Category: M1
M1 – OCBC
Deployment of LTE by 1Q12
Deployment of LTE by 1Q12. M1 Ltd recently announced that it will deploy South East Asia’s first commercial LTE (Long Term Evolution) network in Singapore by 1Q12. M1 has awarded a five-year contract valued at S$280m to Huawei – a leading provider for next-generation telecommunications network solutions for global mobile operators – to provide turnkey LTE solution; this includes installation of macro base stations, distributed base stations and Evolved Packet Core (EPC), for M1’s island-wide next-generation network.
Investing for the future. LTE is capable of delivering downlink speed of up to 300Mbps (versus the current HSPA network which supports 21Mbps) and is specially designed for the efficient carriage of data traffic. We view this development positively, as the demand for mobile data transmission will only continue to grow, fueled by the proliferation of smart devices (phones, tablets and other personal entertainment devices) and also the “stickiness” of new social media. Hence, the network will enable rich multi-media applications such as video conferencing, high-definition content transmission, highspeed video downloads and social network updates.
Timely due to shifting preferences. Recall that M1 had previously paid S$21.7m to secure a lot of the 1800 MHz spectrum, which we understand could also be used for LTE. We view these recent developments as timely due to shifting preferences. As mentioned earlier, we have observed a growing preference towards using instant messaging (via the generous data plans currently) to communicate versus voice – the traditional money churner for the mobile operators. For M1, we note that the post-paid monthly MOU (minutes of usage) has eased to 356 minutes in 1Q11 (down from 364 minutes in 4Q10), while post-paid monthly ARPU has dipped to S$56.1 in 1Q11 from S$58.5 in 4Q10 and S$59.7 in 1Q10. But once the next-gen network is in place, we believe that M1 should be able to offer differentiated services and capture these changing preferences; of course, this is assuming that there are available “4G” devices that can fully utilize the LTE network.
No additional capex needed. In any case, we understand that this LTE move has always been part of M1’s upgrading plans, and hence we do not expect M1 to incur any extra capex this year (or even the next) i.e. capex spending should remain around S$100m, implying no impact on its ability to pay out 70% of its recurring earnings as dividends. As before, we continue to like M1 for its defensive earnings and good dividend yield, hence we maintain BUY with a DCF-based fair value of S$2.79.
M1 – BT
M1 rings up $280m network upgrade
Telco gives five-year contract to Huawei to start deploying LTE
M1 is pointing the way to higher mobile surfing speeds by being the first operator in the Southeast Asian region to kick-start a multimillion-dollar cellular network upgrade.
Singapore’s smallest operator yesterday announced it has awarded a five-year contract worth $280 million to Chinese mobile equipment maker Huawei to start deploying its LTE (long-term evolution) infrastructure.
LTE is widely seen as the successor to the third-generation (3G) mobile networks that are in use today. Its implementation would allow operators to offer blazing cellular download speeds of up to 300Mbps (megabits per second), faster than most fixed-line broadband packages available to consumers today.
‘We are building an advanced world-class mobile network which will truly enhance the wireless Internet experience for our customers, and cater to the increasing demands of future mobile devices and applications,’ M1’s CEO Karen Kooi said in a statement.
In the past year, local operators have seen more than two-thirds of their mobile customers flock towards smartphones, thanks to the widened distribution of the coveted iPhone and the deluge of Android-powered handsets.
The trend places an added strain on their 3G networks as more users are now surfing and streaming Web videos on their mobile phones. The LTE upgrade promises to boost an operator’s mobile bandwidth exponentially and allows it to offer new multimedia services such as high-definition videoconferencing and video downloads.
While M1 is the first in the region to go for the upgrade, its local rivals Singapore Telecommunications (SingTel) and StarHub are not far behind.
SingTel on Thursday said it will start deploying its LTE network in the fourth quarter of this year, with its long-term equipment supplier Ericsson likely to be its designated partner.
