# Singtel — H1 FY2024 Financial Results Briefing Transcript - **Event**: H1 FY2024 Financial Results Presentation & Analyst Q&A - **Date**: 9 November 2023 - **Kind**: Unofficial transcript reproduced from the issuer's own transcript - **Source**: https://cdn2.singteldigital.com/content/dam/singtel/investorRelations/financialResults/2024/h1fy24/Singtel_H1_FY24_analyst_briefing_transcript_FINAL.pdf > **Unofficial transcript.** Reproduced by SMID Research from the transcript Singapore Telecommunications Limited publishes for this briefing and checked against it; the words are the speakers' own as the issuer recorded them. Not a company publication: the headings, speaker labels and summary are ours and may contain errors. The [official transcript](https://cdn2.singteldigital.com/content/dam/singtel/investorRelations/financialResults/2024/h1fy24/Singtel_H1_FY24_analyst_briefing_transcript_FINAL.pdf) is the authoritative record. Copyright in the briefing rests with Singapore Telecommunications Limited; contact contact@smidresearch.com for corrections or removal. --- ## Management - Mr Yuen Kuan Moon, Group CEO - Mr Arthur Lang, Group CFO - Ms Kelly Bayer Rosmarin, CEO, Optus - Mr Bill Chang, CEO, Digital InfraCo - Mr Ng Kuo Pin, CEO, NCS - Mr Ng Tian Chong, CEO, Singtel Singapore - Ms Anna Yip, Deputy CEO, Singtel Singapore - Mr Adrian Seah, Head, Investor Relations ## Analysts and attendees - Mr Arthur Pineda, Citigroup - Mr Eric Choi, Barrenjoey - Mr Piyush Choudhary, HSBC - Mr Darren Leung, Macquarie Bank - Mr Sachin Mittal, DBS - Mr Corey Okinaka, Capital Group - Mr Ranjan Sharma, JPM - Mr Entcho Raykovski, E&P - Mr Somesh Agarwal, UBS --- ## Transcript ### Mr Adrian Seah, Head, Investor Relations Good morning to everyone and a warm welcome to Singtel’s results briefing for the half year ended 30 September 2023. I’m Adrian and I lead investor relations at Singtel. Before we start the briefing proper let me introduce management who are on the call today. With us today are Mr Yuen Kuan Moon, Group CEO, Mr Arthur Lang, Group CFO, Ms Kelly Bayer Rosmarin, CEO Optus, Mr Bill Chang, CEO Digital InfraCo, Mr Ng Kuo Pin, CEO NCS, Mr Ng Tian Chong, CEO, Singtel Singapore and Ms Anna Yip who is Deputy CEO of Singtel Singapore. Before we start taking questions, I would like to invite Moon to share some quick thoughts and highlights from this set of results. Moon, please. ### Mr Yuen Kuan Moon, Group CEO Thank you, Adrian. Good morning, everyone. Thank you for joining us. Let me start with the key highlights for the half year. We faced a number of headwinds as macro-economic uncertainty and inflationary pressures weighed on consumer and business sentiment. Despite these challenges, the Group put in a resilient performance with EBIT stable on continued momentum of our mobile business and strong performance of our growth engines. This helped offset softness in the enterprise space from structural declines in the legacy fixed business in Australia and lower ICT carriage spend by enterprises in Singapore. Regional associates’ PBT grew 9%, boosted by improving dynamics in their respective markets. This helped us deliver a 16% growth in underlying NPAT. If we strip out the impact of strong Singapore Dollar, NPAT surged 83% mainly from Telkomsel dilution gains. Importantly, we continued to execute to our strategic reset. In the last few months, we have further simplified our business structure by integrating the consumer and enterprise businesses in Singapore, unlocking another S$1.1 billion from a 20% stake sale of our data centre business to global investment firm KKR to use as growth capital and completed the H1 FY24 Results Briefing Conference Call 9 November 2023 divestment of Trustwave. This puts us in a strong position to drive ROIC improvements and shareholder returns. With that in mind, we have raised our interim dividend by 13% to 5.2cents as well as increased our payout ratio to between 70% and 90% of underlying net profit. On to key financial highlights. Our results for the half year were impacted by the strong Singapore dollar, affecting revenues and underlying net profit by S$338 million and S$42 million respectively. Excluding currency movements, revenue and EBIT both increased 2% on continued mobile growth and strong performance from our growth engines. Our regional associates’ pre-tax contributions increased 9% on improving market dynamics and strict cost control. Substantial cash from a asset recycling also generated S$58 million of interest income resulting in an overall 16% higher underlying net profit. A key tenet when I launched the strategic reset two and a half years ago was the need to reorganise our structure to reposition the Company for growth. Today, I’m pleased to say that we have realigned the business and simplified our structure to drive growth, synergies and productivity. Consumer and enterprise businesses have been consolidated into one operating entity for both Singapore and Australia, giving them more operational autonomy and direct accountability. NCS and Digital InfraCo have also been carved out as standalone businesses, better positioning them to capture new growth. We’ve also completed a strategic review of our digital investments, divesting both Amobee and Trustwave for S$500 million, as well as closed down HOOQ. More importantly, we’ve taken out EBIT drag of over S$200 million a year. With our simplified structure, our focus is now on taking out costs in our core operations. We will also actively support our regional associates as they build out new growth engines, particularly in the enterprise and the fibre broadband space. With all these initiatives, we remain on track to deliver low double digit ROIC in the mid-term. Let me elaborate on how we intend to take costs out of our core business. We have launched a cost- out programme to drive a 15% or S$600 million reduction in indirect costs over the next two and a half years. It hinges on two key pillars – eliminating operational inefficiency, harnessing the power of digitalisation to drive productivity. I assure you that our cost-out programme will not come at the expense of our network. We will continue to invest in network resilience and security. The Group’s strong balance sheet also provides a buffer against economic uncertainty. We have divested S$5 billion of assets in the last two years, and expect to receive another S$2 billion which has already been secured with another S$4 billion to be unlocked in the mid-term. Proceeds from asset recycling has placed us on a firm financial footing, reducing gross debt by $S1.6 billion while boosting cash balances to S$3.1 billion. It has also provided necessary funding for our growth investment. With the improvement in our financials, successful asset recycling and firm financial footing, we are increasing our interim dividend by 13% to 5.2cents per share. We are confident of the future of our business and are revising our dividend payout range towards between 70% and 90% of underlying net profit, so shareholders can share in the Group’s improving prospects. With that I conclude my presentation and