M1 – DBSV
Declining handset subsidies
- 2Q14 net profit of S$43.9m (+12.1% y-o-y, +2.5% q-o-q) was 4-5% ahead our estimates. Declared interim DPS of 7Scts (+2.9% y-o-y) or 75% payout ratio
- Postpaid acquisition costs declined sharply, partly offset by a drop in International Call Service (IDD) revenue.
- BUY with TP of S$3.85 for mid single-digit growth and 4.6% yield
Cost reduction offset weak IDD revenue. Postpaid acquisition cost per subscriber declined sharply to S$268 (-19% y-o-y, -13% q-o-q). It was partly offset by a drop in IDD revenue to S$23.7m (-20% y-o-y, -1% q-o-q).
Tiered data plan seeing fast adoption. About 58%of postpaid subscribers (54% in 1Q14) adopted the tiered data plan, with 20% (16%) exceeding their caps. M1 expects adoption of tiered plans to stabilise at around 65%.