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8 M1 LIMITED ANNUAL REPORT 2016 AT A GLANCE MOBILE DATA AS A % OF SERVICE REVENUE 54.0% 54.0% 46.3% Mobile Customers (End-2016) 2.02m +91,000 15 16 OPERATING REVENUE MIX Fibre Customers (End-2016) 160,000 +32,000 Mobile telecommunications 60.3% International call services 5.8% Fixed services 9.8% Handset sales 24.1% 9 CASH DISTRIBUTION CAPITAL EXPENDITURE NET DEBT/EBITDA PER SHARE (DECLARED) 12.9 cents S$141m 1.2 times 15.3 cents S$141m 1.2x S$133m 12.9 cents 1.0x 15 16 15 16 15 16 SERVICE REVENUE MIX MOBILE CUSTOMER MIX MOBILE TELECOMMUNICATIONS REVENUE MIX Mobile telecommunications 79.5% Postpaid 61.8% Postpaid 89.0% International call services 7.6% Prepaid 38.2% Prepaid 11.0% Fixed services 12.9% 10 M1 LIMITED ANNUAL REPORT 2016 PERFORMANCE HIGHLIGHTS OPERATING AND EBITDA NET PROFIT AFTER TAX SERVICE REVENUES 40.4 41.6 21.2 21.7 38.9 38.7 19.0 19.5 18.6 1,157 38.1 1,077 1,076 1,061 1,008 336 342 176 179 312 312 160 820 831 822 300 150 772 806 147 12 13 14 15 16 12 13 14 15 16 12 13 14 15 16 Operating revenue (S$m) EBITDA (S$m) Net profit aer tax (S$m) Service revenue (S$m) EBITDA margin on service revenue (%) Net profit aer tax margin on service revenue (%) CASH FLOW AND EARNINGS AND CASH DISTRIBUTION CAPITAL EXPENDITURE FREE CASH FLOW PER SHARE PER SHARE (DECLARED) 335 19.1 18.8 19.1 302 16.7 17.4 275 273 16.1 16.1 7.1 239 13.9 11.3 1.7 10.0 11.9 8.3 140 141 6.3 7.1 5.9 123 125 133 6.6 6.8 7.0 7.0 7.0 12 13 14 15 16 12 13 14 15 16 12 13 14 15 16 Net cash flow from operating Earnings per share (basic) (cents) Interim dividend (cents) activities (S$m) Free cash flow per share (cents) Final dividend (cents) Capital expenditure (S$m) Special dividend (cents) 11 OPERATING HIGHLIGHTS 2016 2015 Change (%) Mobile Telecommunications Number of mobile customers ('000) Postpaid 1,247 1,195 4.4 Prepaid 772 733 5.2 Total 2,019 1,928 4.7 Market share1 (%) Postpaid 24.7 24.6 – Prepaid 22.4 21.7 – Overall 23.8 23.4 – Singapore mobile penetration rate1 (%) 149.2 148.4 – Average revenue per user (ARPU, S$ per month) Postpaid (excludes Data plan) 58.0 61.7 -6.0 Postpaid (excludes Data plan and adjusted)2 50.3 54.2 -7.2 Data plan 14.8 17.1 -13.5 Prepaid 12.2 14.7 -17.0 Mobile data as a % of service revenue 54.0 46.3 – Average monthly churn rate (%) 1.0 1.0 – Acquisition cost per postpaid customer (S$) 369 363 1.7 Fixed Services Number of fibre customers ('000) 160 128 25.3 ARPU (Fibre, S$ per month) 45.1 46.7 -3.4 1. Based on IMDA statistics as at November 2016 2. After adjustment for ARPU allocated to handset sales FINANCIAL HIGHLIGHTS 2016 2015 Change (%) Operating revenue (S$m) 1,060.9 1,157.2 -8.3 Mobile telecommunications 640.0 667.7 -4.2 International call services 61.3 68.7 -10.8 Fixed services 104.2 85.9 21.4 Handset sales 255.4 334.9 -23.7 EBITDA (S$m) 312.1 341.8 -8.7 Net profit after tax (S$m) 149.7 178.5 -16.1 Free cash flow (S$m) 129.6 105.7 22.6 Net assets (S$m) 403.4 413.2 -2.4 Net debt (S$m) 390.0 343.8 13.4 Financial ratios Net debt/equity (x) 1.0 0.8 – Net debt/EBITDA (x) 1.2 1.0 – EBITDA/interest (x) 46.2 69.5 – ROE (%) 36.7 44.2 – ROCE (%) 19.9 25.1 – Note: Figures may not add up due to rounding 12 M1 LIMITED ANNUAL REPORT 2016 LETTER TO SHAREHOLDERS The Internet’s impact is felt in every aspect deliver the benefits of our technology to of our modern society, in businesses, jobs, even more customers. capital allocation, and in our relationships with one another. It has expanded our FINANCIAL HIGHLIGHTS world and made experiences even more deeply personal, for everyone. Service revenue for 2016 decreased 2.0% to S$805.5 million, as traditional revenues At M1, we feel our responsibilities as were impacted by over-the-top (OTT) services. the communications provider to over However, fixed services posted strong two million people and businesses keenly, growth with a 21.4% increase in revenue and this drives our commitment to always to S$104.2 million, and this accounted for be at the forefront of this always-on, 12.9% of service revenue compared to always-connected world to deliver a 10.4% a year ago. The growth was driven by superior experience to our customers. a larger retail customer base and increased contribution from the corporate segment. In anticipation of the surge in mobile data, Operating revenue decreased 8.3% to M1 launched Singapore’s first commercial S$1,060.9 