• M1’s 2Q18 results were marginally better than our forecast. It added 34,000 post-paid mobile customers, boosted by Circles.Life’s launch of its S$0 Flexi Plan in May.
• Post-paid ARPU recovered 1.8% q-o-q due to seasonality and growth from data. We expect TPG to launch commercial services in September and competition to intensify in 4Q18.
• Management expects earnings to decline in 2H18.
• Maintain SELL. Target price: S$1.55.

2q18 Results

M1 reported a net profit of S$36.2m in 2Q18, marginally better than our forecast of S$34.3m.

Mobile: Hefty net additions boosted by Circles.Life.

M1 added a sizeable 34,000 post- paid customers in 2Q18. These new customers were a combination of M1’s own customers and those from MVNO Circles.Life but management did not disclose the breakdown. Circles.Life launched its new S$0 Flexi Plan on 22 May 18, which provides 1GB of data, 30 mins of local talk time, 10 SMS and caller ID for free. Circles.Life would have contributed substantially to M1’s net additions during the quarter.

Post-paid ARPU declined slightly by 0.4% y-o-y but increased 1.8% q-o-q to S$55.60. 34% of customers on tiered data plans exceeded their primary data bundle (1Q18: 29%). Average usage of data increased 33% y-o-y to 5.2GB. Data Passport also contributed positively as well. Data contribution to mobile services revenue surged to 64.4% (1Q18: 61.3%). Contributions from voice and SMS were reduced to 35.6% of mobile service revenue.

Source: UOB Kay Hian Research - 30 Jul 2018