M1’s fixed-line foray: too little, too late?

M1’s RECENT diversification into fixed-line broadband services is an attempt to quell longstanding market concerns about its lack of headroom in the mobile space. However, the dependence on rival technology, coupled with shifting dynamics in the local broadband sector, means this foray is unlikely to raise M1’s revenue ceiling significantly in the near term.

Last week, M1 finally joined SingTel and StarHub in providing wired broadband services to consumers with the launch of four new high-speed Internet packages.

Unlike larger rivals SingTel and StarHub, M1 is the only local telco that does not have its own Internet pipes. Without a direct connection to homes, the company is at a natural disadvantage as it has to depend on infrastructure and bandwidth from others to power the broadband venture. In M1’s case, potential revenue is thinned by the need to pay StarHub’s monthly cable leasing bill.

This limitation aside, Singapore’s swelling broadband user base simply does not leave M1 with much room to grow. According to statistics from the Infocomm Development Authority of Singapore (IDA), the country’s household broadband penetration rate hit 86.8 per cent at the end of June.

Close to 990,000 families are already using high-speed Internet packages to surf and e-mail, with StarHub’s cable modem service and SingTel’s ADSL (asymmetric digital subscriber line) offerings accounting for the bulk of paid household subscriptions. With such entrenched beachheads, M1 faces a formidable task in trying to eke out a decent market share.

To be fair, with the heat that M1 is starting to feel in its core mobile business, the company has little choice but to promptly take the broadband plunge. IDA’s mandate for true mobile number portability means that consumers can now jump ship while hanging on to their handphone numbers.

In the lead-up to its introduction on June 13, local telcos have been racking up giant advertising bills in a bid retain customers and attract defectors when the new ruling kicks in.

StarHub has already blamed aggressive marketing tactics for dragging down its second-quarter profits, while M1’s advertising and promotion expenses also went up by a staggering 51 per cent to $5.9 million quarter-on-quarter in Q2.

To add to soaring costs, M1 also appears to be losing out to its competitor’s ability to provide discounted bundles that combine services such as pay-TV, broadband and mobile subscriptions.

The telco added merely 57,000 customers in the second quarter; in the same period, StarHub’s subscriber base swelled by 178,200, while SingTel was the biggest gainer with 182,000 new customers. With SingTel set to launch Apple’s coveted iPhone 3G here within the next two weeks, the red camp’s lead could be extended further in the coming months.

M1 had already signalled its broadband ambitions before last week by partnering with StarHub and Hong Kong’s City Telecom to vie for a tender to build Singapore’s new and improved Internet highway. SingTel is part of a second consortium that is bidding for the same Next-Gen NBN (National Broadband Network) project.

However, this mammoth undertaking is at least four years away from completion, and it will take far longer for the winner to recoup the billion-dollar investment. In the meantime, M1 cannot sit idle and watch its mobile market share slide.

Without a regional strategy, M1 needs to make every local cell phone customer count, or carve out alternative revenue streams to ensure its long-term survival. The main issue here is that last week’s broadband announcement does not convincingly address either of these points.

With the ties that M1 already has with StarHub on the Next-Gen NBN front, perhaps a full-fledged union could be a way for the two Singapore-centric telcos to stem the advancing red tide? After all, the idea is hardly new, since SingTel did think of acquiring M1 back in 2001.

M1 to offer fixed broadband from today

IN a move that gives more choice to broadband customers, Singapore’s smallest telco, MobileOne (M1), announced yesterday that it will offer fixed broadband services from today.

With this, M1 joins StarHub and Singapore Telecommunications (SingTel) in offering both fixed and mobile broadband services. M1 was the first telco to introduce mobile broadband service in Singapore in 2006.

According to M1, it will offer four unlimited data plans. The lowest offers 10 megabits per second (mbps). The other three speeds are 15 mbps, 30 mbps and 100 mbps. With the 100 mbps option, M1 joins StarHub in offering the highest connection speeds in Singapore today.

The promotional price for the 10 mbps plan is $43.50 a month, with existing M1 customers paying $40.60 a month. For the 100 mbps plan, the promotional price is $88.50 a month with existing M1 customers paying $76.70 a month.

Customers will be offered a plug and play cable modem as part of the launch promotion when they sign up for the service.

M1 fixed broadband will be available to all homes with cable access points or which are cable-ready, according to an M1 spokesman.

He added that the service is capable of achieving download speeds of up to 100 mbps and upload speeds of up to 2 mbps.

