Okay. A good morning to everyone, and a warm welcome to Singtel's results briefing for the half year ended 30 September 2023. We do apologize for the slight delay in starting this results briefing, as we were sorting out some things on our end. 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.
Thank you, Adrian. Good morning, everyone. Thank you for joining us. Let me start with key highlights for the half year. We faced a number of headwinds as macroeconomic 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 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 continue 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, unlocked another SGD 1.1 billion from a 20% stake sale of our data center business to global investment firm KKR, to use as growth capital, and completed the divestment of Trustwave. This put 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 SGD 0.052, as well as increased our payout ratio to between 70% and 90% of underlying net profits. On to key financial highlights. Our results for the half year was impacted by the strong Sing Dollar, affecting revenues and underlying net profit by SGD 338 million and SGD 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 asset recycling also generated SGD 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 reorganize 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 the strategic review of our digital investments, divesting both Amobee and Trustwave for SGD 500 million, as well as closed down HOOQ. More importantly, we've taken out EBIT drag of over SGD 200 million per year. With a 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 in the fiber broadband space. With all these initiatives, we remain on track to deliver low double-digit ROIC in the midterm. Let me elaborate on how we intend to take costs out of our core business.
We've launched a cost-out program to drive a 15% or $600 million reduction in indirect costs over the next two and a half years. It hinges on two key pillars: deliberating operational inefficiency, harnessing the power of digitalization to drive productivity. I assure you that our cost-out program 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 $5 billion of assets in the last two years and expect to receive another $2 billion, which has already been secured. We have another $4 billion to be unlocked in the midterm. Proceeds from asset recycling has placed us on a firm financial footing, reducing gross debt by $1.6 billion, while boosting cash balances to $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 SGD 0.052 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.
Thank you, Moon. We will now be taking questions. A gentle reminder to everyone to use the Raise Hand function to indicate your interest, and I will call your name shortly. We will also greatly appreciate if you could turn on your video when asking your questions. So the first question comes from us, from Arthur Pineda from Citi. Arthur, you may ask your question.
Hi. Thanks for the opportunity, just three questions, please, from my side. Can we get some color on what's driving the decline in data center profitability for this semester? When should we see that turning around? Second question is with regard to the cost savings targets of SGD 0.6 billion over three years. Can you please elaborate on this? And is this mainly OpEx, or are there any CapEx elements on this as well? I'm just wondering on the impact on the margins. Last question is with regard to Optus. What are the observations on Optus subscriber base post-network outage? Has there been any indications of potential parting out activities? Thank you.
Thank you, Arthur. Maybe I'll just cover briefly, all the three questions, and I'll hand over to Bill and Arthur to talk about DC and, OpEx, the cost savings out, details. I will take the Optus question. I think it's definitely, Arthur, too, early to tell, any impact on customer, 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 want to make sure that if there's any gaps identified, we'll improve on them. I think that's the current status. For data centers, of course, we are in investment mode.
We are building up the new Tuas data center, the Batam data center, as well as the Bangkok data center. Our existing data centers are all fully filled, and I will let Bill elaborate a bit more on that.
Yeah. Thank you, Moon. Arthur, thank you for the question. So, like Moon said, we are 100%, or I should say 99.5%, built in our two current DC assets in Singapore. And, what's happening is, we're building new DCs, DC Tuas. That will be coming on stream towards the end of 2025. So monetization will happen in 2026 onwards. So, and then those in Bangkok and Batam will also come in 2026, late 2025-2026. 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 into the region with our JVs and also those in Singapore. And so there'll be OpEx sort of investments there, and as well as capital investments in building the three DCs.
Yeah, so this is the, you know, sort of, 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, you know, customers are, you know, paying for the energy that they consume themselves. Now it's over 80% of those contracts are all passed through, and we're increasingly doing that, you know, in, in, as co-contracts come up for renewal. Other than that, it's just a price uplifts through the contractual negotiations on those capacities has been maxed out.
