M1 – BT

M1’s Q4 net profit dips 3.4% to $36.6m

Telco paying a final dividend of 7.2 cents, bringing its full-year payout to 13.4 cents

MOBILEONE yesterday reported a 3.4 per cent decline in net profit to $36.6 million for the fourth quarter of 2008 as competitive pressure started easing after months of intense rivalry.

Q4 sales slid 5.9 per cent to $194.7 million, while earnings per share came in 2.4 per cent lower at 4.1 cents for the period. M1’s Q4 profit was higher than the $35 million median estimate from five analysts polled by Bloomberg.

For the full 2008, the country’s smallest operator saw its net profit dive 12.6 per cent to $150.1 million from the preceding year. Sales for the year dipped 0.3 per cent to $800.6 million.

M1 proposed a final dividend of 7.2 cents, bringing its full-year payout to 13.4 cents or around 80 per cent of its 2008 profit. Despite the adverse economic conditions, the company expects to maintain a similar dividend payout ratio in 2009.

The firm’s full-year profit decline was due to higher customer retention costs with the introduction of mobile number portability (MNP) in June last year, said Karen Kooi, M1’s acting CEO and chief financial officer.

Average retention cost per post-paid customer for 2008 was $148, against 2007’s $132.

In addition, higher international traffic expenses also contributed to the drop, Ms Kooi told reporters and analysts at its results briefing yesterday. She was chairing the conference in place of outgoing M1 chief Neil Montefiore, who is set to leave the company next month after 12 years of service.

In response to MNP, the operator had introduced more competitive subscription plans which resulted in lower margins, while stepping up its marketing efforts to attract and retain customers but these initiatives tapered off in the tail end of 2008.Customer acquisition cost in Q4 fell to $131 from $162 in the preceding quarter and retention cost also dropped from $155 in Q3 to $135 in the last quarter of 2008.

‘Throughout the festive season, there were more rational promotions from the three telcos. The campaigns stayed clear of providing free monthly subscriptions, which wreaked havoc on margins earlier, to focus on deeper handset subsidies or rebates for monthly subscriptions without equipment,’ CIMB said in a research note.

M1 added 10,000 new subscribers in Q4, most of whom were prepaid customers, to take its user base to 1.63 million. However, its churn rate, or the percentage of subscribers leaving M1, rose to 1.7 per cent from 1.2 per cent a year earlier.

‘We are not going out aggressively to take market share,’ Ms Kooi stressed. However, she reiterated the company’s intention to diversify beyond mobile services into Internet provision when the upcoming Next-Gen National Broadband Network is completed in 2012.

In the meantime, M1 has started offering fixed broadband by leasing infrastructure from StarHub but it did not reveal the take-up rate for these services.

‘We are not actively pushing the fixed-line broadband just yet and we have not started bundling,’ Ms Kooi said, adding that M1 is using this arrangement as a dipstick for its broadband foray in future. M1 shares rose 1.3 per cent to close at $1.52 yesterday.

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