting a authorities assessment. The Australian Tax Workplace additionally lately introduced, and received, a case in opposition to Singtel that reversed almost $600 million in tax deductions from earlier years that concerned Optus. That is apparently a part of a broader push by Australian regulators, which for a few years gave telcos a comparatively free hand after the trade deregulated within the Nineteen Nineties, to extend scrutiny on the operations and funds of main telecommunication suppliers.
Large regional telcos getting burned by their abroad holdings will not be distinctive to Singtel both. Malaysia’s Axiata, which can also be majority owned by state-owned funding funds, had a tough 2023. At present change charges, Axiata booked a net loss of $525 million final yr in comparison with a internet revenue of $2.1 billion the earlier yr. The loss was largely attributable to Axiata’s determination to exit its holdings in Myanmar. Axiata additionally took a giant loss on its holdings in Nepal, stating that “present circumstances of unfair taxation and regulatory uncertainties” made sustaining operations within the nation untenable.
It’s straightforward to neglect that telecommunications is a politically delicate sector, one that’s capital and technology-intensive and thus lends itself to pure monopolies. For the final a number of many years there was a common impetus towards deregulation in telecoms, and we have now seen the rise of huge diversified conglomerates. However what we could also be seeing now could be that rising geopolitical tensions and financial nationalism are beginning to unwind that development considerably.
It might not be shocking within the years forward to see abroad telecom holdings develop into much less engaging as investments within the face of elevated regulatory scrutiny. Nor would it not be shocking to see governments push for higher home management and possession of nationwide telecom networks. For a few years it was arguably the logic of the market that dictated developments in telecom, however we could also be getting into a interval the place geopolitics and nationalism changing into more and more vital issues.
