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6 Quotes From M1 Ltd’s Management Investors Should Know

M1 Ltd (SGX: B2F) reported its 2016 third-quarter earnings recently.

As a quick background, M1 is the smallest player within Singapore’s telco industry, sitting in third place behind StarHub Ltd  (SGX: CC3) and Singapore Telecommunications Limited (SGX: Z74). M1’s business has four segments, namely, mobile services, fixed services, international services, and handset sales; the first three are collectively known as service revenue.

Here’re six quotes you might not want to miss from M1’s third-quarter earnings presentation.

Net profit is falling

Lee Kok Chew, M1’s chief commercial officer, stated the following during the earnings presentation:

“Net profit after tax declined 12.6% year-on-year to SGD 118 million mainly due to lower roaming and IDD revenues, lower voice usage, higher handset loss as well as higher depreciation and amortization.”

M1’s mobile revenue was down 6.6% year-on-year to $155 million in the third quarter of 2016. This came despite an increase in the company’s mobile customer base. Lee added:

“During the quarter, our mobile customer base grew 15,000 Q on Q [quarter-on-quarter] to 1.99 million and mobile data revenue increased to 54.2% of [mobile] service revenue.”

Along with the above, Lee also noted that mobile data revenue now makes up a majority of M1’s mobile revenue.

Spectrum rights

Nicholas Tan, M1’s chief financial officer, reported on the company’s cash flow and capital expenditure figures:

“Cash flow and CapEx: our free cash flow for the third quarter is lower due to a one-time spectrum rights payment of SGD 64 million. Year-to-date free cash flow increased SGD5 million to SGD 121 million.”

M1’s cash flow from operations came in at $97.8 million in 2016’s third-quarter. Capital expenditure was $26.7 million. As mentioned, spectrum rights (a one-off payment) cost $64.1 million. Without the spectrum rights, M1 generated over $71 million in free cash flow. If we include the spectrum rights, M1 generated just $7 million in free cash flow.

Debt, debt, debt

Tan also shared some stats on M1’s debt holdings:

“As at the end of September 2016 our net gearing and net debt to EBITDA was slightly higher at 1.1 times and 1.2 times respectively, mainly due to the spectrum payment and our share buyback.”

As of 30 September 2016, M1 has $9.7 million in cash and equivalents and $401.3 million in debt. This gives M1 a net debt position of about $391.6 million. This is higher compared to the third-quarter of 2015, when M1 had a net-debt position of $325 million.

“Competitively priced”

Poopalasingam Subramaniam, M1’s chief marketing officer, shared his thoughts on the mobile revenue decline:

“… postpaid revenue for third quarter decreased 5% quarter on quarter to SGD 138 million due to competitively priced data offerings and lower roaming revenue. Postpaid ARPU decreased 5.7% quarter on quarter to SGD 56.5.”

In short, there is competition when it comes to data packages. Later on, Subramaniam said that data packages today are, in general, more attractive for users compared to six months ago.

There are bright spots

Subramaniam also added comments on M1’s Fixed services business:

“On fixed services, as at end September, our fiber base increased by 7,000 during the quarter to 152,000. Corporate and government customers account for 10% of our base and contributed 51% of third-quarter fixed services revenue.”

The comment highlights the importance of corporate customers to M1. Corporate customers currently make up the majority of the company’s Fixed services revenue. Sales came in at $27 million for the third quarter, up from the $22 million recorded a year ago.

We can learn much more about M1 through its earnings briefings. The six quotes above give investors a deeper insight on how the company’s business is performing.

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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.