Okay. Thank you.
Uh, Arthur?
Yeah, sure.
Arthur, just to build on what Bill said on data centers, and I'll talk about the cost outs later. You know, if you look at this slide that's in front of you, the EBITDA margins for the RDC business is a very healthy 57%. You know, as 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, you know, the team and building up the, effectively, the regional platform, right? And then, of course, once it's constructed, it's completed, you know, you'll see a big jump in the EBITDA. And that's perhaps why KKR paid, you know, the valuation. It is really for the future build-out of the capacity.
So we do see the EBITDA margins falling, we have mentioned this before, to more industry standards. But I would say, you know, with the growth in the industry, we are of course managing that, but we're in growth mode, right? So like, like most data centers that are in growth mode, you, you see the EBITDA margins coming out, but once it's completed, you see that jump. On the cost outs, if I could ask that, we go to the next slide. You will see it's about SGD 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 covered Singtel for a very long time. You know, last time I remember, you probably have to look at, for Singapore, the GBE 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, right? And as a result of that merger, there will definitely be, I would say, simplification synergies that you see, right? You know, whether it's all the details there, even the consolidation of vendors, that's where we can actually generate a lot of cost synergies.
I think the second bit is with, you know, the event of AI and-
... And digitalization, I think there is a significant way for us to actually leverage on that and reduce our overall cost to serve. And then finally, energy, right? I think it is where we will, you know, kind of, again, use new AI and ML to really optimize our usage. There is some workforce optimization where we will upgrade jobs, basically, you know, with what we are doing. I think there's an ability for us out there. 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, you know, 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. And we will continue to come out with some CapEx guidance every year. We have said to the market that, you know, we are very focused on ROIC, right? Which would mean that, you know, it has to be not just OpEx, but it's also CapEx efficiency. We've 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.
Very clear. Thank you very much.
Thank you. Thank you, Arthur. Our next question comes from Eric Choi, from Barrenjoey. Eric, you may ask your question.
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 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, like, what picks up the slack to get you there? And 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.
Thank you. Maybe I'll handle the ROIC questions, and Arthur can elaborate, and Kelly, you come in and talk about how we're going to take care of our customers. First of all, I think if you look at the ROIC, you know, 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 two and a half years ago, probably around 6% ROIC, and now we are at 8.3%. And we say that the mid-term target is to go into low double-digit ROIC.
That's right.
Right? And actually, if you look at the—what Arthur had mentioned earlier on, we have actually removed some of the drags on, on our EBIT. Basically, we have divested the, negative EBIT business of MOB and Trustwave. That, has a drag of about SGD 200 million of,
Yes.
EBIT every year. So that is removed now. And 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 or autonomous unit, every business unit is very clear on what they need to achieve. You know, not just, not only in Optus but including Singtel Singapore, NCS, and Regional Data Center. So they are all very clear of the targets, immediate, in the target and further out, how they're going to improve ROIC. So we will be very disciplined to look at how we deploy CapEx in a very efficient manner and continue to look at synergies in optimizing our OpEx.
I think maybe, in terms of, you know, every market that we operate in, mobile is actually a very big part of our business. We are seeing positive momentum on market pricing more rationally in our associates market 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. 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, you know, if there's enough market discipline by all the players, you'll see that the business will continue to improve organically, and we layer on the productivity improvement that we put in, then the overall business bottom line will improve. Maybe, Kelly, you talk about the, you know, the cost and maybe also about some of the things that you're doing to support our customers.
Yeah, great. So, thanks for the question, Eric. Just on making sure that we can keep improving the ROIC in 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 losing 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 we'll continue to do so. I think Arthur articulated very well that a lot of the cost there 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 add to the simplicity 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. And 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 take that. Our focus yesterday was on restoring services to customers. That was our singular focus, and all about services of our 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 services are restored. We understand that the number one thing customers want is for their service 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 on a 49-dollar plan and they didn't have service for a day, that would equate about AUD 1.60. And we don't think that's what customers want, is a credit for AUD 1.60.
