Strong performance continues, double digit revenue and profit growth
Group raises dividend payout ratio to between 40% and 50%

Singapore & Sydney, 6 November 2003 - Singapore Telecommunications Limited
(SingTel) today announced its unaudited results for the second quarter and half year ended 30 September 2003.

Highlights

Group

The SingTel Group's results for the quarter ended 30 September 2003 showed strong growth in underlying earnings. The appreciation of the Australian Dollar against the Singapore Dollar also helped performance. Group revenue increased by 16 per cent to S$2.85 billion. Operational EBITDA rose 13 per cent to S$1.04 billion.

The regional mobile associates ¹ continued to perform very well. SingTel's proportionate share of these companies' EBITDA rose 55 per cent to S$340 million. Overseas operations contributed 63 per cent of the Group's proportionate EBITDA. In terms of revenue, 73 per cent was from outside Singapore.

The Group's net profit after tax rose 14 per cent to S$473 million. Excluding goodwill, net profit rose 10 per cent to S$636 million. Double digit earnings growth was achieved despite an exceptional gain of S$228 million recorded in the September 2002 quarter from the disposal by Belgacom of its investment in BEN Nederland.

The results for the half year ended 30 September 2003 show operational trends broadly in line with those for the quarter. Net profit (pre-goodwill) for the six months rose 80 per cent to S$2.0 billion. This included exceptional gains from the SingPost and Yellow Pages divestments in the first quarter. Excluding exceptional items in both periods, net profit (pre-goodwill) increased by 24 per cent to S$1.31 billion.

Mr Lee Hsien Yang, SingTel President & CEO, said: "These results reflect the continued strong financial performance of the Group, with the Singapore business continuing to generate robust cash flow and SingTel Optus delivering further operating improvements. Our regional mobile associates are also growing rapidly, in terms of profits and dividends.

"The Group has executed its strategy successfully and has met its commitments to investors. In recognition of our success in growing free cash flow and reducing leverage, we intend to adjust our dividend policy to reflect this."

SingTel

Despite difficult market conditions, the Singapore business maintained its operational EBITDA margin at 51 per cent.

Data and Internet revenue for this quarter was S$279 million, comparable to the preceding two quarters although a 6.2 per cent decline year-on-year. Demand for broadband services remained robust. Compared to the last corresponding quarter, the number of ADSL lines more than doubled to 219,000 and broadband revenue increased 126 per cent to S$56 million.

For mobile communications services, monthly postpaid churn fell to an all time low of 1.2 per cent despite the introduction of free mobile number retention in August 2003. Subscriber acquisition cost fell sharply to S$130 this quarter, from S$212 in the preceding quarter.

Mobile revenue was S$206 million for the quarter, an increase of 2.5 per cent from the preceding quarter and a dip of 2.1 per cent year on year. Compared to July 2003, the number of SingTel's postpaid subscribers rose in August and again in September.

In the international telephone market, outgoing international and transit traffic was stable. However, lower collection and inpayment rates contributed to revenue decreasing 16 per cent to S$194 million.

SingTel's share of this market is 77 per cent, a significant achievement given that the Singapore market has been fully liberalised for more than three years. International telephone services in Singapore today account for just 7 per cent of Group revenues.

Revenue from IT and engineering services increased 5.6 per cent to S$124 million. This included contributions from IPACS which was acquired in October 2002. Excluding IPACS, the increase would have been 2.9 per cent.

SingTel's total revenue for the quarter was S$1.0 billion. Excluding the postal and directories operations in the last corresponding quarter, this was a decline of 7.1 per cent.

Tight management of costs enabled SingTel to maintain its operational EBITDA margin. SingTel's operating expenses for the quarter amounted to S$504 million.

Excluding SingPost and Yellow Pages in the last corresponding quarter, operating expenses declined 2.8 per cent. Staff costs edged up 1.6 per cent, including a modest expense for SingTel's performance share plans.

Traffic expenses fell 15 per cent due partly to a 12 per cent decline in the average outpayment rate. Higher interconnect costs were driven by higher SMS traffic, which increased 17 per cent.

Selling and administrative expenses increased 1.6 per cent with the introduction of inter-company charging between SingTel and SingPost. Excluding payments to SingPost for postage and counter services, selling and admin costs were stable.

