Telcos poised for flat earnings in Q2

The sector is projected to remain steady.

Earnings of telecommunications companies are expected to be flat in the second quarter (Q2), continuing their 1.7% muted growth in the first three months.

“Moving into Q2 2025, we expect similar sector earnings growth, largely driven by Singtel and NetLink,” UOB Kay Hian said in its latest sector update.

In the previous quarter, the sector’s slight growth was backed by strong contributions from Singtel’s regional associates and better overall cost discipline.

UOB Kay Hian noted that Singtel has increased its target for capital recycling to $9b from $6b in the medium term. This is expected to come from paring down its stakes in its regional associates (specifically Bharti Airtel and Gulf Development) and non-core fixed assets.

“Specifically, we expect Singtel to pare down its 28.3% total effective stake in Bharti Airtel, equalising its total stake with the founding Mittal family (23.7% total effective stake) over the next 2-3 years,” it said, adding that the company could gain $7b to $8b in cash by selling a 4.6% stake.

UOB Kay Hian said that some key things to watch out for this second half of the year are continued strong performance from the sector’s enterprise businesses; potential consolidation between incumbents; potential stake sale/divestment of Singtel’s regional associates and non-core assets; higher amortisation costs from the recent 700MHz spectrum payments; and increased contributions from Singtel’s regional associates and stronger profitability from Optus/Singapore.

The report also noted that existing customers from the incumbent telcos would likely continue trading down to lower-value/SIM-only plans amidst pricing competition.

“As of end-Jan 25, Simba had increased its mobile subscriber count to 1,160,000, from 487,000 at end-Jan 22. Also, driven by the strong take-up of its competitively-priced 10Gbps broadband plans, Simba’s active broadband customers quadrupled hoh to 14,347 at end-Jan 25,” UOB Kay Hian noted.

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