So 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. So 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.
Thanks, Kelly.
Thank you. Our next question comes from Piyush Choudhary from HSBC. Piyush, you may ask your question.
Hi, good morning. Thanks for the opportunity. Two questions. In 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. So 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 program, where you expect synergies or cost out of SGD 200 million in fiscal 2024, is some cost out already realized in 1H, or this is entirely for the second half of 2024... Thank you.
Yeah. Piyush, I think. 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, you know, 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 unlock it first. That's our focus. And 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 SGD 0.052, a 13% up, and obviously also increase the range to 70%-90% of a growing underlying profit. So this will, in itself, give it a 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?
Sure. I think, you know, Moon covered most of the points. I would add, Piyush, is that, you know, I think this is a, you know, it's a fiscal year play, right? I mean, so we're only halfway into the financial year. You are right. Moon has actually said it. You know, we. You know, if you look at what we laid out in terms of what we want to achieve, in terms of the strategic reset, whether it is ROIC, whether it is the sale of our strategic reviews of all the digital non-core assets, whether it's simplifying the business, whether it's capital recycling, I would say we've delivered on all that, right?
The balance sheet today, in an interest rate environment where interest rates actually triple, we cut interest expense by 10%. We paid down debt. We've got a SGD 3 billion cash balance, right? So you're right. I mean, investors or you are asking, you know, could we have done more special dividend and all of that? I would say is, you know, is we haven't finished the year, right? So let's see where things go, and then we will see. But I think it is very clear, while we create value for the company, we want to make sure that shareholders also realize some of that back.
All right. On the Singapore side, I think I heard two questions. One was about giving a quick flavor of consumer enterprise, and the other one was the cost out, I believe. I heard that. So, just a quick soundbite. On the business overall, 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 with more value add.
... To our customers, you know, through security as well as our roaming data, et cetera. And the good news is, as we revamp the plans, we see a higher take-up rate since two months ago when we launched on the higher tier plans. So we feel pretty positive. And we do see, as traveling has picked up out of Singapore, travelers are up. Overall, outbound travelers have rebounded to about 92%. On the back of that, we have seen our roaming performance, you know, recover year-on-year. That's contributed, as Moon said earlier, to the mobile services revenue. So that's good news, and we'll continue to work on that. And we recently also launched for inbound travelers, a prepaid tourist e-SIM option as well, you know, so we offer the convenience and all that.
Overall, even from a broadband perspective of consumer, we see strong take-up in our 2Gbps offer. So it's good news. Customers are, you know, wanting better connectivity, et cetera, for hybrid work, entertainment. We see that, so we're offering good deals, and we see a good take-up. And 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 data through an API. So 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.
So there are areas that, that we're working on that we feel are good, and we'll continue to focus on this, plus the overall Internet of Things connectivity. Overall, from a cost side, I don't think I have much to add beyond what Moon and Arthur had shared. We're, we're really looking to simplify our products, simplify our organization, create a more agile, and as a result of that, you know, 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 organization, October, so it's early days for us. We're off the starting block, but have a good line of sight to all the things that has been said.
Got it. Thank you. Just to clarify the cost out for SGD 200 million, which you have for fiscal 2024. I wanted to check if you have realized some benefits already in the first half, or the entire SGD 200 million savings will come in the second half across Singapore and Australia. This is for-
Yeah, so, Adam, I'm happy to answer for Australia. So 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, and 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%. We're always managing the counter balance of both of those. But yes, some of that almost 200 in the first year on this chart has been realized in the first half, with more to come in the second half.
Yeah. I think from a 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 got a very clear plan and line of sight to what to do. We started our early actions to contribute our portion for the year, but quite clearly, we're ready to deliver in FY 2025 and 2026 as well.
Thank you very much, everyone.
