M1 braces for increased competition as net profit continues downward slide

M1 has reported a 17.6 percent decline in net profit for the first half of 2017 to S$68.8 million (US$50.24 million), as it prepares to face increased market competition when Singapore's fourth telco begins operations.

M1 attributed the profit dip to higher depreciation and interest expense, adding that it expected to end the year with an overall decline in net profit based on current outlook. It would mark another year of lower profit following a 16.1 percent dip to S$149.7 million for its fiscal 2016, which it then attributed to lower revenue from international call and roaming services.

Operating revenue climbed 2.9 percent year-on-year to S$512 million for the first half of 2017, while service revenue dropped slightly to S$406.2 million, compared to S$407 million over the same period last year. Mobile revenue also dipped 2.9 percent to S$317 million on lower prepaid revenue.

Mobile data accounted for 55.5 percent of overall service revenue, while fixed services contributed 15.1 percent. Fixed services saw revenue increase by 22.3 percent year-on-year to S$61.2 million, on strong growth from both enterprise and residential customer segments, M1 said.

Its mobile customer base, however, shrank 2,000 from the same quarter last year to 2.04 million, on a higher mobile churn of 1.7 percent. As of April 2017, the telco grabbed a 24.2 percent share of Singapore's overall market. M1's fibre subscribers climbed 8,000 to 176,000 from the the same quarter last year.

Average monthly postpaid mobile data usage increased to 3.9GB for the second quarter, up from 3.3GB last year.

Outlining its outlook for the Singapore market, M1 said "new entrants" would lead to heightened competitive activities while over-the-top (OTT) services would continue to impact traditional telecommunications revenue. However, it pointed to new opportunities from the country's focus on becoming a digital economy.

Noting that the telco was ready to tap these new business avenues, M1 CEO Karen Kooi said: "We have been investing in NB-IoT (narrowband Internet of Things) network and digital solutions, and expanded our offerings to include managed infrastructure services, cybersecurity, business solutions, and analytics. This would enable us to better serve our customers and generate new revenue streams for future growth."

M1 said it would further focus on improving its services to meet changing customer preferences as well as develop new ICT and cloud-based offerings. It also expected to launch its national NB-IoT network next quarter.

M1 as well as Singapore's two other operators--StarHub and Singtel--would face new competition from Australia's TPG Telecom, which last December snagged the license to become Singapore's fourth telco with its winning bid of S$105 million (US$73.45 million). The telco was expected to commence operations in mid-2018.