Once in place, it will help power services such as a new ‘business-class’ mobile broadband offering that gives subscribers a speedier and more reliable connection for surfing on the go, SingTel’s Singapore chief Allen Lew said.
Similarly, StarHub will roll out its LTE network later this year after successfully testing the technology in 2010, its spokeswoman Cassie Fong told BT.
To accommodate the network upgrade, the Infocomm Development Authority of Singapore has already set aside two mobile frequency spectrums – the 2.3 and 2.5 GHz (gigahertz) band and the 900 and 1800 MHz (megahertz) band – for operators to boost their cellular bandwidth.
TELCOs – BT
When roaming rates drop, S’pore telcos may pay a higher price
They have more to lose than their M’sian counterparts: analysts
SINGAPOREAN operators are likely to be hit harder than their Malaysian counterparts when the two countries start to ring in cheaper mobile roaming rates from next month.
This is because a higher proportion of their sales come from overseas calls. In addition, Singapore Telecommunications, StarHub and M1 have more inbound and outbound roaming usage on their networks in comparison to Malaysian operators, analyst firm DMG Research said in a report yesterday.
On Thursday, a two-year effort to curb the high cost of cellular roaming between Singapore and Malaysia finally bore fruit with both governments announcing that fees for making and receiving calls will be slashed by 20 per cent from next month and a further 10 per cent a year later.
The cost of sending text messages back home from across the causeway will be cut by 30 per cent in May and halved 12 months later.
Once fully implemented, it would mean that the cost of making a Singapore call from Malaysia would be slashed from 59 cents per minute currently to 46 cents in 2012. Sending an SMS would cost 30 cents by next May, compared with the prevailing rate of 60 cents per text message.
‘We estimate that roaming revenue makes up circa 10 to 25 per cent of Singapore telcos’ mobile revenue versus 8 to 10 per cent for Malaysian telcos,’ DMG said.
‘A reciprocal 20 per cent reduction in roaming tariffs between the two countries would slice off Singapore mobile revenue by 1 to 2 per cent compared to an estimated 0.5 to 0.9 per cent for Malaysian telcos, all else being equal,’ the company explained.
Malaysian operator Celcom had previously forecast its sales could shrink by 40 million ringgit (S$16.5 million) when the rate cuts are pushed through, while rival Digi said the impact on its revenue is marginal. Maxis on the other hand, expects sales to be hit to the tune of 6 million ringgit (S$2.5 million).
Local operators declined to reveal Malaysia’s contribution to their international services revenue but all three admitted the country is among their top mobile roaming destinations.
For its last financial year, SingTel derived $563 million from international call services while M1’s full-year revenue from this business segment stood at $129 million.
StarHub’s mobile roaming income is folded under its mobile sales, which stood at $302.7 million in 2010.
Instead of dragging down their top-line, local telcos say they are confident that the tariff reductions would instead boost their income by spurring greater usage.
‘We believe the downside on mobile revenues will be mitigated by the fact that operators actively share and swap minutes with one another,’ DMG added.
Other analysts BT spoke to also said local operators are likely to suffer a short-term hit but they should be no worse for wear in the long run.
This is the first time such a mobile roaming accord has been struck between two Asean member countries.
Authorities believe more could soon jump on the bandwagon, with Thailand being seen as the next likely candidate.
TELCOs – BT
When roaming rates drop, S’pore telcos may pay a higher price
They have more to lose than their M’sian counterparts: analysts
SINGAPOREAN operators are likely to be hit harder than their Malaysian counterparts when the two countries start to ring in cheaper mobile roaming rates from next month.
This is because a higher proportion of their sales come from overseas calls. In addition, Singapore Telecommunications, StarHub and M1 have more inbound and outbound roaming usage on their networks in comparison to Malaysian operators, analyst firm DMG Research said in a report yesterday.
On Thursday, a two-year effort to curb the high cost of cellular roaming between Singapore and Malaysia finally bore fruit with both governments announcing that fees for making and receiving calls will be slashed by 20 per cent from next month and a further 10 per cent a year later.
