M1 – BT

M1’s Q1 profit up 10.3%, helped by tax adjustment

Results show underlying weakness in core cellular business

A TAX adjustment helped lift MobileOne’s first quarter net income up 10.3 per cent to $41.9 million but the gain failed to mask the the underlying weakness in its core cellular business.

The increase was largely due to a reduction in Singapore’s corporate tax rate, M1 said in its regulatory filing yesterday. The move translated to a 75 per cent reduction in M1’s Q1 tax provision to $2.2 million, from $8.8 million a year earlier.

The firm’s earnings per share for the period was 4.7 cents, 9.3 per cent higher than 2008.

The ceasefire following the all-out marketing war between the three local telcos as a result of mobile number portability (MNP) last year lent M1 some reprieve in Q1.

Customer acquisition and retention cost in Q1 was $121 and $113, down 15.4 per cent and 16.9 per cent respectively year-on-year.

Cost of sales also dropped 6.7 per cent to $71.9 million in Q1 compared to the previous corresponding period. The conclusion of festive promotions also led to a 30.4 per cent sequential decline in advertising and promotion expenditure to $19 million for the quarter.

However, the company continues to be a victim of MNP, losing 11,000 customers in the last three months to end Q1 with a mobile customer base of 1.62 million.

While the number is 4.2 per cent higher than the tally last year, the growth is lower than rivals StarHub and SingTel.

This means that M1’s market share has now dipped to 25.4 per cent from 26.5 per cent in 2008. Churn rate, or the number of customers leaving M1, stood at 1.6 per cent in the first quarter, up from 1.3 per cent last year.

M1’s post-paid revenue slid 9.9 per cent year-on- year to $122.6 million as a result of aggressive bundling by rivals StarHub and SingTel, as well as exclusive deals for handsets such as the Apple iPhone. Its prepaid sales however, increased by 3.5 per cent to $17.7 million.

The ongoing recession also crimped customer spending on services such as international calls, with revenue from this segment dropping 5 per cent to $32 million in Q1.

One positive trend amid the gloom is the uptake in other M1 services such as its broadband offerings. The firm’s non-voice sales now account for 25.1 per cent of total service revenue, up from 23.2 per cent last year.

The company’s first-quarter operating revenue came in 8.6 per cent lower at $186. 4 million.

Earlier this month, M1 lost the bid to operate Singapore’s upcoming fibre-optic broadband network to StarHub, but it maintained the desire to move from pure mobile play to become a ‘full-service operator’ when the new Internet highway is in place.

‘Based on the current outlook, and taking into consideration the benefits arising from the government measures announced in Jan 09, we continue to expect operations to remain stable for the year 2009,’ the company said.

M1 shares closed unchanged at S$1.47 yesterday before its earnings were released.

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