Net profit fell 16% yoy, inline with our expectations, even as revenue fell 3% and EBITDA margin improved qoq as competition and operating costs eased. The yoy decline was due mainly to the weaker A$ hitting the topline (Optus: 60% of revenue) and regional currencies (in particular INR and IDR) compounding the weak operational results of associates.

Associates’ contributions fell 24% yoy due to weaker currencies, poor Telkomsel results and the mark-to-market losses of Telkomsel and Bharti. Bharti rode the relative immunity of the Indian market to the economic crisis but at group level, the gain was a mere 6.5%. Further, Telkomsel suffered significantly lower ARPU as it cut rates to gain market share.

Vodafone and Hutchison, No. 3 and 4 respectively in a four player market, announced a merger to form a stronger No. 3 in Australia, with revenue that is just 10% shy of Optus. They have historically been the most competitive players in Australia and they now pose a threat to Optus, where margins are already significantly lower than SingTel’s.

The change of guard at Temasek could lead to pressure on the stock. The incoming CEO, Chip Goodyear, is very likely to re-examine Temasek’s portfolio and this could lead to a restructuring of existing investments. Temasek last trimmed its stake in SingTel in Mar 2007 at $2.66 per share and in 2004, at $2.36.

We downgrade our call to Sell with a target of $2.11, based on 10x our revised FY09 forecast of $3359m (previously $3222m; revised on lower tax rate and tweaks to Singapore revenue). Although cashflow remains strong and dividend payout is not in doubt, higher capex guidance will cap dividend upside and already, yield is not terribly attractive at 5%.