M1 Ltd - MANAGEMENT REPLY: Were iPhone 5 sales not enough to prevent revenue decline?

24/10/2013 – M1's third quarter performance shows a revenue decline that management attributes to poor handset sales.

On the outlook, the coming months are probably going to bring only moderate growth.

Management says in its outlook that the investments of S$116 mln for upgrades to networks are on schedule and the first phase is expected to complete in the fourth quarter.

Also, the take-up of internet TV service MiBox 'has been encouraging'.

These are the company's Q3FY13 results published on October 14:

Revenue: -5.1% to S$241.7 mln
Profit: +19.4% to S$39.5 mln
One-off gains/losses: S$0.9 mln vs S$0.3 mln
Cash flow from operations: S$102.6 mln vs S$100.1 mln
Cash reserves: S$48.7 mln vs S$23.8 mln
Dividend: None
Order book: n/a

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Our questions on reviewing the financials.

Question

1. Were iPhone 5 sales not enough to prevent revenue decline?

Handset sales clocked a decline of 39.5%, dropping from S$59.3 mln to S$35.9 mln this quarter, even though the mobile customer base grew 3.5%.

So why did handset sales drop?

Is there a particularly unpopular handset causing this drop in handset take-up?

Mangement reply: Popular handsets such iPhone 5S and Samsung Note 3 were launched on 20 and 27 Sep respectively, or towards the end of 3rd quarter and therefore did not have much impact on our handset sales.

In any case, higher handset sales does not necessarily mean better profitability as M1 subsidises the handsets sold, and high-end handsets generally require higher subsidies.

Question

2. Will M1 discontinue IDD services?

This might be a provocative question, but with internet telephony long distance calls become virtually free.

So, it is no wonder IDD business is on a decline.

IDD or international call services dropped by 8.4%, from S$30.6 mln to S$28.1 mln this quarter.

Are there plans to revitalise this business?

Or is IDD a dead duck for sure?

Management reply: IDD service is an integral part of our offerings. The decline is mainly due to lower roaming traffic, and this segment is likely to remain under pressure in the near term. To encourage usage, we have introduced attractive unlimited mobile data roaming at S$15/day to 16 countries, as well as unlimited WiFi roaming to more than 120 countries (S$12/day for Americas and Asia-Pac, and S$19/day for the rest of the world)

(Total:4 questions and replies)

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