The cost of sending text messages back home from across the causeway will be cut by 30 per cent in May and halved 12 months later.
Once fully implemented, it would mean that the cost of making a Singapore call from Malaysia would be slashed from 59 cents per minute currently to 46 cents in 2012. Sending an SMS would cost 30 cents by next May, compared with the prevailing rate of 60 cents per text message.
‘We estimate that roaming revenue makes up circa 10 to 25 per cent of Singapore telcos’ mobile revenue versus 8 to 10 per cent for Malaysian telcos,’ DMG said.
‘A reciprocal 20 per cent reduction in roaming tariffs between the two countries would slice off Singapore mobile revenue by 1 to 2 per cent compared to an estimated 0.5 to 0.9 per cent for Malaysian telcos, all else being equal,’ the company explained.
Malaysian operator Celcom had previously forecast its sales could shrink by 40 million ringgit (S$16.5 million) when the rate cuts are pushed through, while rival Digi said the impact on its revenue is marginal. Maxis on the other hand, expects sales to be hit to the tune of 6 million ringgit (S$2.5 million).
Local operators declined to reveal Malaysia’s contribution to their international services revenue but all three admitted the country is among their top mobile roaming destinations.
For its last financial year, SingTel derived $563 million from international call services while M1’s full-year revenue from this business segment stood at $129 million.
StarHub’s mobile roaming income is folded under its mobile sales, which stood at $302.7 million in 2010.
Instead of dragging down their top-line, local telcos say they are confident that the tariff reductions would instead boost their income by spurring greater usage.
‘We believe the downside on mobile revenues will be mitigated by the fact that operators actively share and swap minutes with one another,’ DMG added.
Other analysts BT spoke to also said local operators are likely to suffer a short-term hit but they should be no worse for wear in the long run.
This is the first time such a mobile roaming accord has been struck between two Asean member countries.
Authorities believe more could soon jump on the bandwagon, with Thailand being seen as the next likely candidate.
M1 – CIMB
A smooth tone for 1Q
• In line; maintain NEUTRAL. When annualised, M1’s 1Q11 result was in line with ours at 3% below and also consensus at 3% ahead of theirs. As expected, no dividends were declared. The key features of 1Q were i) lower revenue due to seasonality and weaker handset sales and ii) margin recovery. We lower our FY11-FY13 forecasts by 0.3-0.6% as we factor in the additional cost of the recent 1800 MHz spectrum which lowers our interest income. Our DCF-based (WACC: 8.5%) target price falls to S$2.63 from S$2.65 because of this. We maintain NEUTRAL as M1 lacks catalysts but this is balanced by it benefitting from soaring inbound visitors and having the most upside from NGNBN. It remains our top Singapore telco pick.
• Revenue declined. Revenue declined by a slim 2% qoq on the back of lower postpaid revenue and handset sales. Postpaid revenue decline due to seasonality where there were shorter days and less calls were made. Handset sales reduced by 2% qoq as the volumes sold were lower due in part to seasonality and also because some of the iPhone 4 related craze had partially dissipated.
• Margins recovered. As expected, EBITDA margins recovered, climbing by 1.1% pts qoq as it was lifted by i) lower handset costs due to lower volumes sold, ii) lower leased circuit costs as M1 cut over more traffic onto its own backhaul and iii) lower marketing cost due in part to seasonality. M1 is expected to retain the 42-43% service EBITDA margins for FY11 (42.2% in 1Q) despite potentially incurring more NGNBN-related costs in 2H11 as most of those costs are variable in nature and M1 will not spend too heavily on either opex/capex.
• Fibre still not meaningful. The fixed network revenue (mostly from NGNBN) contributed about 3% of revenue in 1Q11. M1 expects the fibre subscriber base to grow as coverage widens and will also be more aggressive in marketing as this occurs. M1 estimates that it has about one-third of the fibre market which currently totals about 16K as reported by the press. Most of the fibre customers are from the residential segment and most of the subscriber base are opting to sign on for the lower speed plans as opposed to the higher speed plans.