M1 – CIMB
Matching SingTel’s 4G prices
M1 does not appear to be trying to claw back market share, judging from the pricing of its new 4G small screen data plans, which closely mirror that of SingTel. M1 priced its 4G plans 5-27% above its 3G plans and 2-3% below SingTel’s.
Not surprisingly, it reduced its data bundles, mirroring SingTel, to better monetise data. The pricier 4G plans and reduced data bundles will help bolster its ARPUs. We maintain Neutral on M1 with a DCF-based target price (WACC 7.6%) and advocate a switch to StarHub, which offers higher dividend yields and potential for capital management.
M1 launched new small and large screen data plans and introduced nationwide 4G services. The key takeaways from the unveiling are:
1) M1’s 4G plans are S$10.70/month or 5-27% more expensive than its equivalent 3G plans and 2-3% below similar SingTel plans.
2) M1 reduced voice bundles, threw in more SMS and raised the price of its top-end plan marginally compared to its previous small screen data plans (Figures 1 and 2).
3) Not surprisingly, it divided data bundles from a flat 12GB to tiered amounts of 2GB, 3GB, 5GB and 12GB, mirroring SingTel.
4) M1 also launched 4G large screen data plans.
The key difference between the operators’ plans is recontracting M1 users will be given extra 1GB data on the new small and large screen plans.
What We Think
We view M1’s upward repricing and tiering of data bundles positively but they are unlikely to help the telco claw back market share (Figure 5) as they are very similar to that of SingTel. Throwing in 1GB extra for recontracting users will help it retain customers but, overall, will not appeal to non-M1 customers. SingTel’s offerings are still more attractive as it also offers bundling discounts for pay TV and broadband. That said, the pricier 4G plans and reduced data bundles will help M1 bolster its ARPUs will help bolster its ARPUs.
What You Should Do
Switch out to StarHub, our top telco pick for its potential to raise dividends or undertake a one-off capital repayment, especially following its plan to sell bonds. M1 lacks re-rating catalysts and the above developments do not change our view.