Singtel Broker Report Asian Capital Markets October 2007

Singapore

Telecommunications

SingTel Ltd

Reuters: STEL.SI Bloomberg: ST SP Exchange: STI Ticker: SGT.SG

Regional growth attraction BUY

Singtel Performance Highlights

SingTel reported 1Q operating revenue of S$3,567m (+10.5% yoy) and net profit of S$927m (+10.4% yoy). Moreover, EBITDA increased to S$1,769m (+9.2% yoy). Its main subsidiaries SingTel and Optus saw slower single digit growth compared to its regional associates which contributed to the strong performance with a recent acquisition of WARID Telecom from Pakistan. A SWOT analysis of Singtel's current position can be found in Apendix 1.

Singtel Competitors and Competitive Strategy: Singapore, Australia

Local competitors in Singapore include M1, Starhub and Virgin, with Starhub being its main competitor ranging from mobile, landline, internet and recently payTV.

In saturated local markets, Singtel as a market leader is defensive in its mobile market share at 50%. As such it looks for growth initiatives such as entering the payTV market, enhancing its internet services and engaging in an aggressive strategy of service bundling with its "Generation Mio" to rival Starhub which previously used service bundling to gain market share.

It is also looking to gain more business customers by providing converged networks and services through its SingTel Meg@POP domestic IP VPN service.

In Australian's current telecommunications environment highly competitive with narrowing margins. Subsidiary Optus is looking at sustainable growth at through cost cutting and expanding on its broadband customer based which has seen the most profit growth.

Singtel Competitors and Competitive Strategy: Regional associates

Singtel also aims for integration in the industry with ownership in networks and infrastructure with ownership stakes in 26 submarine cable systems, 3 satellite systems, Mobile network base stations and broad band networks. This investment is a foundation for more potential expansionary growth overseas. Its data and cable sales are second to its mobile sales (see operating revenue composition figure), and as such sets itself for future demand for bandwidth especially from its business customers.

The highlight of Singtel's Overall Strategy is expansionary growth overseas in growing emerging markets with current low to medium mobile market penetration as seen in Appendix 2 which maps Singtel's stakes in its regional associates and the recent 1 year growth.

Diversifying its revenue streams through investment in different countries and telecom sectors enables Singtel to lower its overall investment risk.

In addition to acquisitions, it is also looking to maximize value of existing businesses including opportunities to increase its stake in its regional associates by being more active in management of their regional businesses.

Singtel group is a Formidable global competitor with an aggregate subscriber base of 136 million at June 2007, making it the third largest Asian mobile group, but also see much competition from large Asian companies with the same growth goals as Singtel.

Singtel Annual report 2006/2007

Singtel: The effect of Merger and Acquisition Trends and global growth

With its current focus on expansion into high growth markets, the easiest way of successful entry into the market is through acquiring a stake in another telecom company where in this industry, network and size effects coupled with first mover advantages provides a competitive edge.

Singtel's large number of investments and acquisitions in the past few years are warranted to other large global competitors especially Asian companies which are also vying for stakes in companies in high growth markets in Asia.

The strong share price performance and Revenue earnings growth from Singtel's regional businesses attribute to 45% of its revenue, and are a testament to the benefits of investing in such markets.

Regional associates contribute 45% to group PBT

Source: Company, CIMB-GK Research

Source: Singtel Annual report 2006/2007

The challenge now is not only in gaining market share through acquisitions but also maintaining that high level of growth through creating synergies from the minor stakes in these companies such as leveraging in Singtel's technological knowhow and also its investments in telecom infrastructure, where we see Singtel currently sold stake in cable i2i to Bharti Airtel to support the much needed telecom infrastructure in India.

Interest rate and credit risk effects on Singtel

The main risks arising from the Singtel Group's financial assets and liabilities are foreign exchange, interest rate, market, liquidity and credit risks. With Outstanding net debt of 9.5 Billion, with 3.8 billion from post acquisition of Warid, interest rates and credit risk pose a higher threat with the recent subprime and contagion resulting in increased global interest rates and a credit risk.

Although Singtel has enough cash flow for its current financing costs, the opportunities to borrow through the bond market to finance its acquisitions may be impeded by higher interest rates. But this may be offset as Singtel has a large equity weighting in the Strait time Index at 10.75%, together with a good credit rating of A+ from S&P. Singtel also includes hedging policies to limit these risks.

Net Debt Stands at SGD $5.7 Billion

Source: Singtel Annual report 2006/2007

Valuation and Rating

We believe Singtel is a BUY with a target We believe that Singtel's highly liquid shares amist market uncertainty has proven itself to be an investment that investors flock to for reliable growth in earnings. . Its liquidity makes it an attractive proxy for regional telcos given expectations for possible