The spokesman added that fixed broadband customers will be connected to M1’s infrastructure via StarHub Cable’s open access network. ‘The traffic is then carried from our network to the Internet.’

When asked about what additional investment was done by M1 for this service, the spokesman said that routers and other such enabling hardware were added to the company’s existing infrastructure to enable this.

M1 and StarHub are both part of the Infinity Consortium, along with Hong Kong-based City Telecom (HK) Ltd. The consortium is one of the two bidders for building Singapore’s prestigious Next Generation National Broadband Network (NGNBN).

Neil Montefiore, M1’s CEO, said the company is repositioning itself for the future as it develops new businesses anchored on its core competencies.

‘The launch of M1 fixed broadband is an important step in our planned transformation from a single-play mobile operator to a dynamic multi-play operator with interests in both the mobile and fixed sectors,’ he added.

Commenting on the M1 offerings, a StarHub spokesman said: ‘The landscape for broadband services is set to change even more radically in the coming years with the Government’s NGNBN initiative.

‘This recent move by our Infinity consortium member should come as no surprise, as we all prepare for new challenges and opportunities. Singaporeans can always count on StarHub to remain committed to offering a strong value proposition to customers, especially those who want fast broadband, mobile, fixed line, and CableTV services from a single service provider.’

A SingTel spokesman noted: ‘We welcome competition and will continue to ensure that our quad-play service offerings – fixed, broadband, mobile and TV – will delight and meet our customers’ needs.’

For more information about M1 fixed broadband, visit: www.m1.com.sg/broadband.

Q2 FY08 results are within expectations

Net profit increased slightly in Q2. For Q2 FY08, M1 reported operating revenue of S$205.3m (+2.8% yoy), profit before tax of S$50.8m (+0.8% yoy) and net profit of S$41.1m (+1.2% yoy).

The increase in revenue was due to service revenue growth as the customer base increased by 57,000 from the last quarter to 1,611,000. Postpaid and prepaid revenue increased 2.8% and 19.0% to S$271.5m and S$35.1m respectively. Moreover, international call revenue rose 15.1% to S$71.7m.

Outlook for FY08. M1 expects the operations for 2008 to remain stable. The introduction of full mobile number portability from 13 June 2008 resulted in an increase in competitive activities. Thus, M1 saw increases in both its acquisition and retention costs. Nevertheless, it expects competitive activities to settle down in a quarter or two.

The City Telecom-M1-StarHub consortium has jointly submitted a bid to design, build and operate the passive infrastructure layer for the Next Generation National Broadband Network (NBN). The Infocomm Development Authority is expected to announce the winner of the bid in Q3 FY08.

Maintain Hold with fair value at S$2.16. Based on our valuation using the free cash flow to firm model, the target price is maintained at S$2.16. M1 remains a hold as the growth in revenues and profits are likely to be limited due to its focus on the domestic market.

M1 to offer iPhone by year-end: CEO

MOBILEONE Ltd (M1), Singapore’s smallest mobile phone operator, will offer Apple Inc’s iPhone in its retail outlets by the end of this year.

‘I think, before the end of the year we will be’ carrying the phones in our stores, chief executive officer Neil Montefiore said yesterday in a Bloomberg Television interview. ‘It will become available in all markets, with all operators.’

M1’s shares rose 2.1 per cent to close at $1.96, the highest in more than a month. Its stock price has risen 3.2 per cent so far this year, against a 16 per cent drop in the broader benchmark Straits Times Index.

Singapore Telecommunications Ltd, the country’s biggest phone company, said in May that it won exclusive rights to distribute the iPhone in the city-state. Chief executive officer Chua Sock Koong said in a shareholders’ meeting yesterday that the timing of the sale of the iPhone will be determined by Apple and a formal release date has not been confirmed.

‘We are very keen to have the iPhone launched in Singapore as soon as possible. Unfortunately, the schedule is controlled by Apple,’ Ms Chua said. ‘But definitely before the end of the year.’

StarHub Ltd, the second-largest mobile operator, said in May that it also expects to offer the handsets by year-end.

M1 on Thursday reported that second-quarter profit rose 1.2 per cent to $41.1 million after winning more customers. That was higher than the $38 million median profit estimate of three analysts surveyed by Bloomberg News. Sales increased 2.8 per cent to $205.3 million.

Mr Montefiore spent more on advertising and promotions to keep customers after a rule change on June 13 allowed users to switch operators and retain their numbers. M1 won 57,000 users during the quarter, compared with 31,000 a year earlier, as it battled to stem defections to its two rivals. — Bloomberg