Okay. Thank you, everyone. Our next question comes from Darren Leung, who's from Macquarie. Darren, you may ask your question.
Morning, guys. Thanks for the opportunity. I just had two, please, both mainly for Kelly. Just thinking about the marketing spend, so do you think the marketing strategy for Optus, you know, will change, you know, post the outage yesterday from, you know, one that was sort of ARPU and price-led to more of a market-share strategy? And while I might as well ask my second question as well, just any comments you can provide in terms of significant conversations with enterprise customers as well, please. Particularly given some of the commentary that's come out in relation to to government customers, please.
Sure, yeah, 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 apologizing to customers, putting in place marketing messages that we knew were tried and tested and resonated, and building back trust. And as a result, we did see an improvement in our brand sentiment and an increase in our brand value over the last year. So 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, 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 have been successfully on the enterprise side. Of course, we keep 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's in good stead moving forward, and that we've taken care of our customers and done what they've expected of us.
Got it. That makes sense. Thank you. Thank you.
Thank you. Our next question comes from Sachin Mittal from DBS. Sachin, you may ask your question.
Yeah, thank you. Two questions. Firstly, again, I'm sorry to harp on the cost cutting. The question is, we have always seen revenue growing slower and then inflation impact, 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 we could see, because SGD 200 million is a big number, 8% or 8%-9% of the group earnings. How confident we are, you know, a portion of this, I don't know, 30%-40%, would flow to the bottom line? 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, you know, how we can see the actual impact on the bottom line flowing from the cost savings. That's question number one. And question number two, on the enterprise side, every telco talks about getting enterprise business. So... And we also know there's a bit of macro softness. So are we seeing a loss of market share coupled with, you know, or probably lower margin in the enterprise side? Because every telco literally gunning for this market share. So is it ICT guys losing market share to telco? What is the overall trend in the enterprise side?
Looks like everyone sees enterprise as an avenue of growth, which actually is not coming through. Thank you.
Yeah. Sachin, I think it's a very good questions. And I think you probably need 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, right, the mobile business of both Singapore and Australia has actually improved and grown 2% and 3% in revenue. And unfortunately, because of the strength of the Singapore dollar, you come back and you translate it into a revenue decline of 3% on, if you roll up the two, Australian Singapore business. So that's the first thing.
The EBIT pressure actually comes from both Australia and Singapore, is on the enterprise space, and it is, so it's related. So what we are doing in the cost cutting side is actually have some improvement on some of our core business. But the particular weakness on the EBIT we are seeing here is directly related to some projects that have rolled off compared to a year ago, and Jin Zhang can elaborate a bit more. And this is really due to the sort of infrastructure ICT program that has rolled off, so it's project-based. In terms of the enterprise growth and people are talking about it, and a lot of these are actually coming from different type of enterprise business.
You will see this from the results of NCS. NCS is growing ICT rapidly. If you compare to last year, the growth is 7.8% in terms of profitability, and that is on the back of a strong 9% revenue growth. This is really because companies are actually investing in digitalization, investing in automation, investing in GenAI, and so this actually helps to drive this part of the business. Some of the telcos are, when they talked about it, they are also looking at capturing this type of growth, right? Whereas on the telco enterprise that Jin Zhang talked about is really more about the traditional no 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.
So I think it's both are enterprises, but it's actually different types of enterprise business. Obviously, we have not shown this specific cost out program in the past. Precisely, you know, 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, we are operating in a very high inflationary environment, right? The inflationary environment in Australia, as what 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, right? So on the other hand, in Singapore, there's also other inflationary prices.
Transportation costs have gone up, delivery costs have gone up. So whenever you operate in a high inflationary environment, you have to continuously take up costs. And in this time, why we are able to cover and show this specific cost out is really because of the structural change that we have got. That means in Singapore, we have consolidated the enterprise and consumer business. And you look at the description that we talked about, it's really about operational, reducing operational complexity, using technology to do more digitalization and automation, and decommissioning legacy system, simplifying our business. So all this will drive cost savings, and we have identified that. Tian Chong can maybe add, elaborate more on that.
