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Handset sales halving drags M1 first-half profits down

While most of its indicators were stable or slightly down, Singapore's M1 saw profit fall by double digits thanks to the tanking handset sales.
Written by Chris Duckett, Contributor

Singapore's third-largest telecommunications company, M1, has seen its sales of new handsets plummet in the second quarter, dragging the company's overall results down with it.

M1 operating revenue for 1H 2016
(Screenshot: Chris Duckett/ZDNet)

In the second quarter, handset sales fell by 50 percent year-on-year compared to the same quarter in 2015, registering only SG$36 million in revenue. This result was down by 33 percent on the performance in the first quarter, and year-on-year saw first half sales drop by 44 percent to SG$90.6 million.

The company conceded in its earnings the handset sales had dragged down its overall result, which saw earnings before interest, tax, depreciation, and amortisation (EBITDA) for the second quarter come in 1.7 percent lower at SG$82 million, while operating revenue fell 13 percent to SG$240 million and net profit dropped by 7.5 percent to SG$41 million.

For the half year to the end of June, M1 reported a 1 percent year-on-year drop in EBITDA to SG$165 million, operating revenue fell 13 percent to SG$498 million, and net profit dropped 7.2 percent to SG$83.5 million.

In the second quarter, the company added 14,000 postpaid and 24,000 prepaid customers to reach just shy of 2 million customers, as it maintained 23.5 percent of the Singapore mobile market. Postpaid customers on the telco averaged 3.3GB of data usage per month, with prepaid users consuming 1.3GB per month. Data now makes up the majority of the telco's service revenue, jumping by 9 percentage points to 54 percent.

For fixed services, M1 added 9,000 fibre customers to have 145,000 overall, as average revenue per user fell 2.6 percent year-on-year to SG$45.

The company is now predicting a single-digit fall in net profit for the full year.

"The increasing adoption of OTT services has impacted traditional telecommunications revenue. This has also led to increasing demand for data," the company said.

"We continue to enhance our service propositions, with investments in new technologies and capabilities to build a portfolio of digital solutions to capture emerging growth opportunities. Meaningful revenue from these investments will be upon achieving scale in service adoption over future years."

Earlier this year, the telco launched its Gigabit Passive Optical Network (GPON) commercial fibre broadband service to give customers access to speeds of up to 10Gbps. While on the mobile side, M1 teamed up with Huawei to have its 4G speeds reach 1Gbps download/130Mbps upload via the use of 4x4 Multiple-Input Multiple-Output, two-component carrier uplink carrier aggregation, 3CC tri-band downlink carrier aggregation, and Higher Order Modulation 256 Quadrature Amplitude Modulation.

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