M1 Q2 net profit up by 1.5% on higher service revenue, but H2 may not be as rosy

TELCO M1's net profit inched up in the second quarter, on growth in post-paid and fixed service revenue, according to unaudited financial results out on Friday.

Earnings came in at S$36.2 million for the three months to June 30, up by 1.5 per cent on the same period the year before, as operating revenue rose by 1.7 per cent to S$253.2 million.

But the company warned in its results announcement that the coming six months might not fare as well.

The increase in turnover was partly on the back of higher mobile service revenue, which rose by 3.8 per cent to S$146.2 million, with the post-paid customer base bigger by 34,000 users quarter on quarter.

The mobile performance was attributed to an increase in SIM-only plans for both M1 subscribers and customers from mobile virtual network operator partner Circles.Life. Mobile data contribution was up to 64.4 per cent of overall service revenue, from 55.3 per cent in the year-ago period.

But chief financial officer Lee Kok Chew said in an earnings call that M1 is unable to give a breakdown between its share and Circles.Life's, citing confidentiality agreements.

Fixed service revenue grew by 27.4 per cent to S$36.7 million, with M1 reporting "strong growth across both corporate and residential segments".

But international call services continued to take a hit.

Beyond service revenue, handset sales slipped by 8 per cent to S$60.2 million.

Earnings per share ticked up to 3.9 Singapore cents, from 3.8 Singapore cents before, while net asset value was 55.2 Singapore cents a share, against 53.4 Singapore cents as at Dec 31, 2017.

For the half-year, net profit inched up by 0.8 per cent to S$71 million against the previous year, on a 1.1 per cent rise in operating revenue, to S$507.3 million.

"Based on current outlook and barring any unforeseen circumstances, we estimate second-half profits to be lower in view of market seasonality and impending new competition," the company said. Australia's TPG Telecom is set to enter the Singapore market as a mobile network operator (MNO) this year.

Elaborating on this in response, Mr Lee told the call: "Typically, for the second half, you see a lot more marketing activities, seasonal promotions."

M1 registered a restated net profit of roughly S$69 million in H2 2017.

Asked about potential partnerships with MVNOs other than Circles.Life, Mr Lee said: "We are open to working with MVNOs that can offer unique propositions, and where they can serve particular segments better than the MNO can."

Chief executive Karen Kooi said in a media statement that the company is looking at 5G services and information and communications technology (ICT) for growth.

"M1 is committed to stay at the forefront of technology advancements and has embarked on early multi-vendor 5G trials, including Singapore's first end-to-end 5G live trial in June 2018. This could provide insightful learning crucial to the successful development of relevant 5G services," she said.

"With our foundation of dense cell grid and advanced narrow-band Internet of Things network, we are well positioned to harness exciting new capabilities and support highly reliable and responsive applications on our network."

She added: "The Smart Nation initiatives will accelerate the digitalisation and transformation of businesses. By leveraging on our scaled-up ICT and digital capabilities, we will be able to capture new opportunities from Smart Nation initiatives and support businesses to leverage digital technologies."

The board has recommended an interim dividend of 5.2 Singapore cents a share, unchanged from the previous year.

M1 shed S$0.01, or 0.62 per cent, to S$1.60, before the results.