In 2006, M1 achieved a net profit after tax of S$164.6 million, a growth of 2.2% over the previous year. Net profit margin on service revenue increased by 1.3% points to 24.1% over the same period. Earnings before interest, tax, depreciation and amortisation (EBITDA) was stable at S$331.7 million, representing a margin of 48.6% on service revenue. While voice and text communication continue to be the mainstay of M1’s business, we are seeing a meaningful contribution from data services which is the fastest area of growth. Focusing on new services and capabilities shall continue to be our priority. M1’s 3G service entered its second year of commercial operations during the year. We saw strong growth momentum in the adoption of 3G despite a slow start. While usage of 3G-type services is still relatively low, the introduction of 3G data cards and attractive marketing plans contributed to the strong growth in data revenue. This year, M1 will focus on introducing innovative and new value-added services to help boost our customer base and 3G revenue.

M1 continues to be in the forefront of leveraging technology advances to meet our customers’ increasingly sophisticated needs and demand for faster network access speeds. In the fourth quarter of 2006, M1 completed the implementation of High Speed Packet Access (HSPA) for our 3G network. With this, M1 became the first operator in Singapore to launch an island-wide HSPA network capable of supporting downlink access speeds of up to 3.6Mbps. We believe the faster network speeds will encourage our customers to use more multimedia services.

The new HSPA network enabled M1 to launch our wireless broadband service – M1 Broadband – in December 2006. The service is aimed at both consumer and business users with the key propositions of simplicity, affordability and most importantly, convenience of a wireless and portable service anywhere. Looking ahead, we plan to further upgrade the network to support downlink speeds of up to
14.4 Mbps by the end of 2007 and this will further strengthen M1 Broadband’s position as a viable alternative to fixed broadband.

We continue to seek out alliances and partnerships to sustain our earnings growth. In 2006, M1 and Vodafone broadened the scope of the existing partnership to include Vodafone’s business products and services, to strengthen M1’s service proposition to our enterprise customers. The partnership also enabled us to launch M1 Broadband with a “plug-and-play” Mobile Connect USB Modem that can be used on any laptop or desktop computer and is available to M1 on an exclusive basis from Vodafone.

On the branding front, M1 continued to build on the strength of our brand and its wide appeal to consumers. In July 2006, we launched a brand campaign with the theme “Make your World Mobile with M1”. This theme was an extension of our “1 life. live it.” brand philosophy and is aimed at bringing home the message that M1’s services enhance and enrich every aspect of customers’ lives, anytime, anywhere. M1’s brand image and personality has been built up over the years and a significant contribution to this comes from advertising. I would like to take this opportunity to congratulate M1’s Chief Executive Officer, Mr Neil Montefiore, on being conferred the Lifetime Achievement Award by the Institute of Advertising Singapore (IAS) for his exceptional commitment and contributions to the advertising industry.

This year, M1 will continue to develop and grow non-voice services, especially by addressing the broadband market and enterprises. Notwithstanding the maturity of the Singapore market, we expect some scope for growth in our core mobile business, particularly the prepaid segment with the prospect of increasing tourist arrivals and foreigners working in Singapore, as well as when more value added services become available to prepaid customers.

In 2006, the government announced its plans for the development of a Next Generation National Broadband Network. The intention is for this network to offer ultra high speed broadband capacity on a wholesale carrier-neutral basis to retail service providers. This is expected to shift the telecommunications industry dynamics in the medium to long term. M1 believes that if implemented successfully, this will enable M1 to leverage the industry trend towards fixed-mobile convergence and expand our business beyond being a pure mobile player.

M1 continues to be committed to a sustainable dividend policy for our shareholders. In respect of 2006,
the Board of Directors recommends a final dividend of 7.5 cents per share. Taken together with the interim dividend of 5.8 cents per share paid in September 2006, this is equivalent to a payout ratio of 80% of net profit for 2006.

In addition, given M1’s continued strong cashflow and relatively low level of debt, and after taking into account M1’s foreseeable operating and investment requirements, the Board is recommending to return S$221.6 million to shareholders by way of a capital reduction. This will entail the cancellation of 10% of shares held as at the books closure date for the exercise. In so doing, M1 will improve its return on equity and earnings per share going forward, while each shareholder will maintain approximately the same level of proportionate shareholding in the Company.

In November 2006, Mr Arthur Seet stepped down as Director and Member of the Audit Committee following his retirement from Singapore Press Holdings. In the course of over 8 years of service on the M1 Board, Mr Seet played an important part in steering M1 through significant developments, especially the transition from a privately held joint venture to a public listed company. On behalf of the Board of Directors, I would like to express my appreciation to Mr Seet and to wish him well.

Finally, on behalf of the Board of Directors, I wish to thank M1 management, customers, shareholders and business partners for their continued support of M1.

Lim Chee Onn
Chairman