Published October 8, 2009

SingTel explains share price fall

It could be due to Bharti price drop over competition concern, ASX told

By WINSTON CHAI

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SINGAPORE Telecommunications (SingTel) shares may have fallen victim to investor concerns that heightened competition in India's telecommunications sector could dent the earnings of Bharti Airtel, its largest overseas associate.

Big chunk: SingTel has a 30% stake in Bharti, the biggest revenue contributor of its six associates abroad

Responding to a query from the Australian Stock Exchange (ASX), SingTel said yesterday: 'The price change in the securities of the company . . . may be attributable to the fall in Bharti Airtel Ltd's share price over the last two days on Oct 5 and 6, 2009, possibly in response to news of increased competition in the Indian mobile telecommunications market.'

In its query earlier yesterday, ASX said: 'We have noted a change in the price of the company's securities from a close of A$2.63 yesterday to a low of A$2.45 at the time of writing today.'

In Singapore, SingTel shares fell six Singapore cents yesterday to S$3.06.

SingTel has a 30 per cent stake in Bharti, the biggest revenue contributor among the group's six overseas associates. The Indian telco accounted for 24 per cent of SingTel's underlying post-tax profits in the first quarter.

To stall new market entrants, Reliance Communications (India's second- largest wireless operator after Bharti) slashed its long-distance and roaming tariffs on Monday by as much as 50 per cent. Market watchers fear the aggressive cuts could spark a bruising war between Reliance and rivals such as Bharti and third-placed Idea Cellular.

'Wireless stocks (in India) have fallen 15-20 per cent on heightened concerns on pricing,' according to Citigroup Investment Research.

'Assuming that Bharti is forced to retaliate, its average revenue per minute could decline approximately 20 per cent in the next one year, offsetting an estimated 25 per cent subscriber growth and 10 per cent usage growth in FY 2010,' said DBS Vickers analyst Sachin Mittal in his research note.

With the collapse of its US$24 billion merger plan with South Africa's MTN Group last week, Bharti is under more pressure to perform locally. The failure of the Bharti-MTN talks also meant that SingTel, which was expected to pump in money to retain its Bharti stake, has been starved of major foreign acquisitions for nearly two years.

Bharti CEO Manoj Kohli said in a Dow Jones report that the company would not respond to its rival's price cuts and that he was still on the lookout for overseas opportunities. Indian dailies suggested Sri Lankan telco Millicom as a possible target.