hand over to Adrian for Q&A. ### Mr Adrian Seah, Head, Investor Relations Thank you, Moon. We will now be taking questions. A gentle reminder to everyone to use the raise hand to indicate your interest and I will call your name shortly. We would also greatly appreciate if you could turn on your video when asking your questions. H1 FY24 Results Briefing Conference Call 9 November 2023 The first question comes to us from Arthur Pineda from Citi. Arthur, you may ask your question. ### Mr Arthur Pineda, Citigroup Hi, thanks for the opportunity. Just three questions please from my side. Can we get some colour on what’s driving the decline in data centre profitability for this semester? When do you see that turning around? Second question is with regard to the cost savings target of S$0.6 billion over three years. Can you please elaborate on this and does this mean the OpEx or are there any CapEx elements on this as well. I’m just wondering on the impact in the margins. Last question is with regard to Optus. What are the observations on subscriber based post-network outage? Has there been any indications of potential porting out activities? Thank you. ### Mr Yuen Kuan Moon, Group CEO Thank you, Arthur. Maybe I’ll just cover briefly on the three questions and I’ll hand over to Bill and Arthur to talk about DC and the cost savings details. I’ll take the Optus question. I think it’s definitely too early to tell if there is any impact on customers with Optus. I think our focus now is to take care of our customers. The network has been fully restored. We are looking into the root cause of the incident, and we will want to make sure that if there’s any big gaps identified, we will improve on them. I think that’s the current status. For data centres, of course we are in investment mode. We are building up the new Tuas data centre, the Batam data centre as well as the Bangkok data centre. Our existing data centres are all fully filled, and I will let Bill elaborate a bit more on that. ### Mr Bill Chang, CEO, Digital InfraCo Thank you, Moon. Arthur, thank you for the questions. Like Moon stated, we are 100%, or I should say 99.5% filled in our two current DC assets in Singapore. What’s happening is we’re building new DCs, DC Tuas, they’ll be coming onstream towards the end of 2025 so monetisation will happen in 2026 onwards. Then those in Bangkok and Batam will also come in 2026 – late ’25 and ’26. So essentially what we have is we’re investing with OpEx to build the teams to ensure that we can design, build and operate those DCs in the region with our JV centre and also those in Singapore and so there will be OpEx sort of investments there as well as capital investments in building the three DCs. So this is the profile. So what is driving the growth in the DC about 9%, it's primarily price uplifts, in a maxed out capacity in our current DCs and essentially we're just uplifting those prices according to inflationary contractual agreements and energy pass through increasingly to ensure that customers are paying for the energy that they consume themselves. Now, over 80% of those contracts are all passed through. We're increasingly doing that as contracts come up for renewal. Other than that, it's just price uplifts through the contractual negotiations on those capacities has been maxed up. Okay, thank you. ### Mr Arthur Lang, Group CFO Arthur, just to build on what Bill said on data centres and I'll talk about cost-outs later. If you look at this slide that's in front of you, the EBITDA margins for the RDC business, it's a very healthy 57%. As H1 FY24 Results Briefing Conference Call 9 November 2023 we start building, right, especially the Tuas capacity, you will see basically this margin coming down because we will be incurring construction costs and just building up the team and building up effectively the regional platform. Then of course, once it's constructed, it’s completed, you’ll see a big jump in the EBITDA. That’s perhaps why, KKR paid the valuation, it is really for the future buildup of the capacity. So we do see the EBITDA margins falling, we have mentioned this before, to more industry standards but I would say with the growth in the industry we are of course managing that but we're in growth mode, right? So like most data centres they are in growth mode. You will see the EBITDA margins coming down but once it's completed you see that jump. On the cost-outs if I could ask that we go to that slide. You will see it's about S$600 million over the next 30 months, 2.5 years across both Optus and Singtel. It's really, the key drivers you see on the right, I think first and foremost it is a result of some of the work that the two companies have done in merging and combining and simplifying the businesses. I think you've covered Singtel for a very long time. Last time I remember that you probably have to look at for Singapore, the GE Group, Consumer Singapore and then you go to OE and Optus and then you've got the OC, I think it was called, Optus Consumer, right? Now it’s just Optus and Singtel. As a result of the merger there will definitely be, I will say simplification synergies that you see. Whether it's all the details there, even all the consolidation of vendors and that's where we can actually generate a lot of possibilities. I think the second bit is with the advent of AI and digitalisation, I think there is a significant way for us to actually leverage on that and reduce our overall cost to serve. Then finally, energy, I think it is where we will use kind of, again, using new AI and ML to really optimise our usage. There is some workforce optimisation where we will upgrade jobs, basically, with what we are doing, I think there's an ability for us, so I would say it's across the board. So it's a 15% reduction in OpEx or what we call indirect costs, costs that are outside cost of sales and traffic costs. This does not include CapEx. I think you will see that we have reaffirmed our guidance for CapEx this year. We will continue to come up with some CapEx guidance every year. We have said to the market that we are very focused on ROIC which would mean that it has to be not just OpEx but it's also CapEx efficiency. We have said this many times, three areas, focus on revenue, OpEx reduction, CapEx efficiency. So nothing has changed but this 15% is really on the OpEx side. ### Mr Arthur Pineda, Citigroup Very clear. Thank you very much. ### Mr Adrian Seah, Head, Investor Relations Thank you, Arthur. Our next question comes from Eric Choi from Barrenjoey. Eric, you may ask your question. ### Mr Eric Choi, Barrenjoey Thanks, team. Just three really quick ones from me. First one, Singtel hasn't changed their ROIC guidance which infers Optus remains committed to theirs, is that right? Or is there some risk that maybe that Optus ROIC achievement may be pushed out given recent events? The second question related to that is, if we think about the three legs to drive that Optus ROIC improvement, it's rational H1 FY24 Results Briefing Conference Call 9 November 2023 mobile markets, winning enterprise share and cost and I'm just wondering