Costs rise faster than revenue for M1 in Q3

Singapore

ACQUISITION and retention costs ate into the third-quarter bottom line at telco M1, despite the boost to operating revenue from higher handset sales and fixed services growth.

Net profit was S$34.5 million for the three months to Sept 30, down by 5.5 per cent on the year before, according to unaudited financial results released on Wednesday. This was in spite of the 10.1 per cent growth in operating revenue to S$274.6 million.

Quarterly expenses rose by 13.8 per cent to S$230.5 million, spurred by higher cost of sales such as handset costs, with the net profit margin on service revenue narrowing to 18.1 per cent from 19.6 per cent before.

The acquisition cost for each post-paid customer grew by 8.7 per cent to S$411, but monthly average revenues per user (ARPUs) fell for pre-paid, post-paid and data plan customers. So, mobile telecommunications revenue edged down, with fewer customers, as a drop in the pre-paid segment outweighed post-paid gains.

Gross post-paid ARPU fell 2.5 per cent, to S$54, and gross pre-paid ARPU slipped 2.8 per cent to S$10.50. Fibre broadband was the only segment with a bump in ARPU, as gross revenue rose 4.4 per cent to S$42.70.

Fixed services, which includes access and information and communications technology services, made up 19.9 per cent of quarterly service revenue - up from 16.1 per cent last year.

The growth in this segment offset decline in both mobile telecommunications and international call services, pushing service revenue higher by 1.9 per cent, to S$190.2 million.

No dividend was recommended for the quarter, unchanged from the same period the year before. Meanwhile, net profit for the nine months slipped by 1.4 per cent to S$105.5 million, even as operating revenue grew by 4.1 per cent to S$781.9 million.

M1 said in its financial statement that it had no comment on any variance from prospect statements, owing to a pre-conditional voluntary general offer announced in September. Shareholders Keppel Corp and Singapore Press Holdings, which publishes The Business Times, are making a buyout bid for M1 at S$2.06 a share.

The counter closed flat at S$2.10, before the results were released.