M1 attributes 2016 profit dip to lower roaming revenue, handset subsidies

Singapore telco says OTT services led to a 2 percent drop in service revenue while its net profit dip of 16.1 percent was the result of lower international call and roaming revenues.

M1 has reported a 16.1 percent drop in net profit to S$149.7 million (US$104.75 million) for its fiscal 2016, dragged down by lower revenue from international call and roaming services.

The Singapore telco added that the dip in net profit, after tax, also was the result of higher depreciation and amortisation expenses of its fixed assets including 4G network and the acquisition of spectrum. In its financial report, M1 also pointed to higher handset subsidies, which pulled down overall net profit.

Operating revenue for the year, ended December 31, fell 8.3 percent to S$1.06 billion (US$741.72 million). Service revenue also dropped 2 percent to S$805.5 million (US$563.63 million), which the company attributed to continuing pressures fromOTT (over-the-top) services on traditional telecom services.

Fixed services revenue, though, grew 21.4 percent to S$104.2 million (US$72.91 million) and accounted for 12.9 percent of overall service revenue, up from 10.4 percent the previous year. Growth for the segment was fuelled by an expanded customer base across residential, enterprise, and government sectors.

Mobile data revenue also increased 7.7 percent, accounting for 54 percent of overall service revenue. For the year, M1 grew its postpaid customer base by 52,000 and prepaid customer base by 39,000, pushing its total mobile users to 2.02 million. Its mobile churn rate clocked at 1 percent.

It saw average postpaid smartphone data traffic climb to 3.6GB per month for fourth-quarter 2016, up from 3.3GB in the previous year.

The telco added 32,000 fibre customers, pushing its total to 160,000 for the year.

In its report, M1 cautioned that market conditions were likely to remain challenging this year and noted that a new mobile player would soon enter the local market. It did, however, point to potential growth opportunities from emerging service segments.

"While traditional revenues are likely to remain subdued, the rise of business ecosystems based on internet, growing IoT (Internet of Things) services, as well as the government's smart nation initiatives, are creating new addressable markets," the telco said.

Australia's TPG Telecom last December snagged the license to become Singapore's fourth telco, with its winning bid of S$105 million (US$73.45 million). Its spectrum rights were expected to commence no earlier than April 1 this year, and the telco was expected to offer nationwide street-level 4G coverage within 18 months from the start of the new spectrum rights. It also would need to establish service coverage in road tunnels and in-building within 30 months as well as MRT underground stations and lines within 54 months.