Singapore Telecommunications (SingTel) has achieved its goal of becoming a major Asian player after a strong performance from regional associates led by Aus-tralian unit Optus, analysts said.
Wholly-owned Optus emerged as the main driver of SingTel's overseas earnings growth in the year to March, enabling the Singapore operator to further reduce its dependence on a tiny home market of four million.
Standard and Poor's equity research analyst Steven Koh sees Optus as the main contributor to the SingTel group's expansion amid growing competition in the domestic Singapore market.
"It is the challenger rather than the incumbent [in Australia] so they have a lot of opportunity for growth. It can adopt a guerrilla warfare strategy," Koh said.
Optus is Australia's second biggest mobile operator with an estimated 34 percent share of the market, or 4.72 million users, placing it behind Telstra, which has nearly half of the market.
In the year to March, Optus turned in a net profit after exceptional items of A$336 million (US$213.528 million) due to an exceptional tax credit of A$308 million. It was the first profit in the history of Optus.
The Australian unit also reported a positive cash flow of A$281 million for the year, a turnaround from the previous year when it needed a cash injection of a billion dollars.
SingTel paid more than S$10 billion (US$5.78 billion) for the Australian unit two years ago and many analysts said the price tag was way too expensive.
"Optus is turning around. It will never be worth the money they paid but they are now making the best of a bad investment," said Peter Milliken, Hong Kong-based telecom analyst at US investment bank Lehman Brothers.
"Australia should be a key market for SingTel. The market success for the (SingTel) group will be minimizing the importance of local business through growth in Australia, and that means SingTel grabbing profitable market share from Telstra," he said.
Despite a 14 percent drop in net profits to S$1.40 billion in the year to March, SingTel's revenues from its foreign operations -- which include stakes in Asian telcos, Optus and European associate Belgacom -- accounted for 65 percent of the enlarged revenues on a proportionate basis.
It was 49 percent in the previous financial year.
SingTel, majority owned by the Singapore government, has acquired stakes in regional telecom firms in order to be less reliant on the local market which offers limited growth amid competition from newcomers.
"Our international expansion strategy is delivering strong profitable growth from both Optus as well as our associates," said SingTel president and chief executive Lee Hsien Yang.
"The success of our international expansion means that we remain well positioned for above-average growth despite the challenging outlook for the Singapore economy," Lee said.
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