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M1 Q3 net profit falls 5.5% amid higher acquisition, retention costs

FIXED service revenue growth and handset sales nudged M1's top line upwards in the third quarter, but earnings still slipped on higher costs, according to unaudited financial results released on Wednesday.

Net profit fell 5.5 per cent on the previous year to S$34.5 million for the three months to Sept 30, even as operating revenue grew 10.1 per cent to S$274.6 million.

The bulk of the operating turnover came from handset sales, which jumped 34.1 per cent to S$84.5 million on higher average selling prices and sales volumes.

Still, service revenue rose 1.9 per cent to S$190.2 million, as higher revenue from fixed services offset the decline in mobile telecommunications and international call service revenues. Fixed revenue accounted for 19.9 per cent of service revenue in the quarter, up from 16.1 per cent the year before.

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But earnings took a hit from higher operating expenses, as cost of sales swelled 28.2 per cent to S$122 million on higher handset costs, as well as "other costs" including corporate project expenses.

M1 also cited higher acquisition and retention costs as a factor behind the slip in net profit, with net profit margin on service revenue down to 18.1 per cent from 19.6 per cent before.

The acquisition cost for each post-paid customer was up 8.7 per cent on the year before to S$411, while gross post-paid average revenue per user (ARPU) slipped 2.5 per cent to S$54.

Gross ARPUs were lower by 2.8 per cent for pre-paid users to S$10.50, and down by 16 per cent for data plans, to S$11, but improved by 4.4 per cent for fibre broadband users to S$42.70.

Earnings per share dipped to 3.7 Singapore cents, from 3.9 Singapore cents before, while net asset value was 53.5 Singapore cents, against 53.4 Singapore cents as at Dec 31, 2017.

No dividend was recommended, unchanged from the corresponding period the year before.

Meanwhile, net profit was down 1.4 per cent to S$105.5 million for the nine months, despite a 4.1 per cent rise in operating revenue to S$781.9 million.

M1 closed flat at S$2.10 before the results were released.

Shareholders Keppel Corp and Singapore Press Holdings, which owns The Business Timesannounced in September that they would make a pre-conditional voluntary general offer for M1 at S$2.06 a share.