do you think number two and three could be harder now and if that's the case, what picks up the slack to get you there? If I can fit a last one in, I think Kelly may have mentioned rewarding customers for their loyalty and I'm just wondering, any early thoughts on that? Is it similar to Telstra back in 2017, they gave out some free data days, so are you thinking more along the lines of that? Thanks very much, team. ### Mr Yuen Kuan Moon, Group CEO Thank you. Maybe I'll handle the ROIC questions and Arthur can elaborate and Kelly will come in and talk about how we can take care of our customers. First of all, I think you look at the ROIC guidance or position that we have taken, we have always said that we will continue to improve our ROIC in each of our businesses and in the Group wise when you roll it up, I think we started 2.5 years ago, probably around 6%, ROIC and now we are at 8.3%. We say that the mid-term target is to go into low double digit ROIC. Actually, if you look at what Arthur had mentioned earlier on, we have actually removed some of the drags on EBIT. Basically, we have divested the negative EBIT business of Amobee and Trustwave. That has a drag of about 200 million of EBIT every year. So that is removed now. If we continue to work on OpEx reduction and CapEx efficiency, we believe the Group's ROIC will improve and obviously, as I said, the restructuring of Singtel into very distinct individual autonomous unit, every business unit is very clear on what they need to achieve not only in Optus but including Singtel Singapore, NCS and regional data centre. So they are all very clear of the targets, immediate in-year target and further out how they could improve ROIC. We will be very disciplined to deploy CapEx in a very efficient manner and continue to look at synergies in optimising our OpEx. I think maybe, in terms of every market that we operate in in, mobile is actually a very big part of our business. We are seeing positive momentum on market pricing more rationally in our associates’ markets as well. Some of the industry structure has improved. In Thailand with the consolidation we have seen a lot more discipline in pricing. In Indonesia we are also seeing the player pricing up as well. I think in India, especially, we've also seen a strong price up from the market. So across the board, including if you look at the half year results, the Singapore mobile business has grown 2% and Optus has also grown the mobile revenue. So I think if there's enough market discipline by all the players, you will see that the business will continue to improve organically and we will layer on the productivity improvement that we put in, then the overall business bottom line will improve. Maybe, Kelly, you will talk about the costs and maybe also about some of the things that you're doing to support our customers. ### Ms Kelly Bayer Rosmarin, CEO, Optus Yeah, great. So thanks for the question, Eric. Just on making sure that we can keep improving the ROIC at Optus, we are absolutely committed to do so and you’ll see we have the top line revenue growth. We're also focused on turning around our enterprise business, winning customers in the areas where we have strength, making sure that we turn our accounts more profitable where we've been loss leading in previous instances and strengthening the team so we can try and build differentiation for our enterprise customers. We've also been focused on costs and will continue to do so. I think Arthur articulated very well that a lot of the cost-out comes from simplification of the business, investment in automation and AI, all things that really are win-win because they add to the resilience and robustness of the company, they H1 FY24 Results Briefing Conference Call 9 November 2023 add to the simplicity of the value proposition, they improve outcomes for customers and they allow us to remove costs. So we're really all about looking for those win-win scenarios and we do have a pathway that we've identified to achieve significant cost-out with that focus on really removing work, reengineering work and being very clear what it is we do and what it is we automate. Then finally, with regard to the outage yesterday, I mean, firstly, it goes without saying that we are hugely apologetic, we let our customers down and we hate that. Our focus yesterday was on restoring services to customers, that was our singular focus, and all of our servers are back up and running. In terms of rewarding our customers for their loyalty and thanking them for their patience, we are looking at options and that's something we're working on today now that services are restored. We understand that the number one thing customers want is for their servers working all the time and so that is our top priority. In addition to that, we do want to give a gesture of goodwill to our customers and I just want to explain that we're not talking about direct compensation because if you took an average customer on a $49 plan and they didn't have service for a day, that would equate to about $1.60 and we don't think that's what customers want, is a credit for $1.60. We're looking at what we can do to make our customers feel like they've been heard, that they know that we care, that we understand that we let them down and to try and give them something more valuable. It may not be exactly the same as the gesture that Telstra gave a few years ago or some other competitors do but we're looking at what we can do that would be meaningful and valuable to our customers. ### Mr Eric Choi, Barrenjoey Thanks, Kelly. ### Mr Adrian Seah, Head, Investor Relations Thank you. Our next question comes from Piyush Choudhary from HSBC. Piyush, you may ask your question. ### Mr Piyush Choudhary, HSBC Hi, good morning. Thanks for the opportunity. Two questions, in one 1H, your company has divested Trustwave, secured growth capital in DC and also recently sold a partial stake in Airtel Africa, you have a very strong balance sheet. In this backdrop, what were the considerations to not have any special dividend or any share buyback? That is the first question. In Singapore, can you update us on the progress of integration of the consumer and enterprise business, and on your cost-out programme, where you have – where you expect synergies or cost-out of $200 million in FY24, is some cost-out already realised in 1H or this is entirely for the second half onwards? Thank you. ### Mr Yuen Kuan Moon, Group CEO Piyush, thank you. I think there are a few questions, Arthur can take the question on dividend. I think Tian Chong can take the question on cost-out. I think, suffice to say, we are always looking at in what way or how we can return value back to our shareholders. Obviously, first, we have to create and H1 FY24 Results Briefing Conference Call 9 November 2023 unlock it first, that's our focus. Obviously, we do have different time to consider different options on whether it is a special or whether it is a buyback and these are all in our consideration. At this point in time, we decided to increase our dividend to 5.2 cents at 13% up and obviously