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SingTel Profit Misses Forecasts on Strong Currency

Singapore Telecommunications, Southeast Asia's largest phone company, posted disappointing flat quarterly underlying net profit on Tuesday, as strength in the Singapore dollar crimped contributions from its regional mobile businesses.

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State-controlled SingTel, which generates about three-quarters of its sales abroad, also cut its guidance for earnings contributions from its foreign operations and warned that Singapore dollar
strength would hurt performance. The currency has risen more than 7 percent against the U.S. dollar over the last 12 months.

"The pretax earnings contributions from the regional mobile associates are expected to grow at low double-digit level and at a pace slower than the past two years," the company said.

SingTel, Singapore's largest listed firm with a market value of over $40 billion, made underlying net profit before goodwill and exceptionals of S$865 million ($612 million) in the April-June quarter, compared with S$868 million a year ago.

This was below an average net profit forecast of S$930.3 million from 3 analysts polled by Reuters.

First-quarter attributable net profit was S$878 million, down 5.3 percent from S$927 million last year.

SingTel shares closed at S$3.58 on Monday.

Facing a domestic market of just 4.6 million people where virtually everyone has a mobile phone, the firm has spent S$18 billion in recent years buying stakes in mobile operators in high-growth Asian countries such as India and in the bigger Australian market.

Group operating revenue rose 5.9 percent to S$3.78 billion.

Australia's Optus -- SingTel's single-biggest revenue and profit generator -- posted flat net profit of A$122 million ($108 million) after depreciation charges.

The unit -- Australia's second-largest mobile phone operator which holds a third of the mobile market -- faces cut-throat price competition, slowing subscriber growth and regulatory changes in a saturated Australian market.

SingTel also owns big stakes in six emerging market mobile operators, including Globe Telecom in the Philippines, India's Bharti Airtel and Indonesia's Telkomsel. Most have shown phenomenal growth in wireless subscribers in recent years.

But growth has slowed visibly. Pretax profit contributions from mobile associates in the quarter fell 11 percent to S$582 million, hit by the strong Singapore currency, lower earnings from Telkomsel and Globe, and losses from Pakistan's Warid Telecom.

SingTel shares fell more than 7 percent in April-June, underperforming a 2 percent drop in the benchmark Straits Times Index.