Telco M1’s 4Q18 net profit fell 21 percent on higher expenses

M1 location in Singapore Geylang neighbourhoodM1 location in Singapore’s Geylang neighbourhood

Singapore telco M1 reported on Monday its fourth quarter net profit fell 21.4 percent on-year to S$25.2 million on rising expenses and falling margins.

The net profit margin on service revenue fell to 13.4 percent in the fourth quarter, from 16.8 percent in the year-ago quarter, M1 said.

Revenue for the quarter ended 31 December rose 3.7 percent on-year to S$312.8 million on higher fixed services revenue and handset and equipment sales, it said in a filing to SGX after the market close on Monday.

For the full year, M1 reported net profit fell 6.0 percent to S$130.7 million on higher customer acquisition and retention costs, increased headcount from the expansion of the corporate segment, and higher repair and maintenance expenses.

Revenue for the full year rose 4.0 percent to S$1.09 billion, M1 said.

That missed a forecast from PhillipCapital for full-year net profit of S$133 million on revenue of S$1.08 billion. In November, Maybank KimEng had forecast revenue at S$1.07 billion, with net profit of S$128 million, while CGS-CIMB had forecast net profit of S$147.0 million and revenue of S$1.04 billion.

At the end of the fourth quarter, M1 said it had 1.38 million post-paid customers, up 7.1 percent on-year and 1.6 percent from the third quarter. However, its pre-paid customer numbers fell 23.4 percent on-year and were down 2.0 percent on-quarter to 572,000, it said.

Its postpaid mobile market share rose to 25.8 percent from 25.4 percent in the year-ago quarter, while its prepaid market share fell to 19.4 percent from 22.2 percent in the year-ago quarter.

The average revenue per user (ARPU) for postpaid services on a net basis was S$40.10 a month in the fourth quarter, down 4.3 percent on-year and 1.7 percent on-quarter, M1 said.

Prepaid ARPU was S$9.70 a month in the quarter, down 7.6 percent on-year and 7.6 percent on-quarter, it said.

Mobile telecommunications revenue fell 2.7 percent on-year in the fourth quarter to S$139.6 million, but rose 0.9 percent for the full year on higher post-paid revenue, M1 said.

Fixed services revenue rose 8.6 percent on-year to S$36.7 million in the fourth quarter on a higher fiber customer base and contribution from corporate projects, while handset and equipment sales increased 13.3 percent on-year to S$125.0 million on higher sales volume and consolidation of a newly acquired subsidiary, M1 said.

M1 declared a final dividend of 6.0 Singapore cents a share, bringing the full-year payout to 11.2 Singapore cents a share. In the previous year, M1 had declared a final dividend of 6.2 Singapore cents, with a full-year payout of 11.4 Singapore cents.

In its outlook, M1 pointed to the general offer for its shares from Konnectivity, which is special purpose vehicle set up by M1 shareholders Keppel Corp. and Singapore Press Holdings (SPH).

The bid for M1 is aimed at getting control of at least 50 percent of the telco to more easily engage in a “transformational” restructuring, which would likely include lower dividends, Konnectivity has previously said.

“The company is facing intensifying competition and industry disruption from the impending launch of a fourth Mobile Network Operator (MNO), as well as the launch of new Mobile Virtual Network Operators (MVNO) in Singapore. Continuing the status quo risks stagnation and further decline in shareholder value,” Konnectivity said in December.

PhillipCapital advised accepting the takeover offer from Konnectivity as M1 is the most exposed among the Singapore telcos to the entry of TPG Telecom as the city-state’s fourth operator; M1 gets around 80 percent of its revenue from mobile services within the city-state, it noted.

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