also increase the range to 70% to 90% of and growing underlying profit. So this will in itself give it the double kick in terms of the absolute dividend paid out. Obviously, at the full year we can review again what are the other options that we have to return more value to our shareholders. Arthur? ### Mr Arthur Lang, Group CFO Sure, I think Moon covered most of the points. I would add, Piyush, is that I think this is a – it's a fiscal year plan, right. I mean, we're only halfway into the financial year. You are right, Moon has actually said it, we, if you look at what we laid out in terms of what we want to achieve in terms of the strategic reset, whether it's ROIC, whether it's the sale of our strategic reviews of all the digital non-core assets, whether it is simplifying the business, whether it is capital recycling. I would say we have delivered on all that. The balance sheet today in an interest rate environment where interest rates actually tripled, we cut interest expense by 10%. We paid down debt, we’ve got a $3 billion cash balance. So, you’re right, investors or you are asking could we have done more, a special dividend, all of that. I would say is we haven’t finished the year, so let’s see where things go and then we will see, but I think it is very clear that while we create value for the company, we want to make sure that shareholders also realise some of the value. ### Mr Ng Tian Chong, CEO, Singtel Singapore All right. On the Singapore side, I think I heard two questions. One was about giving a quick flavour of consumer and enterprise and the other one was the cost-out, I believe I heard that. Just a quick soundbite. In terms of the business overall, we essentially from a Singapore perspective on the consumer side, the mobile price plans obviously remain very competitive but what we have done is focus on what we can do. Recently, we revamped our equipment plans in Singapore, we simplified it and provided it with more value-add to our customers through security as well as our roaming data, et cetera. The good news is as we revamp the plans, we see a higher take-up rate since two months ago when we launched the higher-tier plans, so we feel pretty positive. We do see as traveling has picked up out of Singapore, travellers are – overall outbound travellers have rebounded to about 92% on the back of that we have seen our roaming performance recover year-on-year, that has contributed, as Moon said earlier, to the mobile services revenue, so that is good news, and we continue to work on that. We recently also launched for inbound travellers a prepaid tourist e-sim option as well, so we offer the convenience and all that. Overall, even from a broadband perspective for consumer, we see strong take-up in our 2Gbps offer. So, it’s good news customers are wanting better connectivity et cetera for hybrid work, entertainment, we see that, so we are offering good deals, and we see a good take- up. On the enterprise side, while big enterprise customers are slowing down, their network ICT spend, network connectivity type spend, but they are spending on other areas that we are focusing on like cybersecurity as well as other areas around working with us on using telco through an API. Recently, we launched a silent authentication called SingVerify using our telco data through an API approach and that’s actually got pretty good traction in the FSI environment and we’re looking to grow into other verticals. They are areas that we’re working on that we feel are good and will continue to focus on this plus the overall Internet of Things connectivity. H1 FY24 Results Briefing Conference Call 9 November 2023 Overall, from a cost side, I don’t think I have much to add beyond what Moon and Arthur have shared. We’re really looking to simplify our products, simplify our organisation, create a more agile, and as a result of that all the savings that you see mentioned in the key drivers will flow through in the next two years to come. We just announced our Singtel Singapore organisation October, so it’s early days for us. We are off the starting block but have a good line of sight to all the things that have been said. ### Mr Piyush Choudhary, HSBC Got it. Thank you. Just to clarify the cost-out for $200 million which you have for fiscal ‘24. I wanted to check if you have realised some benefits already in the first half or the entire $200 million savings will come in the second half across Singapore and Australia? This is for the Group? ### Ms Kelly Bayer Rosmarin, CEO, Optus I’m happy to answer for Australia. Yes, if you have a look at our track record over the last three years, we’ve kept our cost growth, our indirect cost growth to 1.8% which is well below inflation, and this year is no different. There’s a range of cost-out activities that occurred in the first half. Of course, we also had huge inflationary pressures, foreign exchange-linked contracts going through at the same time, so the net-net was a higher cost growth in the first half. There’s been further actions taken that will show up in the second half. But it’s always a balancing act between the total cost-out and the inflationary and foreign exchange- related pressures. To give you an idea, electricity costs in Australia in the first half were up 46%, so we’re always managing the counterbalance of both of those, but yes, some of that almost $200 million in the first year on this chart has been realised in the first half with more to come in the second half. ### Mr Ng Tian Chong, CEO, Singtel Singapore I think from Singapore’s perspective, obviously we are the much smaller slice since we just started off October, but Anna and I have been working with the Singapore team. We’ve have got a very clear plan and line of sight for what to do. We started our early actions to contribute our portion for the year, but quite clearly, we are ready to deliver in FY25 and ‘26 as well. ### Mr Piyush Choudhary, HSBC Thank you very much, everyone. ### Mr Adrian Seah, Head, Investor Relations Thank you, everyone. Our next question comes from Darren Leung, who is from Macquarie. Darren, you may ask your question. ### Mr Darren Leung, Macquarie Bank Morning, guys. Thanks for the opportunity. I just had two, please, but mainly first for Kelly. Just thinking about the marketing spend, do you think the marketing strategy for Optus will change post the outage yesterday from one that was ARPU and price-led to more of a market share strategy? H1 FY24 Results Briefing Conference Call 9 November 2023 While I’m here, I might as well ask my second question as well. Just any comments you can provide in terms of the initial conversations with enterprise customers as well, please, particularly given some of the commentary that’s come out in relation to government customers, please. ### Ms Kelly Bayer Rosmarin, CEO, Optus Sure, yes. Happy to. Firstly, in terms of marketing spend I think the team has been very effective and efficient with their marketing spend over the last year. If you put your mind back to where we were, our brand value had contracted significantly and there was a huge fallout from