M1 chalks up 15.5% jump in Q3 net to $39.5m

Q3 operating revenue soared 30% to $245.7m, from $188.4m last year

HIGHER handset sales and subscription revenue helped lift M1’s third-quarter net profit 15.5 per cent to $39.5 million, from $34.2 million a year earlier.

Earnings per share for the three months ended Sept 30 rose 15.8 per cent to 4.4 cents, from 3.8 cents in 2009.

Q3 operating revenue soared 30.4 per cent to $245.7 million, from $188.4 million last year.

However, M1’s profitability was impacted by the recurring trend of having to absorb higher subsidies for smart phones such as the iPhone 4.

This led to a 34.5 per cent spike in the firm’s operating expenses to $196.6 million during the quarter.

Singapore’s smallest operator turned in a better scorecard across all three business lines in Q3.

Revenue from mobile services, which accounts for more than half its sales, grew 2.2 per cent to $143.9 million.

Besides recurring phone subscriptions, local telcos also received a boost from the launch of Apple’s iPad touchscreen tablet in Q3 with the introduction of new data plans for the device.

Income from international call services, which dipped last year as customers cut back on overseas calling during the recession, grew 0.6 per cent to $32 million in Q3.

Sales from its fixed services, M1’s nascent broadband business, grew to $6.1 million in Q3, from a mere $600,000 a year earlier.

M1 is hoping to ride on the recent launch of Singapore’s fibre-optic broadband highway to drive up this segment’s income in the near future.

Last month, the Republic’s new Internet backbone became partly operational and all three telcos have introduced new ultra high- speed Internet packages for estates that are wired up for breakneck broadband access speeds.

‘This (the launch of the fibre-optic network) represents a major milestone as we continue to grow our fixed-line business,’ M1 CEO Karen Kooi said in a statement yesterday.

Thanks to strict government regulations, M1 can buy bandwidth at the same wholesale pricing as its rivals.

This will allow the firm to compete on an equal footing with entrenched broadband incumbents Singapore Telecommunications and StarHub.

To take advantage of the new regime, M1 said it has even established its own operating company or OpCo to cater specifically to corporate customers.

OpCos lease fibre-optic infrastructure from a company called OpenNet, activates these links, and sells Internet packages to end users such as consumers or businesses.

Having its own OpCo will allow M1 to offer more customised solutions and faster customer response times, the company explained.

For the first nine months of the year, M1 registered a 5.7 per cent increase in net profit to $119.6 million on the back of a 27 per cent increase in operating revenue to $717.8 million.

‘Based on the current outlook, we are maintaining our guidance that net profit after tax for 2010 is likely to improve year-on- year,’ Ms Kooi said.

M1 shares closed one cent higher at $2.25 yesterday before its Q3 earnings were released.

Will customer inertia be M1’s Achilles’ heel now?

AS a pure-play mobile carrier, M1 (Mobile-One) has been the one-trick pony against the other two telcos in Singapore, which offer broadband and TV services in addition to their mobile businesses.

The upcoming roll-out of the Next Generation National Broadband Network (Next Gen NBN) will move M1 properly into the broadband space, but the telco’s low-risk profile begs the question of where its next growth spike will be.

So far, M1’s experience with broadband has been limited to a service it rolled out to home users two years ago on infrastructure rented from StarHub and SingTel.

The government-initiated fibre NBN gives M1 the opportunity to access business and residential user bases on wholesale connectivity pricing, levelling the playing field for the smallest telco. To M1’s credit, it was nimble in being one of the first to come out with NBN price plans.

But as carriers move away from being ‘dumb pipes’, that is, to function as utility carriers of data without adding particular value to the equation, M1 might find the competition continuing to pull ahead even as it makes gains in new spaces.

Some are adding services or apps to their connectivity packages, while others bundle telephony with other offerings such as triple-play services, which include TV and broadband.

The value-add is seen as essential for business sustainability, because there is less opportunity to retain customers for a ‘dumb pipe’ carrier, if another will offer the same service at a lower rate.

SingTel, for example, just announced a $200 million seed fund in search of the next promising tech start-up that it can grow and take under its wings. The telco intends to use the fund to scout the globe for talent to contribute to its triple-play businesses.

StarHub, too, has been extending its feelers into new avenues. Two months ago, it announced a partnership with the media agency Mindshare to help content producers eventually get their programmes aired. With an upcoming Web TV channel planned, StarHub is making strides towards differentiating its online channel by populating it with original content.

At a recent NBN event, SingTel Singapore CEO Allen Lew acknowledged that soon, even offering triple-play on its own may not be compelling enough a proposition for customers. Pointing to the company’s interest in the apps space, he said it hopes such new offerings will help pique customer interest.

M1, on the other hand, has stayed relatively reactive to market changes, even though it has managed to stay profitable and continues to earn analyst praise on its stock ratings. The company’s profit held stable over the recent years, at $150 million last year and the year before.