SingTel's free cash flow² during the quarter grew strongly to S$418 million from S$111 million in the last corresponding quarter. With the completion of the C2C cable network, SingTel's capital expenditure during the quarter fell sharply to S$85 million, and this brought the cash capex-to-operating revenue ratio down to 8 per cent from 16 per cent.

SingTel Optus

Optus continued its strong record of improved performance in the first half with significant gains in net profit, increasing market share and improved margins. This quarter was characterised by strong double digit revenue growth and EBITDA growth across all business divisions.

Net profit after tax for the second quarter was A$90 million, a substantial turnaround compared to last year. This takes Optus' net profit for the first half to A$190 million - a turnaround of A$266 million on the first half last year.

Revenue in the quarter was up 18 per cent to A$1.57 billion with operational EBITDA growing 43 per cent to A$459 million (excluding C1).

"At the half way mark, Optus is in a strong position," Optus Chief Executive, Mr Chris Anderson said.

"These results reflect consistent performance over 18 months and this is the seventh successive quarter of double digit revenue growth for Optus. We have sustained our revenue momentum. We are growing at a significantly greater rate than the market and our cash flow continues to improve.

"Operational EBITDA margins continued their improving trend, reaching 29 per cent compared to 24 per cent for the same quarter last year. This was driven by improving margins across the business. It shows that Optus is on track for the important 30 per cent margin target set," Mr Anderson said.

Optus continued to deliver very strong cash flow growth. It delivered A$231 million of cash flow before borrowings in the second quarter - more than four times the same quarter last year. Operating cash grew by 67 per cent to A$459 million.

Capex was A$157 million or 10 per cent of revenues. Optus expects to spend more on capex in the second half on projects such as mobile coverage expansion.

Optus Mobile continues to deliver profitable growth and is delivering strong operating margins. Its total revenues were up 21 per cent to A$843 million, with service revenues up 19 per cent for the quarter. Mobile maintained its operational EBITDA margin of 38 per cent. Total customer numbers grew by 17 per cent to more than five million.

The results reflect mobile's successful focus on higher value customers and reductions in unit subscriber acquisition and retention costs.

Consumer and Multimedia (CMM) has delivered positive cash flow for three consecutive quarters - establishing a sustainable trend. It has generated a positive cash flow of A$39 million for the half year - six months earlier than management had previously predicted.

In achieving a position of sustainable positive cashflow, CMM has executed a remarkable turnaround. As recently as FY 2002, CMM's funding requirement exceeded A$400 million. The division's focus on broadband and bundling has delivered strong top line revenue growth of 24 per cent to A$376 million.

The total number of Internet customers increased by 27 per cent compared to the same quarter last year. Broadband Internet customers increased by 62 per cent. Total Internet customers now stand at 646,000.

CMM's major drivers of margin improvement have been customer growth, bundling and cost base reduction including lower subscription television costs.

Optus Business and Wholesale achieved a key milestone, launching the C1 satellite during the half year. Overall revenues for the two divisions rose 5.4 per cent to A$362 million this quarter. Combined EBITDA margins increased by four percentage points to 25 per cent (excluding C1) with continued focus on costs delivering this result.

Optus Business saw underlying revenue growth of 4.4 per cent with corporate voice revenue increasing by 16 per cent. Domestic data and IP revenues grew ahead of market growth but international data remained challenging, with the market characterised by sharp price decline. Optus Wholesale saw a 7.6 per cent increase in revenue. This is an excellent result given tough conditions in the wholesale market.

Associated companies

The Group's share of pre-tax profits (before exceptionals) from its associates rose 78 per cent to S$321 million. This was driven by a 49 per cent increase in the subscriber base of the four regional mobile associates to 34.2 million. Including Optus and SingTel, the Group's regional mobile base was 40.8 million, Asia's largest outside of China and Japan.

Among the associates, the three largest contributors to the Group's earnings were Telkomsel, Belgacom and AIS. There were also positive contributions from Globe, Bharti, SingPost and PT Bukaka.

Telkomsel increased the Group's share of pre-tax profit by 75 per cent to S$118 million. Profit growth was spurred on by a strong operating performance as its mobile subscriber base went up by 76 per cent to 8.8 million.