the cyberattack. The team spent their time apologising to customers, putting in place marketing messages that we knew were tried and tested and resonated, and building back trust. As a result, we did see an improvement in our brand sentiment and an increase in our brand value over the last year. I think we’ve been using all layers of the brand funnel from general branding right down to demand generation in a very effective and efficient manner. Having said that, obviously yesterday’s outage is very fresh so clearly there is no knee jerk change in strategy that we have come up with now. I think what you were actually asking is are you expecting us to abandon reason and start discounting heavily, and I would say that’s – if that’s what you were trying to get at, we remain very committed, as we have been always, to profitable, sustainable growth and delivering great value for our customers. Great value is not just about giving an excellent price but it’s also about providing a very good service and unique differentiators. That is our strategy and as horrible as yesterday was, and as much as we let our customers down and we’ll do everything we can to make up for it, at this stage I don’t see us completely abandoning a strategy that we’ve been committed to, and I believe successfully executing. On the enterprise side, of course we hate letting those customers down and we worked very closely with our enterprise and government customers yesterday to give them all the assistance that we possibly could, and that too is disappointing and we’ll be working with those customers to make sure they have confidence in our operations moving forward, that learnings that we have garnered are shared with them, and that everybody is in good stead moving forward and that we’ve taken care of our customers and done what they’ve expected of us. ### Mr Darren Leung, Macquarie Bank Got it. That makes sense. Thank you. ### Mr Adrian Seah, Head, Investor Relations Thank you. Our next question comes from Sachin Mittal from DBS. Sachin, you may ask your question. ### Mr Sachin Mittal, DBS Thank you. Two questions. Firstly, sorry to harp on the cost-cutting. The question is we have always seen revenue growing slower and then inflation impacts and then we also see that many telcos claim cost savings but actually nothing flows to the bottom line. So, the question here now is how confident we are that could we see – because $200 million is a big number, 8%, or 8-9% of the Group earnings, how confident we are that a portion of this, I don’t know, 30%, 40%, would flow to the bottom line. H1 FY24 Results Briefing Conference Call 9 November 2023 That’s the question, and because if we have seen savings in the first half already, actually we can’t really see in the bottom line. That makes it tricky. Is it because inflation was particularly high in the first half and inflation will be lower in the second half, or is it because savings were lower in the first half and savings will be higher in the second half? Just to understand how we can see the actual impact on the bottom line flowing from the cost savings. That’s question number 1. Question number 2. On the enterprise side, every telco talks about getting enterprise business, and we also know there is a bit of macro softness. Are we seeing a loss of market share coupled with or probably lower margin in the enterprise side, because every telco is literally gunning for this market share. Is it ICT guys building market share to telco? What is the overall trend in the enterprise side? It looks like everyone sees enterprise as an avenue of growth, which actually is not coming through. Thank you. ### Mr Yuen Kuan Moon, Group CEO Sachin, I think those are very good questions and I think it will probably take a bit of explanation on the enterprise business. Maybe I just focus on the quick cost-cutting first and then elaborate a bit more on the enterprise space in different markets which are quite different. The cost-cutting, if you look at the first half, the mobile business of both Singapore and Australia has actually improved and grown 2% and 3% in revenue. Unfortunately, because of the strength of the Sing dollar you come back, and you translate it into a revenue decline of 3% if you roll up the two Australian/Singapore business. That’s the first thing. The EBIT pressure actually comes from both Australia and Singapore is on the enterprise space, and so it is related. What we are doing in the cost-cutting side is actually have some improvement on some of our core business, but the particular weakness of the EBIT you are seeing here is directly related to some projects that have rolled off compared to a year ago, and Tian Chong can elaborate a bit more. This is really due to the infrastructure ICT programme that has rolled off, so it’s project- based. Then in terms of the enterprise growth and people are talking about it, and a lot of these are actually coming from different types of enterprise business, and will you see this from the results of NCS. NCS is growing ICT rapidly; compared to last year the growth is 10.8% in terms of profitability and that is on the back of strong 9% revenue growth. This is really because companies are actually investing in digitalisation, investing in automation, investing in gen AI, and so this actually helps to drive this part of the business. Some of the telcos when they talk about it, they are also looking at capturing this type of growth. Whereas on the telco type of enterprise that Tian Chong talked about it’s really more about the traditional carriage business that is facing a bit of inflationary pressure and companies are reducing their cost in connectivity, and this is where they are switching out. I think both are enterprises but it’s actually different types of enterprise business. Obviously, we have not shown this specific cost-out programme in the past, and precisely – it’s actually very hard to look at how much is being flowed down, because there's so many moving parts. On top of that, it's also a very – we're operating in a very high inflationary environment, right? The inflationary environment in Australia, like Kelly have said earlier, on just the electricity prices have gone up by 46% in the first half of the year. So this will be putting a pressure on the overall cost structure of our business. On the other hand, in Singapore, there's also other inflationary prices; transportation costs have gone up, delivery costs have gone up. Whenever you operate in a high inflationary environment, you have to continuously take out costs. In this time, while you're able to carve out and show this specific cost- H1 FY24 Results Briefing Conference Call 9 November 2023 out, it's really because of the structural change that we have got, that is, in Singapore we have consolidated the enterprise and consumer business. If you look at the description that we talked about. It's really about reducing operational complexity, using technology to do more digitalisation and automation and decommissioning legacy system, simplifying our business. All these will drive cost savings and we have