Reprieve From Mounting Costs
Optus has clarified that 100,000-150,000 passport details were stolen during the data security breach. Following discussions with Australia’s federal government, Optus has announced that these affected customers do not need to change their passports, lowering the total expected replacement costs required, but Optus is still required to pay for driver’s licence replacements. Based on these new developments, we estimate a smaller impact on Singtel’s FY23 earnings. Maintain BUY with a target price of S$2.90.
• Singapore Telecommunications (Singtel) is expected to book in provisions and regulatory fine in 2QFY23. Our estimate – based on recent developments, suggests a potential provision amounting to around S$240m (7% earnings impact to our FY23 PATMI estimate). Our base case assumes a regulatory fine of A$2.2m, based on Australia’s existing Privacy Act law.
• Optus co-operating well with the government of Australia… Singtel’s wholly-owned Australian subsidiary, Optus, has clarified that out of the 2.1m customers who had personal identification document (ID) details compromised during its 22 September data breach, around 100,000-150,000 passports and 43,000 Medicare card details were stolen. Other ID details that were stolen include Pensioner Card, Photo ID/Proof of Age Card and drivers’ licences.
• …as Optus is spared from the full passport bill. Following discussions with the federal government, Optus announced that affected customers, whose passport details (valid or expired) were stolen, do not need to have their passports replaced. However, despite valid/current passports being safe to use for international travel, passports (up to three years past expiry) have been blocked by the federal government for online credit checks. If affected customers want to replace their passports, Optus would bear the replacement costs under specific circumstances, which applies to customers with valid/current passports and not expired passports. This is positive for Singtel as we previously expected 70% of the 2.1m customers affected (one current or expired form of ID stolen) require a change in passports, accounting for around 70% of the total expected reimbursement costs. With this new development, we expect total passport replacement costs to drop sharply by A$260m-310m to A$22m-34m for FY23, estimating that 100,000-120,000 (1.4m previously) customers would change their passports. As such, earnings impacts to our FY23-24 estimates are 4% and 3% respectively (significantly lower than our previous estimates of 11% and 3%).