Higher revenues, lower operating expenses and a stronger Euro were the main factors in the 48 per cent rise in contribution from Belgacom, amounting to S$89 million for the quarter.

Contributions from AIS rose 87 per cent to S$68 million on the back of a 20 per cent increase in revenue. Operating expenses were also well controlled. AIS’s subscriber base increased 30 per cent to 12.7 million.

During the quarter, dividends received from associates rose sharply. Ordinary dividends increased four times to S$171 million and there was also a special dividend of S$110 million from SingPost.

SingTel has had a consistent track record of making profitable investments. As it moved its strategic focus to Asia in the second half of the 1990s, the Group divested a number of major non-core assets. This resulted in substantial gains on disposals amounting to some S$950 million. Exceptional gains of S$705 million have also been recorded this half year from the disposal of the postal and directories businesses.

Similarly, investments in its regional mobile associates have also been a success. The three listed companies - AIS, Bharti and Globe - have market values that are on average 80 per cent higher than SingTel's cost of entry. Non-listed Telkomsel had first half profits of approximately S$230 million, proving an annualised return of 24 per cent on SingTel's investment of S$1.9 billion.

Financial position

The Group's free cash flow for the quarter at S$763 million was 3.5 times that for the last corresponding quarter. This reflected improved cash flow at Optus and higher dividends from associates.

Net debt was reduced to S$8.1 billion as at 30 September 2003, even after the payment of the FY 2003 final dividend (S$765 million), purchases of short term investments (S$274 million) and net interest expense (S$109 million). Net debt gearing was 32 per cent. Net debt was 1.4 times EBITDA and EBITDA interest cover increased to 14 times from the preceding quarter.

Dividend policy

The Group is committed to maintaining its strong investment grade credit ratings. The current dividend policy is to target a dividend payout ratio of 30 per cent to 45 per cent of net profit after tax and before goodwill.

Effective immediately, SingTel is increasing its payout ratio target range to between 40 per cent and 50 per cent of net profit after tax and before goodwill and exceptionals. If exceptional items result in significant cash flow, the Board will review alternative capital management strategies including a special dividend or share buyback program as appropriate.

Refinement of strategic focus

In recent years, the strategic focus of the Group has been on execution and maximising the value of its existing businesses and its regional franchise. This has included reviewing opportunities to increase shareholdings in existing associates. Consistent with this approach, Optus has been successfully integrated and the shareholding in Globe has been increased.

Stronger free cash flow and disposals of non-core assets have allowed the Group to reduce leverage to within target levels. SingTel now has the flexibility to adopt a more generous dividend policy and - on a selective basis - to consider new investments. The geographic focus will remain in Asia, and on strategic investments where SingTel can add value by taking an active role in management, and which can be funded from internal cash flow generation.

Outlook

The Group expects consolidated revenue and operational EBITDA to increase for the full year. There is no change to its medium term objective of growing earnings at double digit levels. The outlook for the Group's operations outside of Singapore continues to be positive.

In Singapore, SingTel expects to generate free cash flow exceeding S$1.5 billion for the year. This includes S$135 million of dividends from SingPost in the second quarter, and a further S$90 million special dividend expected from SingPost in the December 2003 quarter.

In Australia, Optus has a goal of increasing operational EBITDA margins to 30 per cent, although margins may fluctuate from quarter to quarter due to seasonal impacts. Due to strong revenue growth and margin expansion, Optus has increased its guidance for operational EBITDA growth for the year to approximately 30 per cent.

Optus has also increased its guidance for free cash flow before interest expense to approximately A$800 million, consistent with its expectations of higher operational EBITDA growth. It expects to be significantly net cash positive for the year as a whole.

The profit contribution from the ordinary operations of associates should continue its trend of strong underlying growth, with an increase in the contribution by regional mobile associates of at least 50 per cent for the full year. This includes the impact of an increased holding in Globe.

Please refer to the Management Discussion and Analysis document for a full commentary on the Group's results as well as on the outlook for the current financial year.

¹ Advanced Info Service (AIS), Bharti Group, Globe Telecom and Telkomsel.
² Cash flow from operating activities less cash capex.

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