identified that. Tian Chong can maybe elaborate more. ### Mr Ng Tian Chong, CEO, Singtel Singapore Yes. I mean, the timing topic you know why we didn’t see in the first half like I said, for Singtel Singapore, which is a very profitable portfolio, part of Singtel Group, we only announced the new organisation in October. We've just started, like I said, earlier, and you will see that translate going forward. Now, in terms of the enterprise business, we – obviously along the lines of what Moon said, we are seeing enterprise customers moving from traditional connectivity to new ways to communicate. We do have a very rich portfolio around unified communication, SD-WAN, all of which we've got a full portfolio we're building towards that. The margins are different, but that is precisely why we are simplifying our structure, getting ourselves ready while we manage that mix in profile while we continue to do well in the traditional businesses, we also have equally rich offerings in the new connectivity. We are pursuing that with equal vigour and we've got all those things in place while we work with Moon and other organisations like GSMA to build out the APIs to our core telco data where we can monetise that as well. There's actually lots of potential. The main thing is to get our structure in check and understand these secular changes that are going on and we are very confident that what we have, both Australia and Singapore, we're working along these lines, as you heard. Yes. ### Mr Yuen Kuan Moon, Group CEO Kelly, maybe you'd like to elaborate a bit more about the simplification of our Optus enterprise businesses and then you’ll go through a lot of simplification as well, and some of the savings are actually resulted from that. ### Ms Kelly Bayer Rosmarin, CEO, Optus Yes. Absolutely. In terms of the Optus enterprise business, we've actually taken it and consolidated into segment-focused teams for the first time. So we have a segment focus on enterprise and government customers, a segment focused around mid-market, which we've never really tackled before with its own leader and with a complete line of sight into what the value proposition is there and a small business segment. We've also then been able to take all the teams that support the business customers and consolidate them not only within the business and enterprise team, but within the whole Optus team. So if you think about having multiple legal teams, procurement teams, marketing teams, we've been able to bring all those together, keeping them with a flavour on targeting different individual segments, but leveraging a core capability that can be shared. That's enabled us to remove a lot of costs and complexity. We've also been focused on developing a clearer product catalogue, so that we have a rationalised number of products and services that we are offering our customers moving forward. We've implemented new pricing disciplines around that, H1 FY24 Results Briefing Conference Call 9 November 2023 and we continue to look at ways to simply that catalogue even further. We're also looking at how many different partners we have, e, and we're looking to consolidate around a smaller number of more powerful partnerships that are more relevant to each of the segments. So these are all programmes that are underway that give a lot more clarity, both as simplifications to our teams – we've removed a lot of duplication – and we've been able to take out a significant number of people as a result. We've also been able to work on our non-staff costs as well. That programme will continue. ### Mr Yuen Kuan Moon, Group CEO Yes. Thank you, Kelly. I think maybe I'll also invite Anna to speak a bit more about the simplification of the mobile business in Singapore, because now that we got consolidated enterprise and consumer to one group, the SMB segment has been consolidated as well, I think Anna can talk through some of the things that she's doing in simplification and therefore improving efficiency. ### Ms Anna Yip, Deputy CEO, Singtel Singapore Thank you, Moon. I hope you can hear me well. I think this is a very exciting, new journey for us, because the combined combination of consumer and SMBs is a new concept in Singtel. It was combined, I think, some years ago, but in recent years it has really run separately. We do see a lot of potential upside by putting them together, from cost efficiency all the way to revenue capture. Because just to give you one example, when we look at analytics on the rewards side there's a lot of potential to leverage the big machinery on the consumer side that are already serving millions of customers in terms of our plans and in terms of our rewards system and open it up to our SMB customers. That's one example. Another thing that we have been actually just introduced in the market and to very good reviews is our bundle plans. Traditionally, bundle plans are bundling handset, as well as mobile plans or mobile data, voice data, but we have now rejigged the plans, so that the latest plans that we have launched in the market actually have more benefits combined, including the incentives for consumers. For the midsize customer to renew their plans and also get a new handset from us over the next cycle and also to an extent some roaming benefits are also included. So it is really like an all-in-one plan for consumers. Based on the initial result in the first two months, I think it's very encouraging. We will keep pushing in terms of giving more benefits to customers and also deriving more efficiencies from our operations. ### Mr Sachin Mittal, DBS Okay. Okay. Thank you for an elaborate answer. Thanks. ### Mr Adrian Seah, Head, Investor Relations Thank you. Our next question comes from Corey Okinaka from Capital. Corey, you may ask your question. H1 FY24 Results Briefing Conference Call 9 November 2023 Mr Corey Okinaka – Capital Group Thank you. Hopefully you can see me. Just a question for Kelly. I know that the MVNOs, specifically those on Telstra's network, are starting to raise prices, so Aldi I've seen has raised prices within the last month. You had mentioned that the capital markets day that that was an important aspect of driving growth in ARPU and for Optus and for Australia in general. Given the network outage, I know it's just yesterday, but do you see that as helping? Do you see that – do you think you'll be able to take advantage of that change or will there be delays in lower-end ARPU improvement? Thank you. ### Mr Yuen Kuan Moon, Group CEO Kelly. ### Ms Kelly Bayer Rosmarin, CEO, Optus Thanks. Yes. We definitely see the beginning of price movement in the MVNO segment and we're really encouraged by that. So there was an announcement that Aldi was moving its prices up and you might have seen that the next day amaysim also moved its prices up. So that market repair is starting. There is still a very large gap between the tier-1 and tier-2 pricing. So we're on the path to recovering that, but that gap does need to close further over time. We're very encouraged by those signs in the market. Again, I don't think there's any big strategic shifts