M1 Ltd Dials Up Growth for the Year

Telecommunications provider M1 Limited (SGX: B2F) reported its annual financial results yesterday just after the market closed.

For the whole of 2013, the company saw a 6.3% gain in service revenue from S$772m a year ago to S$820m, helped by higher mobile services and fixed services. However, overall operating revenue actually fell 6.4% year-on-year to S$1.01b primarily due to the steep 38.4% decline in handset sales compared to a year ago.

Nevertheless, its net profit after tax edged up 9.4% year-on-year to S$160m, mainly due to the considerable reduction of operating expenses by 8.6% from S$888.6m to S$812.4m. The curtailment of taxation costs also played an important role by slashing S$4.3m off total expenses, when it decreased from S$36.9m to S$32.6m.

M1’s latest financials showed that it remained in a healthy financial position. Compared to a year ago, its cash & cash equivalents swelled 369.8% from S$11.6m to S$54.5m while its net debt (total debt minus total cash) decreased significantly by 24.9% from S$260.4m to S$195.5m on a year-on-year basis. As a result, its net assets per share increased by 12.3% from 38.1 cents to 42.8 cents as compared to the previous year.

M1 grew its post-paid mobile customer base from 1.095m customers a year ago to 1.13m. It was the fourth consecutive quarterly increase in customer base numbers since the fourth quarter of 2012 for the segment. Elsewhere, its quarterly pre-paid mobile customer base numbers did not fare so well, dropping 3.5% year-on-year to 979,000.

Let’s zoom in to M1’s customer statistics.

Its mobile customers based on both post-paid and pre-paid segments remained essentially unchanged at a total of 2.11 million customers. Then again, both the postpaid and prepaid monthly average revenue per user (ARPU) saw some marginal declines. Postpaid monthly ARPU fell slightly from S$62.7 to S$61.8 while the prepaid figure had a wider difference as it dropped from S$15.4 to S$14.8. Furthermore, M1 also faced year-on-year declines of 9.3% and 2.1% in ARPU for its fixed services and international call services respectively.

M1 also seems to be facing tough competition from its peers SingTel (SGX: Z74) and Starhub Limited (SGX: CC3) as its market share in the mobile market in Singapore declined from 26.1% a year ago to 25.3%.

M1’s management provided some outlook for its network investments in its earnings release: ”The nationwide rollout of 3G radio network on the 900Mhz spectrum will be completed by end of the first quarter. M1 will also be upgrading its 4G network to LTE-Advanced, which can offer higher throughput speeds of up to 300Mbps, by end of the year. These enhancements will further improve customer experience.”

The company’s chief executive, Ms Karen Kooi, also expressed optimsm about M1’s growth that would be driven by both mobile data and fixed services such as home broadband and Pay-TV. In M1’s press release, Kooi commented: “Mobile data will be driven by customers upgrading their smartphone plans and increasing adoption of smartphones by prepaid customers. Fixed services will benefit from the increasing fibre adoption in both the consumer and enterprise segments. We are well-placed to capitalise on these opportunities.”

Shares of M1 closed at $3.24 on Monday and are selling for 18.6 times trailing earnings. M1 has also recommended a final and special dividend of 7.1 cents each, bringing the  full-year payout to 21 Singapore cents (a huge 44% jump from the previous year’s annual payout of 14.6 cents), translating into a dividend yield of 6.5%.

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