Yeah. I mean, the timing topic, you know, why we need to see first half? Like I said, for Singtel Singapore, which is a very profitable portfolio, part of Singtel Group, we only announced the new organization October. So we've just started, like I said earlier, and you will see that translate going forward. Now, in terms of the enterprise business, you know, we obviously, along the lines of what Moon said, we are seeing enterprise customers moving from traditional connectivity to new ways to communicate. And 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 and profile.
While we continue to do well in the traditional businesses, we also have equally rich offerings in the new connectivity, and we are pursuing that with equal vigor. And we've got all those things in place, you know, while we work with Moon and other organizations like GSMA to build out the APIs to our core telco data, where we can monetize that as well. So 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, you know, both Australia and Singapore, we're working along these lines as well.
Yeah. Kelly, maybe you would like to elaborate a bit more about the simplification of our Optus enterprise business. I think it go through a lot of simplification as well, and some of the savings are actually as a result of that.
Yeah, absolutely. So, 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 focused 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 us having multiple legal teams, procurement teams, marketing teams, we've been able to bring all of those together, keeping them with a flavor on targeting different individual segments, but leveraging a core capability that can be shared.
That's enabled us to remove a lot of cost and complexity. We've also been focused on developing a clearer product catalog, so that we have a rationalized number of products and services that we are offering our customers moving forward. We've implemented new pricing disciplines around that, and we continue to look at ways to simplify that catalog even further. We're also looking at how many different partners, we have, whose services we onsell to customers, 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 programs that are underway that give a lot more clarity, focus, simplification to our teams. We've removed a lot of duplication, and we've been able to take out a significant number of, of people as a result.
We've also been able to work on our non-staff costs as well.
Yeah.
That program will continue.
Yeah. 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 have 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.
Thank you, Moon. I hope you can hear me well.
Mm-hmm.
I think this is a very exciting new journey for us, because the combination of consumer and SMB is a new for Singtel. It was combined, I think, some years ago, but in recent years, it is really run separately. And 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 the analytics and the reward 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 reward 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 or 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 next cycle to renew their plans and also get a new handset from us for the next cycle, and also to extend some roaming benefits for 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, and we will keep pushing in terms of giving more benefits to customers and also deriving more efficiency from our operations.
Okay. Okay, thank you for an elaborate answer. Thanks.
Hi. Thank you. Our next question comes from Corey Okinaka, from Capital. Corey, you may ask your question.
Thank you. Hopefully, you can see me. Just a question for Kelly. You know, I know that the MVNOs, specifically those on Telstra's network, are starting to raise prices. So Aldi, I've seen, has raised prices kind of within the last month. You had mentioned at the capital markets day that that was an important aspect of driving growth in ARPU and for Optus and for Australia in general. Given kind of the network outage, I know it's, you know, just yesterday, but do you see that as helping? Do you think you'll be able to take advantage of that change? Or, will, you know, there be delays in kind of lower-end ARPU improvement? Thank you.
Kelly?
Thanks. So yes, we definitely see the beginning of price movement in the MVNO segment, and we're really encouraging 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 the Tier 2 pricing, so we're on the path to recovering that, but that gap does need to close further over time. And so we're very encouraged by those signs in the market. And again, I don't think there's any big strategic shifts that are gonna 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.
And so that aspect is not gonna change. And 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 gonna hope to prove that to them ongoing into the future.
Thank you. And if I could ask just a quick follow-up to that. You know, you mentioned that kind of 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 be, you know, 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?
Yeah. 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 to 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. And then 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.
Thank you.
Thank you. Our next question comes from Ranjan Sharma, from JPM. Ranjan?