that are going to come out of what we experienced yesterday. It was a very unfortunate outage. Our focus has, is and always will be on providing a resilient and robust network. So that aspect is not going to change. Hopefully, most of our customers know how even though we let them down yesterday how resilient we've been every other day and we're going to hope to prove that to them ongoing into the future. ### Mr Corey Okinaka, Capital Group Thank you. If I could ask just a quick follow-up to that, you mentioned that giving rebates to customers based on the lost time probably doesn't make sense, because it's so small. But I did see some news flow that the government was encouraging business owners to keep receipts and that there could potentially damages assessed or something like that. Do you have any view on whether or not that would be something that you might have to incur, like damages for revenues lost, for example, which might not be directly related to the amount of data consumed? ### Ms Kelly Bayer Rosmarin, CEO, Optus Yes. Look, we know how much people rely on connectivity and that's why we strive to give people a great connectivity experience every day that they can build their businesses off of and profit every day of the week. So obviously it's devastating for some businesses that they weren't able to do what they normally do. Many businesses have contingency plans in place that kicked into action and they were still able to move forward. Some weren't. That's a very case-by-case scenario. So our plan is to make sure that when we think about offering our customers a gesture of goodwill that we include in that our business customers. For those who've had particularly unique impacts, as always, they can speak with us and we're very good at tailoring responses and working with our customers to provide them the right level of support. H1 FY24 Results Briefing Conference Call 9 November 2023 Mr Corey Okinaka – Capital Group Thank you. ### Mr Adrian Seah, Head, Investor Relations Thank you. So our next question comes from Ranjan Sharma from JPM. Ranjan. ### Mr Ranjan Sharma, JPM Hi. Good morning and thank you for the presentation. Two questions from my side. Firstly, coming to – coming back to your cost measures and you talk about vendor consolidation, streamlining IT, does that change your relationship with NCS in any way? Any changes in the way you award RFPs as you pursue lower cost for the business? The second question is on the data centre side. Is it fair to say that your current data centres are seeing improving earnings? The earnings impact that you've seen in the current quarter is because of the new growth initiatives? So if you split out current versus growth initiatives, that these existing businesses are seeing improving earnings. If you can confirm that. Thank you. ### Mr Yuen Kuan Moon, Group CEO Yes. Ranjan, a simple answer to your second question is yes. The current business is improving. We are investing in the new business. ### Mr Bill Chang, CEO, Digital InfraCo So we're investing and until the new DCs come up and then we'll see that uptick in 2026 onwards, when the new capacities come onstream. Yes. Until then, we'll have to invest to build those DCs and have the teams to build those DCs. Thank you. ### Mr Yuen Kuan Moon, Group CEO Yes. In terms of your first question, Ranjan, I think in the cost-out, obviously, Singtel has always been very prudent in its procurement and process and we always want to make sure that we are buying in a cheap and reasonable manner when we call out a big tender. NCS is just one of many, many vendors that we have got. We have always been operating with NCS very clearly that while they're part of the Group, they have to be very efficient in delivering their service to us. So I don't think that's a big issue, Ranjan, of that. In fact, on the contrary, if you look at NCS growth has been quite significant in the last year and they've grown 9% year-on-year in revenue and EBIT has actually rebounded very strongly and the margin expansion have shown that we are now back to 10.8% on EBITDA margin. So maybe perhaps I can ask Kuo Pin to highlight a bit more about how enterprises are buying and where are we seeing the growth in NCS and that will give you a bit of colour of how enterprises are invested. ### Mr Ng Kuo Pin, CEO, NCS H1 FY24 Results Briefing Conference Call 9 November 2023 Thanks, Moon. Okay. I think maybe three points for NCS. First, I think we have a very strong pipeline flow over the last half a year and this is despite the uncertain market condition in general, there’s an 8.8% overall growth. The reason I like to believe is because we've been really selective in terms of markets and the services that we offer. So if you look at our three-axis strategy, we're very focused on outside Singapore markets like Australia, Greater China, Southeast Asia. We also spend a lot of effort, which is now reaping returns, to grow our enterprise business and also our Telco+ business. Actually, the major growth is actually in the enterprise side. I know your earlier question around Singtel but that's, for Singtel, we obviously treat Singtel both a parent as well as a client it’s really not a big part of NCS’s business. So I think the growth is really very well balanced across different industries. Also, I should emphasise that a large part of that growth is because of the new innovation and technology waves that we're seeing such as generative AI, AI in general, digital trust, the broader cloud and digitalisation, which is really fuelling a lot of the growth that we're seeing. So I think the first point is really around this very strong top line growth that we're seeing. I like to think if you compare NCS with NCS peers, which is really guiding downwards to the low single digit, we are probably in a pretty good state. My second point is around the steady marginal improvement that we have been escalating to. I think if you look back for four consecutive quarters, we've been seeing consistent improvement and I think that’s something which we are very pleased with. Moon mentioned that if you look at our EBITDA as a percentage of revenue today, excluding the reselling business, we're looking at 10.8% and I think that is really something that we are pleased with. This didn't clearly come about by accident. I think there were a lot of initiatives around improving our cost to serve, our optimisation around that, as well as the revenue growth certainly helped tremendously to lift up our margin. Finally, in terms of market positioning, we are very clear we need to differentiate in a market that is fairly crowded, there are very big players in Asia Pac. There's also the smaller boys and local SIs that you see. Where I think we differentiate is that very clear focus around the three strategic business groups that we have around governments, around enterprise, around telcos and also very clear value proposition which is really a very trusted party that can deliver huge complex, multi-year IT systems, which is not that common, plus the recent injection of the innovation elements that is