M1 Q3 profit down 20 percent on handset subsidies

Singapore telco's net profit drops to US$27 million, but sees boost from 4G rollout to subscriber base and revenue, and expects fourth quarter to be better.

Singapore's smallest telco M1 has posted a 19.5 percent dip in its net profit for its third quarter at S$33.1 million (US$27 million), which it has blamed on higher handset subsidies.

In a statement Monday, the company said operating revenue for the three months ended September rose 4 percent to S$254.7 million (US$208.5 million). Free cash flow in the third quarter rose 56 percent to $83 million (US$67 million).

The bottomline was dragged down mainly by a rise in handset costs of about S$83 million (US$67 million)--up 22 percent from the same period last year. The quarter saw the launch of smartphones such as Apple's iPhone 5 in September , and Samsung's S3 close to the start of June.

profit margins dipping
Q3 results (source: M1 presentation slides)


During the third quarter, M1 added 24,000 customers to bring its total mobile customer base to 2.059 million. It also reduced monthly postpaid churn improved to 1.2 percent from 1.3 percent in the preceding quarter.

The quarter also saw M1 become the first operator in South East Asia to launch a nationwide 4G service in September, which M1 said had "very strong take-up of 4G handsets on our new smartphone plans".

"Based on current economic outlook and barring unforeseen circumstances, the fourth quarter performance is likely to improve over the previous quarter," noted Karen Kooi, CEO of M1. The telco had in July also blamed handset subsidies for poorer first half results.

M1 has a marketshare of 25.9 percent as of August, said the company. It is the first local telco to announce its results, and could be an indicator of what could be in store for rivals SingTel and StarHub in their upcoming earnings announcement.