In the financial year ending March 2024, Singapore’s Singtel posted a net profit of around $589 million at current exchange rates. This is a 64 percent decrease from the previous financial year, when net profit was reported at $1.65 billion. Singtel is majority-owned by Singaporean sovereign wealth fund Temasek, and it is a sprawling telecommunications conglomerate with operations spanning the region.
Singtel is interesting because it typifies Singapore’s particular and highly successful style of state-capitalist development. With state support, including a monopoly on the domestic telecommunications market, by the 1990s Singtel had grown into a large company with substantial financial resources. The government ended the monopoly in 2000, but by then Singtel had a sufficiently strong balance sheet to pivot toward international acquisitions and was making inroads into various overseas markets. This is characteristic of many big Singaporean companies, which initially grew rapidly thanks to state support and then began reinvesting their accumulated surpluses abroad.
In addition to being the largest telecom provider in Singapore, Singtel currently owns Australian telco Optus and holds substantial ownership positions in Indonesia’s Telkomsel, the Philippines’ Globe Telecom, Thailand’s AIS, and India’s Airtel. It is a huge cash generator for shareholders, including Temasek. Even though the firm booked a lower net profit in its most recent financial statement, that is mostly a matter of accounting. Cash generated from operations, including dividends received from associates, was still $3.5 billion.
So what happened last year? The main drag on Singtel’s earnings is coming from its overseas holdings. While its associated companies in the Philippines, Indonesia, and Thailand continue to pay steady dividends, Airtel Africa was responsible for a significant fair value loss in 2023. But the biggest hit came from their wholly-owned Australian subsidiary, Optus, which accounted for a one-time non-cash impairment of nearly $1.5 billion. This was partially offset by gains in other areas, but still resulted in a total non-cash impairment for the financial year of just over $1 billion.
Optus has had a rough couple of years. In November 2023 the network suffered a 12-hour outage, causing millions of customers to lose service and prompting a government review. The Australian Tax Office also recently brought, and won, a case against Singtel that reversed almost $600 million in tax deductions from previous years that involved Optus. This is apparently part of a broader push by Australian regulators, which for many years gave telcos a relatively free hand after the industry deregulated in the 1990s, to increase scrutiny on the operations and finances of major telecommunication providers.
Big regional telcos getting burned by their overseas holdings is not unique to Singtel either. Malaysia’s Axiata, which is also majority owned by state-owned investment funds, had a rough 2023. At current exchange rates, Axiata booked a net loss of $525 million last year compared to a net profit of $2.1 billion the previous year. The loss was largely due to Axiata’s decision to exit its holdings in Myanmar. Axiata also took a big loss on its holdings in Nepal, stating that “current conditions of unfair taxation and regulatory uncertainties” made sustaining operations in the country untenable.
It’s easy to forget that telecommunications is a politically sensitive sector, one that is capital and technology-intensive and thus lends itself to natural monopolies. For the last several decades there has been a general impetus toward deregulation in telecoms, and we have seen the rise of big diversified conglomerates. But what we may be seeing now is that increasing geopolitical tensions and economic nationalism are starting to unwind that trend somewhat.
It would not be surprising in the years ahead to see overseas telecom holdings become less attractive as investments in the face of increased regulatory scrutiny. Nor would it be surprising to see governments push for greater domestic control and ownership of national telecom networks. For many years it was arguably the logic of the market that dictated developments in telecom, but we may be entering a period where geopolitics and nationalism becoming increasingly important considerations.