setting us apart from our competition. Also the scale of where we are now, which is really sizable $1.4 billion of revenue in half a year is not, it's not small, I think we're the largest player in Southeast Asia today and will continue to grow. We're leveraging on all the resources we have across Asia Pacific to continue to be successful. So I think those are just my thoughts to summarise. Thank you. ### Mr Ranjan Sharma, JPM Thank you. ### Mr Adrian Seah, Head, Investor Relations Thank you. Our next question comes from Entcho from E&P. Entcho, please. ### Mr Entcho Raykovski, E&P H1 FY24 Results Briefing Conference Call 9 November 2023 Thank you and hopefully you can see me. So I have a couple of fairly quick questions. I suspect they'll be for Kelly. The first one is just wondering what percentage of the Optus back book has been repriced to date to be in line with front book pricing and whether you expect the outage yesterday will stop that repricing at least in the near term? So that's the first question and the second one, just looking at the prepaid ARPU at Optus, how do you reconcile the declines with the introduction of the new prepaid plans? Are you seeing fairly aggressive spin down from customers towards the lower price plans and more generally, any comments you can make around what you're seeing in consumer behaviour, that’d quite helpful. Thank you. ### Mr Yuen Kuan Moon, Group CEO Kelly? ### Ms Kelly Bayer Rosmarin, CEO, Optus Okay, great. I'll answer the second question first, just about prepaid ARPUs. That is entirely a mix effect. So yes, we are seeing an acceleration of customers taking tier two plans, given all the cost of living and inflationary pressures. So I think we've been talking about that for a while. It's why we feel so passionately that the differential in price between tier one and tier two needs to narrow because we're seeing an increasing spin down effect and that’s true of the entire market. So it's quite evident that that's accelerating. So that trend is also evident in our mix and that is why you’ll see the declining ARPU. In terms of the Optus back book repricing, we actually are a large way through in terms of moving our customers on to our in market plans. That's terrific for us because we've been able to simplify and drastically reduce the number of plans on offer for our customers and we're a large way through that. The last bit has been happening over the last few weeks. So we’re looking forward to, by the end of this financial year, having the vast majority of our customers on our in market plans. ### Mr Entcho Raykovski, E&P Kelly, maybe just a quick follow up is, is any front book repricing contingent on that back book being done, so essentially 100% of the back book being repriced? ### Ms Kelly Bayer Rosmarin, CEO, Optus No, I wouldn't say that. I think as I always say, pricing is something that we do dynamically. We are nimble, we are the customer champion. So we will look at the market conditions, the affordability, the value for money that we can offer our customers and we will try and make the very best decision on front book pricing that we think is right for our customer base and for the market. ### Mr Entcho Raykovski, E&P Okay, thank you. ### Mr Adrian Seah, Head, Investor Relations H1 FY24 Results Briefing Conference Call 9 November 2023 Thank you. We have time for just one last question, maybe from Somesh from UBS. Somesh, you may ask your question. ### Mr Somesh Agarwal, UBS Yeah, hi and thank you for the opportunity. So my question was to Kelly. Kelly, on the outage, could you give us an insight on any discussions that you have ongoing with the government regarding it in terms of repercussions, what you need to do to avoid a situation like this in the future and also if there are any ongoing discussions on possible penalties? Thank you. ### Ms Kelly Bayer Rosmarin, CEO, Optus Yes. Of course, we are a heavily regulated entity operating critical infrastructure, so we talk to the government all the time about how we keep that infrastructure up and running and robust. Of course, yesterday during the outage we spoke to government frequently, consistently, all throughout the day. I spoke myself to the Minister for Communications, the Deputy PM who’s the Acting PM because our PM was traveling, and our team were in contact with numerous departments and government organisations. Also, you’ll see that the government has announced that they’re going to do a few reviews into what occurred yesterday, one by the ACMA to test the veracity of our emergency systems and the failover that happens when there is an outage of this nature; one by the Department of Communications so that we can share learnings from outages that happen in the industry; and a Senate inquiry so that they can understand how Optus specifically responded. We are fully welcoming of all of those reviews. We ourselves want to learn as much as possible and prevent it from happening in the future and so we’re very supportive, and to cooperate with those reviews fully. ### Mr Somesh Agarwal, UBS Sure. To my second question, is there any probability of any possible penalties? ### Ms Kelly Bayer Rosmarin, CEO, Optus That’s not something that we’ve seen in the market ever before. Of course, nobody has an outage like that on purpose, so I think it’s just premature to even speculate in that direction. ### Mr Somesh Agarwal, UBS Okay. Thank you very much. Thank you. ### Mr Adrian Seah, Head, Investor Relations Okay. We have reached our… ### Mr Yuen Kuan Moon, Group CEO H1 FY24 Results Briefing Conference Call 9 November 2023 Adrian, let me do a quick wrap-up before we close. Thank you, everybody for joining us. I’d like to highlight some of the positive momentum that we have gotten from our strategic reset. As I presented earlier on, the Group ROIC has improved from 2.5 years ago until now, 8.3% as earnings of our core business and associates have grown. We have boosted our financial position with $7 billion of capital recycled which will cover our 5G and growth investments. We continue to do another $4 billion of recycling in the next two to three years. Shareholders have also directly benefited from these positive developments with the $4 billion of dividends declared in the last two years and today we have declared another increase in interim dividend to 5.2 cents, a 13% increase over last year. In addition, we have also commenced a 2.5- year $600 million cost-out programme to improve operational efficiency. As you can see, we are way underway in delivering our strategic reset. Thank you. ### Mr Adrian Seah, Head, Investor Relations Thank you, Moon, for that very succinct summary of the strategic reset. We will have to end the call now to proceed for our next engagements. For those who were unable to ask your questions, we have noted down your names, and we will reach out to you directly to get your questions. With that, we thank you for your time and hope to see you next time. A transcript of today’s call will be posted on our website by Friday. On behalf of management and the Singtel IR team, thank you and goodbye.