M1 – BT

M1’s Q4 profit inches up 0.4%

Operating expenses eat into strong sales; final dividend of 7.9 cents

M1’s net profit edged up 0.4 per cent to $37.6 million for its fourth quarter ended Dec 31, 2011, while revenue surged 21.3 per cent to $317.1 million.

For the full financial year, net profit rose 4.5 per cent to $164.1 million. Revenue for the same period increased 8.8 per cent to $1.06 billion from $979.2 million.

M1 has proposed a final dividend of 7.9 cents per share. Including the interim dividend, the total dividend was 14.5 cents per share, representing an 80 per cent payout of net profit.

Earnings per share for the quarter and full year were 4.1 cents and 18.1 cents respectively, compared with 4.2 cents and 17.5 cents in the year-earlier period.

Though Q4 revenue was driven up by higher service and handset sales, the bottomline only rose slightly because of higher operating expenses, which increased 26 per cent over the year to $272.7 million.

Q4’s higher expenses were partly due to higher acquisition cost per post-paid customer, which shot up to $423 after hovering below the $300 mark in the two preceding quarters. This was attributed to the high demand for the iPhone 4S that was launched in the quarter.

For the full year, however, customer acquisition cost fell 2.6 per cent to $342.

Smartphone users make up about 67 per cent of M1’s total post-paid customer base.

In 2011, M1 added 45,000 new post-paid mobile subscribers, bringing the total to 1.05 million. Including prepaid customers, M1’s total mobile customer base for the year was 2.02 million, an increase of 104,000 subscribers.

M1, which was the first to introduce specific price segmentation based on usage of 3G mobile data plans last year, will reinforce the same pricing principle with the Long Term Evolution (or 4G) data bundles by repackaging them according to customer usage.

‘We believe it’s fairer to our customers to make them pay for what they use so that the experience of the majority is not impacted by the minority who hog the bandwidth,’ said M1 CEO Karen Kooi.

Last month, SingTel revealed that 11 per cent of dongle and tablet users take up 60 per cent of data traffic, a consumption pattern made possible by generous 3G data caps.

Ms Kooi said the data usage pattern that M1 has seen is ‘similar’ to its competitors’.

’10-15 per cent of our base are hogging the bandwidth. With the revised pricing, we hope to rebalance that,’ she said.

Even as the telco moves to further monetise data, the uncertain economic outlook for the year might have an impact on roaming revenue, especially if travel is curtailed, Ms Kooi said.

‘What we are seeing is the trend of people, instead of roaming with their mobile phone, they … buy a local prepaid card for either voice or data. Sales of our prepaid cards at our airport outlet grew by some 200 per cent over last year. Whether or not this trend is going to continue, we are watching it very closely,’ Ms Kooi said.

The telco said it expects a ‘stable performance’ for 2012.

M1 shares closed one cent higher at $2.56 yesterday before its earnings were released.

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