In a note published by DMG & Partners Securities last month, M1 remained the top pick for its capital management, and with the expected line of business from the NBN. But any boost from the NBN will rely on M1’s ability to increase its broadband subscriber base. In Singapore’s saturated market with 168 per cent broadband penetration, this requires additional effort on M1’s part to pull existing broadband customers over from competitors.

One bump in the road may be customer inertia. According to the Infocomm Development Authority’s statistics, each month the number of subscribers hopping over to competing carriers hovers around the 10,000 mark. Out of a total of 7.1 million subscriptions in the country, however, this represents a mere 0.14 per cent of the entire user base. So far, it might even have worked to M1’s advantage. While the competition has been bundling triple-play services together, M1 has held onto a respectable 26 per cent market share. StarHub is close, at 28 per cent, and SingTel has a 44 per cent share.

Taking this general inertia as an indication of the way customers might react to the tight broadband competition on the horizon, this very phenomenon that has benefited M1 may turn out to be a thorn in its side.

M1 has been doing a respectable job of retaining its customer base. For example, it was quick to respond to competition, and was the first carrier here to announce it had a plan for the next-generation mobile standard after 3G, known as LTE (long-term evolution).

And M1 may well be able to continue keeping business running smoothly, by prioritising customer service and reliable uptime. But as the role of telcos continues to evolve and widen to cover more aspects of ICT, this one-trick pony needs to seek its next growth spurt in order to run with the big boys.

Will customer inertia be M1’s Achilles’ heel now?

AS a pure-play mobile carrier, M1 (Mobile-One) has been the one-trick pony against the other two telcos in Singapore, which offer broadband and TV services in addition to their mobile businesses.

The upcoming roll-out of the Next Generation National Broadband Network (Next Gen NBN) will move M1 properly into the broadband space, but the telco’s low-risk profile begs the question of where its next growth spike will be.

So far, M1’s experience with broadband has been limited to a service it rolled out to home users two years ago on infrastructure rented from StarHub and SingTel.

The government-initiated fibre NBN gives M1 the opportunity to access business and residential user bases on wholesale connectivity pricing, levelling the playing field for the smallest telco. To M1’s credit, it was nimble in being one of the first to come out with NBN price plans.

But as carriers move away from being ‘dumb pipes’, that is, to function as utility carriers of data without adding particular value to the equation, M1 might find the competition continuing to pull ahead even as it makes gains in new spaces.

Some are adding services or apps to their connectivity packages, while others bundle telephony with other offerings such as triple-play services, which include TV and broadband.

The value-add is seen as essential for business sustainability, because there is less opportunity to retain customers for a ‘dumb pipe’ carrier, if another will offer the same service at a lower rate.

SingTel, for example, just announced a $200 million seed fund in search of the next promising tech start-up that it can grow and take under its wings. The telco intends to use the fund to scout the globe for talent to contribute to its triple-play businesses.

StarHub, too, has been extending its feelers into new avenues. Two months ago, it announced a partnership with the media agency Mindshare to help content producers eventually get their programmes aired. With an upcoming Web TV channel planned, StarHub is making strides towards differentiating its online channel by populating it with original content.

At a recent NBN event, SingTel Singapore CEO Allen Lew acknowledged that soon, even offering triple-play on its own may not be compelling enough a proposition for customers. Pointing to the company’s interest in the apps space, he said it hopes such new offerings will help pique customer interest.

M1, on the other hand, has stayed relatively reactive to market changes, even though it has managed to stay profitable and continues to earn analyst praise on its stock ratings. The company’s profit held stable over the recent years, at $150 million last year and the year before.

In a note published by DMG & Partners Securities last month, M1 remained the top pick for its capital management, and with the expected line of business from the NBN. But any boost from the NBN will rely on M1’s ability to increase its broadband subscriber base. In Singapore’s saturated market with 168 per cent broadband penetration, this requires additional effort on M1’s part to pull existing broadband customers over from competitors.

One bump in the road may be customer inertia. According to the Infocomm Development Authority’s statistics, each month the number of subscribers hopping over to competing carriers hovers around the 10,000 mark. Out of a total of 7.1 million subscriptions in the country, however, this represents a mere 0.14 per cent of the entire user base. So far, it might even have worked to M1’s advantage. While the competition has been bundling triple-play services together, M1 has held onto a respectable 26 per cent market share. StarHub is close, at 28 per cent, and SingTel has a 44 per cent share.

Taking this general inertia as an indication of the way customers might react to the tight broadband competition on the horizon, this very phenomenon that has benefited M1 may turn out to be a thorn in its side.

M1 has been doing a respectable job of retaining its customer base. For example, it was quick to respond to competition, and was the first carrier here to announce it had a plan for the next-generation mobile standard after 3G, known as LTE (long-term evolution).

And M1 may well be able to continue keeping business running smoothly, by prioritising customer service and reliable uptime. But as the role of telcos continues to evolve and widen to cover more aspects of ICT, this one-trick pony needs to seek its next growth spurt in order to run with the big boys.