M1 Annual Report 2007

“...These new initiatives will improve our competitive edge and help achieve our vision of eventually transforming M1 from a single-play mobile operator today to a dynamic multi-play operator.”

In 2007, M1 achieved a net profit after tax of S$171.8 million, a growth of 4.4% over the previous year. Operating revenue increased 3.9% to S$803.3m, driven mainly by a 6.4% growth in service revenue. Benefiting from our capital management initiatives, earnings per share improved 11.4% to 18.5 cents and return on equity climbed from 38.9% to 58.8%.

In the face of determined competition in a highly penetrated mobile market, M1 achieved a creditable performance. During the year, we grew our customer base by some 198,000 to 1.54 million customers, and mobile telecommunications and international call revenues increased 5.5% and 11.5% respectively. The uptake of data services continued to grow and contribution from non-voice services rose to 21.6% of service revenue, driven mainly by mobile data (excluding SMS) which increased to 8.4% of service revenue, compared to 6.3% a year ago.

Postpaid customers continued to be the mainstay of M1’s mobile business. They constituted some 56% of our customer base as at end 2007, but accounted for 90% of mobile telecommunications service revenue. With market penetration currently exceeding 120%, maintaining existing customer satisfaction is as important as acquiring new customers, as we believe our customers are M1’s best brand ambassadors. To continue delivering best-in-class customer experience and giving substance to our iconic M1 brand, our priority continues to be providing customers innovative services on a reliable and advanced network, maintaining the highest standards of customer care and strengthening the brand they already relate to.

Globally, telecom market dynamics are changing, spurred in no small part by the rapid convergence of communications and entertainment services. For Singapore, the development of the Next Generation National Broadband Network (NGNBN) will help provide a pervasive platform for such convergence and offers M1 an opportunity for future business expansion into areas such as fixed broadband and pay TV. Recognising these industry developments, we set in motion several key initiatives towards the end of 2007, for M1 to stay competitive, capitalise on new opportunities and also, address changing customer needs and the development of new technologies. These new initiatives will improve our competitive edge and help achieve our vision of eventually transforming M1 from a single-play mobile operator today to a dynamic multi-play operator.

For 2008, the market conditions will remain challenging as full mobile number portability is scheduled to be introduced by the middle of the year. Nonetheless, we expect to see continuing growth in contribution from data services, with voice and text communication remaining as the mainstay of M1’s business. Take-up of M1 Broadband – our wireless broadband service – has been encouraging, and as the first operator to launch this service in December 2006, we are pleased to be the market leader with 70,000 broadband customers at the end of December 2007. We will also continue to seek alliances and partnerships to broaden the scope of our products and services. While the strategic initiatives that we have adopted will take time to materialise, we believe we have put in place the pre-requisites for M1 to not only grow organically but also to remain competitive and profitable in the foreseeable future.

M1 continues to be committed to enhancing long-term shareholder value and maintaining a sustainable payout policy for our shareholders. In respect of 2007, the Board of Directors recommends a final dividend of 8.3 cents per share. Taken together with the interim cash distributions, this translates to a payout ratio of 80% of full-year net profit after tax for 2007. Since M1’s initial public offer in December 2002, we have built up a good track record of strong cashflow and returning cash to shareholders. If we include the final recommended dividend for FY2007 (subject to shareholders’ approval), M1 would have distributed 124% of its cumulative net profit after tax from FY2002 to FY2007. Looking ahead, M1 will continue to align its capital structure to support business requirements and capitalise on business opportunities that might arise, so as to enhance shareholder value. With prudent capital management, M1 aims to maintain a sustainable payout policy.

To my fellow Board directors, I would like to take this opportunity to express my appreciation to your sterling support and significant contribution over the years, especially in ensuring that M1 meets the standard for good corporate governance. In the latest Business Times Corporate Transparency Index score card, I am pleased to note that M1 was ranked 3rd out of 675 Singapore-listed companies for the level, quality and timeliness of disclosure. This exemplifies M1’s commitment to good corporate governance and transparency. In closing, I would also like to thank M1 management, customers, shareholders and business partners for your continued support of M1.

Lim Chee Onn
Chairman