What Investors Need to Know About M1’s Latest Earnings

Telecommunications provider M1 Ltd (SGX: B2F) reported its third quarter earnings on 16 October 2014 after the market closed. M1 is one of the smaller players in Singapore’s telco industry behind Starhub (SGX: CC3) and SingTel (SGX: Z74). You can learn more about the company here.

For the quarter that ended 30 September 2014, the services revenue for M1 rose by about 1% from $206 million to $208 million. The services revenue consists of the mobile services, international call services, and fixed services. On an overall revenue basis which includes handset sales, M1’s sales rose by 3.3% to $250 million.

Financial highlights

We can find out more about the sales performance of the company by looking into the different business segments. Quarterly sales for its Mobile services segment rose 3.7% from $162 million in the third quarter of 2013 to $168 million in the third quarter of 2014. Fixed services also went up by a nice 12.5% during the same duration. Rounding up the services revenue, the international call services fell by 21.4% compared to the same period a year ago.

Mobile services, Fixed services and International Call Services made up 67.2%, 7.2% and 8.8% respectively of revenue for the third quarter of 2014. The rest of the revenue came from the handset sales.

On the profitability side, free cash flow (operating cash flow minus capex) rose 17.5% from $57 million to $67 million. Meanwhile, M1 closed the quarter with $48.7 million in cash and $250 million in bank borrowings.

Operational Highlights

The sales increase for its Mobile services segment was driven by growth in its postpaid subscriber base, and a higher average revenue per user (ARPU). Most of the growth in ARPU was from increased data usage from customers. Average smartphone data usage increased from 2.4 GB/month in the quarter a year ago to 2.9 GB/month in the latest quarter. Despite the rise in sales, M1 market share shrank from 25.6% from a year ago to 23.9%.

Revenue increases for its Fixed services segment came from the 27.2% increase in fibre broadband subscribers to 98,000. The segment continues to show sales growth despite the drop in ARPU. On the other hand, according to a report from The Business Times, M1 will be ditching its plan for a nation-wide TV license, and instead focus on more niche areas for its Mi-Box pay TV initiative.

Foolish Summary

At the closing price on last Friday of $3.51, M1 traded at a price-to-earnings ratio of around 19, and has a dividend yield of around 6% (based on a trailing twelve months dividend of 21.2 Singapore cents per share).

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.