M1 – BT

M1’s Q2 profit up 5% to $42.8m

Higher mobile and broadband revenue helps offset increase in handset costs

M1’s second-quarter net profit grew 5 per cent to $42.8 million, from $40.8 million a year earlier as higher mobile and broadband revenue helped offset a continued increase in handset costs.

Earnings per share for the three months ended June 30 rose to 4.7 cents, from 4.5 cents in 2010. Second-quarter sales climbed 10 per cent to $245.4 million, from $223.1 million.

For the first six months of this year, M1’s net profit rose 6.6 per cent to $85.4 million on the back of a 6.5 per cent improvement in sales to $503 million.

With its improved performance, Singapore’s smallest operator is proposing an interim dividend of 6.6 cents per share, to be paid next month, up from 6.3 cents in 2010.

In the second quarter, M1 added 34,000 mobile subscribers to take its customer tally to 1.97 million. Revenue from cellular services edged up 2.1 per cent during the period to $147.7 million.

The operator continues to see a strong demand for smart phones in Q2. This pushed up handset costs which in turn hiked Q2 operating expenses by 11.4 per cent year on year to $192.3 million.

To cope with the heightened demand for mobile bandwidth from smart phone and tablet users, M1 became the first local telco to introduce Long-Term Evolution (LTE) or so-called 4G services last month.

Coverage for its new LTE network is mostly confined to the financial district for now but it expects nationwide deployment to be achieved by the first quarter of 2012, according to M1’s CEO Karen Kooi.

M1’s nascent broadband venture turned in the highest improvement in the second quarter as the rollout of Singapore’s Next-Gen NBN (National Broadband Network) continues to gather steam.

Fixed services sales soared 61.3 per cent on year to $9.9 million as the operator dangled attractive promotions to snap up more customers for its fibre-optic broadband services.

Close to 70 per cent of the island is now covered by the new network. However, the actual percentage of local homes that are wired up and ready for fibre-optic services is far lower at just under 40 per cent, Ms Kooi revealed.

This resulted from a combination of factors, including initial resistance from the management committees of condominiums, as well as a low awareness of the government-backed NBN project among HDB dwellers, she added.

‘All stakeholders are working to resolve this,’ Ms Kooi said in a conference call yesterday.

The only business segment to turn in a poorer Q2 was international call services. Revenue from this segment dipped nearly 2 per cent to $30.9 million.

Looking ahead, Ms Kooi said she expects the implementation of the government’s cross-carriage policy on Aug 1 to open up new business opportunities for M1.

Introduced in March last year, the mandate forces pay-TV operators to allow their rivals to carry any exclusive programme they acquire. The policy was supposed to kick in last year but authorities pushed it back by nine months to give industry players more time to adjust to the new regime.

‘The whole pay-TV landscape may well change,’ Ms Kooi said, adding it could potentially allow consumers to purchase programmes on an a la carte basis instead of being forced to take up a bundle.

Looking ahead, she expects M1 to register an improvement in full-year net income, while dividend payout ratio will be kept at 80 per cent of its net profit after tax.

M1 shares closed unchanged at $2.57 before its second-quarter earnings were released.

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