Hi. Good morning, and thank you for the presentation. Two questions from my side. Firstly, 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 costs for the business? The second question is on the data center side. Is it fair to say, like, your current data centers, you're 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, at least the existing businesses seeing improving earnings. If you can confirm that. Thank you.
Yeah, Ranjan, a simple answer to your second question is yes.
Yeah.
The current business is improving. We are investing in the new-
... 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 on stream. Yeah, until then, we'll have to invest to build those DCs and have the teams to build those DCs. Thank you.
Yeah. In terms of your first question, Ranjan, I think in the cost out, obviously, Singtel has always been very prudent in its procurement and so 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've got. We have always been operating with NCS very clearly that while they are 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, on 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 the 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 Ng 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 color of how enterprises are investing.
Thanks, thanks, Moon. Okay, so I think three, maybe three points for NCS. First, I think we had a very strong top-line flow over the last half a year, and this is despite the uncertain market condition, I think, in general. There's an 8.8% overall growth. And the reason I like to believe is because we've been very selective in terms of the markets and the services that we offer, right? 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 class business. Actually, the major growth is actually in the enterprise side.
You know, I know your earlier question around Singtel, but, well, Singtel, we will obviously treat Singtel as both a parent as well as a client. It's really not a big part of NCS business. So, I think the growth is really very well-balanced across different industries. And also, I should emphasize 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 digitalization, which is really, you know, fueling 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 with the lows in the digit, we are probably in a pretty good state. My second point is around the steady margin, improvement that we have been executing to. I think if you look back for four consecutive, consecutive quarters, we've been seeing consistent improvement, and I think this is 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, we are pleased with. And, and this didn't really come about by accident.
I think there were a lot of initiatives around, you know, improving our cost to serve, our optimization 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 AsiaPac. 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 government, 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. One point four billion of revenue in half a year is not small. I think we're the largest player in Southeast Asia today, and we continue to grow. And 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 summarize. Thank you.
Thank you.
Thank you. Our next question comes from Entcho, from E&P. Andrew, please.
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 outages that they 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? I mean, 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 behavior, that'd be quite helpful. Thank you.
Okay, great. I'll answer the second question first, just about prepaid ARPUs. That is entirely a mixed effect. So yes, we are seeing an acceleration of customers taking Tier 2 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 1 and Tier 2 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. And so that trend is also evident in our mix, and that is why you see the declining offers. In terms of the Optus back book repricing, we actually are a large way through in terms of moving our customers onto 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 long way through that. The last bit has been happening over the last few weeks. And 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.
Kelly, maybe just a quick follow-up. Is any front book repricing contingent on that back book being done? So essentially 100% of the back book being repriced?
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.
Okay, thank you.
Thank you. We have time for just one last question, maybe from Somesh, from UBS. Somesh, you may ask your question.
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.
Yes, of course. We're 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 of 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 organizations. 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.
A Senate inquiry, so they can understand how Optus specifically responded. We are fully welcoming of all 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 aim to cooperate with those reviews fully.
Sure. To my second question, is there any probability of any possible penalties?
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.
Okay. Thank you very much. Thank you.
Let me,
We've reached our mark.
Adrian, let me do a quick wrap-up before we close.
Okay.
So thank you, everybody, for joining us. But I'd like to, you know, highlight some of the positive momentum that we have gotten from our strategic reset. You know, as I presented earlier on, the group ROIC has improved from 2.5 years ago to 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 this positive development, with the $4 billion of dividends declared in the last two years. And, more...
Today, we have declared another increase in interim dividend to SGD 5.02 , a 30% increase over last year. And in addition, we have also commenced a 2.5-year, SGD 600 million cost-out program to improve operational efficiency. So, as you can see, we are way underway in delivering our strategic reset. Thank you.
Thank you, Moon, for that very succinct summary of the strategic reset. We will have to end the call now to proceed with our next engagements. For those who are 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. So on behalf of management and the Singtel IR team, thank you and goodbye.
Thank you.
Thank you. Thank you all.