Singtel credit quality remains resilient amidst Optus downgrade: Moody's

Lower dividend payouts can support its free cash flow and liquidity, if sustained.

Singapore Telecommunications's (Singtel's) dominant market position in Singapore and its diverse investments across high-growth telco markets in Asia continue to underpin its credit quality and offset the weaker operating and financial performance of its largest overseas subsidiary Singtel Optus, according to a report from Moody’s Investors Service.

The report added that lower dividend payouts would support Singtel’s free cash flow and liquidity if sustained over the next one to two years.

"Singtel's overall credit quality remains resilient despite Optus' rating downgrade in January, which was based on our expectation of a weakening in Optus' credit profile over the next 12-18 months due to its declining retail margins and mobile service revenues," Moody’s vice president and senior analyst Nidhi Dhruv said.

Singtel's gross leverage is set to peak to 2.7x in fiscal year 2021, which will end on 31 March, driven by weaker profitability, high capital spending, shareholder returns and spectrum and acquisition-related payments.

However, Moody’s expects its leverage in fiscal years 2022 and 2023 to recover to between 2.4x-2.5x due to reduction in dividends and a gradual recovery from the impacts of COVID-19.

The report also noted that Singtel’s significant investments counterbalance the higher leverage, with the market value of its investments totalling $38b – significantly higher than debts of around $13.4b as of September 2020.

Whilst the company’s operations will remain under pressure as the pandemic augments the effects of continued competition, it will remain the dominant integrated telco in Singapore, according to Moody’s.

It will also retain its second position in Australia through Optus, although some market shares may be chipped away.

If you've been wondering whether SBR could work for your company — yes, probably.

A lot of the companies we partner with started as readers. They'd been following our coverage for a while, saw their own customers and competitors in it, and eventually asked the obvious question: could we do something with you? The answer is usually yes. The shape of it depends on what you're trying to do.

The options are broader than most people assume — thought leadership articles, sponsored content, industry summits across Southeast Asia, regional awards programmes, podcasts, and media placements in print and digital. Some partners use one channel; most use a mix. We figure out the right combination by starting with your brief, not with our rate card.

So if the question has been on your mind, here's the easy way to ask it.

We'll tell you honestly whether we can help, and how. It's a better use of everyone's time.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia