Impact of network outage in Australia
- Optus customers face nationwide outage in Australia
- Management confirms that Optus has not fallen victim to a cyberattack again
- Optus is a small contributor to Singtel’s net underlying profit; maintain BUY with unchanged TP of S$3.39.
Optus customers were left without a phone or internet connection on Wednesday after Optus experienced an unexplained nationwide outage. As per Reuters, Optus says some services are gradually being restored, Optus CEO says no indication of a cyber attack
While a matter of concern it is a bit of relief to know that Optus has not fallen victim to a cyberattack again. Australian government has raised the maximum penalties for serious or repeated privacy breaches drastically recently. It is being raised from the A$2.2m to the greater of A$50 million, three times the value of the benefit obtained through the misuse of information, or 30% of turnover in the relevant period. There could be some penalties due to the breach of service level agreement as it is a critical infrastructure, however, a bigger issue in our mind is a potential rise in the customer churn out if Optus is not able to fix this issue promptly.
Optus is a small contributor to the Singtel’s net underlying profit. Optus’ net profit of ~S$45n in FY23 was ~2% of group underlying profit so we don’t expect a big impact on Singtel’s net profit. However, in our model, we project Optus profit contribution to rise by S$65m in FY24F (~3% of group profit) so there could be limited impact on Singtel’s underlying net profit. Investors need to note that core operating profit which excludes associates is a critical metrics for Singtel’s share price and Optus contributes ~25% of the core operating profit. If core operating profit recovery is delayed due to this incident, Singtel’s share price recovery could be delayed as well. Will monitor developments.
We maintain BUY on Singtel with TP of S$3.39.