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The State of the Mobile Industry: 8 Insights From M1 Ltd’s Management

Singapore’s smallest telecommunications services provider M1 Ltd (SGX: C33) held its 2016 third-quarter earnings briefing in October this year.

During the briefing, M1’s mobile service revenue was an area of focus, as it made up over 64% of the telco’s sales. During the quarter, the company’s mobile service revenue had declined by 6.6% year-on-year. For the first nine months of 2016, the business’s revenue was down by around 3.4% compared to the same period last year.

This is summarised in the slide below:

2016-12-07-m1-revenue
Source: M1’s earnings presentation

Reasons for the fall

Nicholas Tan, M1’s chief financial officer, explained why the company’s mobile service revenue had declined for the first nine months of the year:

“On a segment basis, mobile revenue was 3.5% lower year on year at SGD 482 million mainly due to lower voice and roaming revenues. International call revenue was 13% lower at SGD 46 million due to lower usage.”

Later on, Lee Kok Chew, M1’s chief commercial officer, gave more details:

“Traditional telecom revenues continued to be impacted by OTT services.”

Regarding OTT (over-the-top) services, Lee could be referring to services such as Facebook’s Whatsapp which offers video calls, voice calls, and messaging capabilities. These OTT services are an alternative to traditional mobile services such as international calls and SMS messaging.

Data, data, data

Data usage is on the rise, though. Poopalasingam Subramaniam, M1’s chief marketing officer, said:

“Mobile data revenue increased to 54.2% of mobile revenue in the latest quarter.”

That’s a significant figure. But, competition in the mobile data space is heating up. Subramaniam explained:

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

The key word here is “competitively priced.” Analysts present during the earnings briefing had questions around this statement. Subramaniam responded:

“You asked about whether there are competitive pressure. I think you can see that the data offerings in the market today are more attractive than maybe about six months ago. And that’s the state of data pricing today.”

In short, data usage is on the rise, but competition is heating up in this area too. M1 has rolled out an upsized data plan. Subramaniam added some comments to the new plan:

“We saw more take-up of upsized data plan which replaces ad hoc revenue with recurring revenues.”

Subramaniam added that the average postpaid data usage was 3.4 GB per month compared to the 3.3 GB per month recorded a year ago. But this raised a question: How much can data usage grow? Tan responded:

“… remember the data usage per customer on average is still climbing. From now 3.3 it’s gone up to 3.4. And don’t think you can put a cap on it at this point in time. So overall, I think data usage will continue to grow, but a bit too early days for us to point a definitive trend.”

Subramaniam also had some insights on the matter when he was responding to an earlier question:

“With respect to your question on 3.4 GB, I think it’s reached a stage where it is still growing, but probably at a slower rate. So we’ll monitor the usage as that goes along.”

We can learn much more about M1’s mobile service business segment through its earnings briefings. The eight quotes above give investors a deeper insight on how M1’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 owns shares in Facebook.