CEO's Statement
“...We delivered growth in revenue and net profit, embarked on several key initiatives to drive operating efficiency and continued to invest and allocate resources for future growth.”
M1’s performance in 2007 reflects a continuation of our track record of delivering long-term shareholder value. Amidst a challenging and competitive market, we delivered growth in revenue and net profit, embarked on several key initiatives to drive operating efficiency and continued to invest and allocate resources for future growth.
Operating revenue increased 3.9% to S$803.3m, driven mainly by a 6.2% growth in postpaid revenue to S$538.5m and 11.5% increase in international call revenue to S$127.1m. The growth in postpaid revenue was attributed to a larger customer base and higher average revenue per user (ARPU), whilst international revenue benefitted from an increase in promotions for the value segment. Net profit after tax grew 4.4% to S$171.8 million. Earnings per share improved 11.4% to 18.5 cents, representing a compounded annual growth rate of 8.7% over the past 5 years. In terms of the balance sheet, we continued to be comfortably leveraged with net-debt-to-EBITDA ratio at 0.8x as at end 2007.
During the year, M1 added 47,000 postpaid and 151,000 prepaid customers. The growth in postpaid customer base was driven mainly by M1 Broadband. With nation-wide coverage, simple “plug-and-play” devices and competitive price plans, M1 Broadband offers a strong value proposition for customers to enjoy wireless broadband services. As for mobile postpaid services, while voice revenue remained stable, we saw continued growth in data usage. This was fuelled by increasing prevalence of 3G and high speed downlink packet access (HSDPA) handsets, as well as new services introduced during the year, such as MeTV – Singapore’s first video sharing service on mobile phones, mClassified – a mobile version of classified advertisements that supports video and image uploads, M1 Mobile eMail, as well as Google Search Box and eBay on mobile.
On the pre-paid front, revenue was stable in 2007 as growth from an enlarged customer base was offset by increased price competition. During the year, we became the first operator to extend the 3G experience to our prepaid customers through the launch of our 3G M card in April 2007. We also introduced new competitive plans targeted at the mass market, launched One2One Top-up which allows customers to transfer prepaid credits to other accounts and retailed lower denominated M cards to increase our product range. These initiatives reflect our commitment to continuously introduce innovative features and add value to our prepaid offerings.
In the international call services segment, we continued to drive sign-ups for IDD postpaid plans and increased the number of free IDD countries. There were also bundled promotions for our prepaid card and 1818 International Calling Card. These initiatives, targeted mainly at the value segment, generated higher retail traffic and increased our market share, but also resulted in lower margin. Nonetheless, international call gross margin remained healthy at above 50%.
To further increase operating efficiency, we have commenced the rollout of our own cellular backhaul network to move towards greater self provisioning in carrying traffic between our base stations and operating centres. We have also started to offshore part of our call centre to Kuala Lumpur, Malaysia to improve our cost structure. In addition, we will review our network efficiency and the competitiveness of our current infrastructure and technology roadmap.
Given our rapidly changing environment, M1 must continue to invest for future growth, and this includes developing new businesses anchored on our core competencies. One such area is mobile advertising, which could potentially become an additional future revenue stream for our business. In 2007, we launched SMS2.0 and Singapore’s first location-based-advertising (LBA). SMS2.0 is a next generation messaging service that brings together messaging, content and advertising in a single, seamless application while LBA enables advertisers to send targeted messages to our customers shopping within the vicinity of their shops and reach out more effectively to them. In addition, we are working with MediaCorp to launch a consumer trial on Mobile TV in 2008. M1 will also continue to explore investment, partnership and other commercial opportunities within and beyond the confines of Singapore, and seek to adopt those that will enhance shareholder value.
Looking ahead, 2008 will be a year of both challenges and opportunities. The Infocomm Development Authority (IDA) is expected to introduce full number portability by the middle of the year and this may lead to increased market competition. We have already set in motion several key initiatives that will eventually transform the single-play mobile operator that M1 is today to a new and dynamic M1 – a multi-play operator with interests in both the fixed and mobile sectors. In December 2007, the IDA announced a Request-For-Proposal for a Network Company (NetCo) to design, build and operate the passive infrastructure layer of the NGNBN. M1, as part of the consortium with City Telecom (HK) Ltd, intends to submit a bid to form the NetCo. The rollout of the NGNBN is a multi-stage process. Regardless of the tender result, we believe the new open access network will level the playing field in the fixed space and enable M1 to compete more effectively.
To re-energise our brand, we unveiled a new brand identity - a “Brighter” M1 in November 2007. Featuring an updated vibrant logo, the new “Brighter” branding campaign exemplifies everything we do at M1 and how our class-leading services can deliver brighter experiences to our customers. We believe this campaign will establish a stronger customer affinity for the M1 brand.
Besides working hard to meet our business targets, I am pleased to note that M1 management and employees also actively participated in giving back to the community. We continued to support and fund children and youth causes such as Beyond Social Services and Club Rainbow. CARE (Children-at-Risk Empowerment Association), another charity adopted by M1, launched a scheme in M1’s name to motivate students and to recognise their achievements. In the year, M1’s employees gave their time generously to run the SunCare Club which organises activities to bring cheer to the lives of the children of the various charities M1 supports. To champion the local arts scene, we sponsored the M1 Singapore Fringe Festival organised by the Necessary Stage for the 3rd year running. In recognition of M1’s long term support of the arts, M1 was conferred the Distinguished Patron of the Arts by the National Arts Council for the 6th consecutive year. We were also the title sponsor for the M1 Asia Challenge, an “Intelligent Sport” outdoor event which sees corporate teams of 5 go head to head in a series of mental, physical and intellectual challenges over 2 days and 2 nights. It is heartening to note that M1 was among the top three teams who won the right to represent Singapore at the World Team Challenge held in France.
Finally, I would like to express my deepest appreciation to all M1 management and employees for their hard work and dedication in the past year and look forward to working together as we bring M1 into the next phase of growth and development.
Neil Montefiore
Chief Executive Officer