M1 – CS

Non-deal roadshow feedback – more ready for NGN than the market expects

● CEO Karen Kooi explained to investors in the UK and the US that M1 intended to maintain revenue market share, using product innovation (e.g. Take 3) and, post-NGN, bundling with broadband.

● However, profitability will also be monitored carefully, and cost control remains a key area of focus. Off-shoring of call-centre operations and backhaul rollout are progressing on schedule.

● M1 is extremely bullish on its prospects under the NGN; fully open access at low wholesale prices points is the “best case scenario” for the company. M1 aims to achieve a 20% share in the residential and corporate sectors by 2015, uplifting revenue by up to 40%. Given M1’s existing strengths (distribution, wireless broadband share) we believe a 21.9% market share is achievable.

● The NGN therefore puts M1 in a position to enjoy structural growth which is not, we believe, priced in by the market given current multiples (9.3x FY10E P/E , 11.5% FY10E cash flow yield). M1 will also finally be able to bundle broadband with cellular, further stabilising cellular market share. Maintain OUTPERFORM rating.

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