million on lower handset sales. nationwide 4G network in 2012, following up on this achievement with the first 4G+ network in 2014. In 2016, we took important steps toward evolving our networks to 5G, as we began OUR COMMITMENT: the deployment of our NB-IoT (narrowband Internet of Things) and small cell networks. TO ALWAYS BE AT THE 5G networks are designed to deliver reliable, FOREFRONT OF THIS high-speed and massive connectivity, ensuring we continue to be able to meet the ALWAYS-ON, ALWAYS- growing data needs of our customers and to CONNECTED WORLD support new applications such as virtual/ augmented reality and autonomous vehicles. TO DELIVER A SUPERIOR EXPERIENCE TO OUR We leveraged our advanced technology to make available new products and services CUSTOMERS for our customers across all segments, and capitalised on our expanded capabilities, such as in the area of data analytics and cloud applications, to penetrate new corporate accounts. To improve efficiency Net profit after tax for the year decreased and time-to-market, we continued to 16.1% to S$149.7 million due to lower IDD digitise our operations to ensure we have and roaming revenues, higher handset the right cost structure to remain competitive. subsidy, as well as higher depreciation and amortisation expenses from investments in The year 2017 will usher in a significant infrastructure, spectrum and platforms for milestone as we celebrate our 20th anniversary. future services. Since M1’s launch in 1997, we have built up a strong brand that stands for excellent Mobile data usage continued to grow, with service, innovation and value. We will 2016 revenue from mobile data increasing continue to build on these values to meet 7.7 percentage points year-on-year to 54.0% the challenges ahead, further entrench M1 of service revenue. Average data usage per as the service provider of choice, and post-paid smartphone customer increased to 3.6GB per month in the fourth quarter of 2016, 13 compared to 3.3GB per month a year ago. The Group’s balance sheet remained healthy, with net debt-to-EBITDA at 1.2 times as at end-2016. PERFORMANCE HIGHLIGHTS M1’s total customer base grew to 2.18 million as at end-2016. Postpaid customer base increased 52,000 year-on-year to 1.25 million. The number of customers on tiered data plans grew three percentage points to 77% as at end-2016, of which 28% exceeded their primary data bundles in the fourth quarter of 2016. To cater to our customers’ growing mobile WE HAVE BUILT A data needs, we launched Upsized Data STRONG BRAND bundles in March 2016. This enables our customers to significantly increase their THAT STANDS FOR data bundles at a highly attractive rate EXCELLENT SERVICE, of S$5.90 per month. In November 2016, we offered even more choices for INNOVATION customers with the launch of Upsized AND VALUE Data Plus and Upsized Data Super, which allowed customers to increase their data bundles by up to 36GB per month. We also expanded our unique M1 Data Passport service for customers to use their local data bundles affordably to 48 overseas destinations +21.4% including China, Malaysia, the United Kingdom GROWTH IN FIXED SERVICES and the United States, from 29 destinations REVENUE a year ago. This helped drive more than 100% increase in active data roaming users in 2016 and more than two times increase in data roaming traffic year-on-year. Prepaid customer base increased 39,000 to 772,000, driven by various marketing campaigns, promotions and new offerings. At the start of the year, we pre-provisioned all new M Cards with 4G speeds and enhanced our prepaid offerings during the year with various data bundles, ranging from 100MB to 100GB of data. We also added three more overseas destinations – Hong Kong, Macau and Taiwan, for prepaid customers to use their data bundles at no additional charge, after introducing Malaysia and Indonesia in 2015. A new IDD prefix, 033, was launched in June 2016, offering all-day flat rates to customers to make international calls on the M Card with the lowest rates to India, Bangladesh, and other popular regional destinations. Fibre customer base increased 32,000 to 160,000, as we added new customers in both the residential and corporate segments. Throughout the year, we held tactical promotions for our fibre service plans, 14 M1 LIMITED ANNUAL REPORT 2016 LETTER TO SHAREHOLDERS especially during trade shows.