Singtel Shares Slide After Second Optus Outage; Analysts Remain Optimistic
Shares of Singtel experienced a decline following a second outage affecting its Australian subsidiary, Optus. The latest incident disrupted emergency services calls, raising concerns about the telco's reliability. Despite the setbacks, analysts are maintaining a generally positive outlook on Singtel's long-term prospects.
Optus Outage Details and Impact
On September 28th, Optus, Australia’s second-largest telco, suffered an outage that impacted emergency 000 (triple zero) calls to police, fire, and ambulance services. This incident affected approximately 4,500 customers in the Dapto area of New South Wales (NSW) between 3:00 AM and 12:20 PM. Singtel stated that one individual requiring emergency services was affected but was able to make a call from another phone.
Singtel maintains that this outage is unrelated to a previous incident on September 18th and is a common issue encountered by carriers globally, not resulting from upgrade or maintenance. They stated it was limited to one cell site out of 3,140 in NSW.
Previous Outage and Government Response
The recent outage follows a prior incident on September 18th that affected South Australia, Western Australia, and parts of NSW during network upgrades. This earlier outage is linked to the tragic deaths of three individuals unable to make emergency calls. A Singtel delegation, led by CEO Yuen Kuan Moon, is scheduled to meet with Australia’s Communications Minister Anika Wells and Optus CEO Stephen Rue to discuss the initial outage.
Mr. Rue attributed the first outage to human error by staff in Australia and India who did not adhere to standard procedures during the upgrade. Minister Wells has warned that Optus faces significant fines for the September 18th outage.
Analyst Perspective and Future Outlook
Despite the negative press, analysts covering Singtel are not overly concerned. Mr. Paul Chew, Head of Research at Phillip Securities, believes Optus is capable of recovering, citing its history of successfully navigating larger disruptions. He also noted that Telstra, Australia’s largest telco, experienced a similar 000 outage, demonstrating that these issues are not unique to Optus. He stated Telstra experienced a power outage leaving some Western Australia customers unable to make 000 calls for 12 hours.
Phillip Securities is maintaining its "accumulate" recommendation for Singtel with an unchanged target price of $4.86. Other brokerages like Maybank also maintain their "buy" recommendations.
Regulatory Scrutiny and Investment
Optus faces increasing pressure from politicians and industry figures who are demanding an overhaul of minimum performance standards and greater enforcement powers for regulators. Ms. Nerida O’Loughlin, chairwoman of Australia’s federal telecommunications regulator, plans to investigate whether Singtel and Optus have adequately invested in their networks to ensure reliable emergency service connectivity.
Mr. Yuen stated that Singtel has invested over A$9.3 billion (S$7.8 billion) in Optus in the past five years, largely focused on building network infrastructure across Australia and will continue to invest as needed.
Optus was also ordered by the Australia Federal Court to pay a A$100 million penalty for "unconscionable" conduct between 2019 and 2023.
