M1 Singapore - Modest Growth in a Maturing Market

M1, Singapore's smallest mobile operator by customers, has reported its fourth quarter and full year results. Taking the latter first, we see that revenues actually declined, from S$778m to S$773m, but operating costs declined slightly more rapidly, from S$569m to S$559m, so the bottom line has edged up from S$161m to S$165m, an increase of 2.2%. The fourth quarter story is different. In the last three months of the year, revenues rose, albeit by a modest 3.5% (from S$194m to S$201m) but this led to a rather more marked 7.9% rise in profit before tax, 7.6% after tax, as operating expenses only rose by 2.4%.

The company finished the quarter with 1.337m customers, up from 1.246m one year earlier, but a little down on the prior quarter. The contract base increased, from 800k to 809k, but a net 7,000 prepaid customers disconnected. M1 estimates its market share to be around 28.5% overall, which would imply a total market of just under 4.7m customers, equivalent to 103% penetration (using population figures from The Mobile World - M1's own penetration rate is stated as 100.9%).

Looking at the KPIs, the year on year changes are mostly marginal. Churn is down from 1.4% to a commendably low 1.3%, but this may, in part, be due to the higher level of retention spend in the quarter, which rose from S$105 to S$141, an increase of more than one third. Acquisition costs are also up, though not quite so dramatically - by just 15.4% from S$130 to S$150. M1 does not give a blended ARPU figure, so an exact calculation isn't possible, but it is safe to assume that with contract ARPU up just 2.2% quarter on quarter and prepaid only up 4.9%, the payback period has lengthened somewhat.

The increase in ARPUs is largely attributable to increased usage: the number of minutes of use among contract customers was up 1.4% to 356, while prepaid usage rose 15.6% to 156.

M1 is one of the great revisionists in the industry and all of the recent quarters ARPUs have been restated to reflect the fact that the company now strips out data only customers from the contract base. The effect has been a marginal reduction all round, but we now have a new metric, ARPU from Dataplan customers. These are 3G datacard users and here we see a strong increase year on year - from S$26.8 to S$41.8, though the quarter on quarter increase is a more modest 3.7%. M1 has not disclosed how many customers are connected through this plan, but the marginal change to the contract ARPUs suggests the answer is not many. That said, the company says that "there has been an overwhelming response to this new service" and it expects a material benefit to its revenues in 2007.

It is investing heavily in the area of mobile broadband and is looking to increase the maximum download speed from 3.6Mbps to 14.4Mbps by the end of this year.

This article was extracted from The Mobile World Briefing, the weekly newsletter from The Mobile World. To download a sample issue of the Briefing in PDF format, please click here. For more information including full subscription pricing, please visit The Mobile World"

Posted to the site on 1st February 2007