| Financial Review | |||
| OPERATING REVENUE | |||
Year Ended 31 Dec |
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| Operating Revenue | 2008 (S$m) |
2007 (S$m) |
YoY Change |
| Mobile telecommunications services | 601.4 |
600.1 |
0.2% |
| International call services | 137.1 |
127.1 |
7.9% |
| Total service revenue | 738.5 |
727.2 |
1.6% |
| Handset sales | 62.1 |
76.1 |
-18.4% |
| Total | 800.6 |
803.3 |
-0.3% |
For 2008, M1’s operating revenue remained stable at S$800.6m, with higher service revenue being offset by lower handset sales. Service revenue increased 1.6% to S$738.5m mainly due to higher international call revenue. International call revenue increased 7.9% to S$137.1m, driven by higher retail traffic. Handset sales decreased 18.4% as a result of lower volume and lower average selling price per unit. |
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| MOBILE COMMUNICATION | |||
Year Ended 31 Dec |
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| Mobile telecommunications revenue | 2008 (S$m) |
2007 (S$m) |
YoY Change |
| Postpaid | 529.8 |
538.5 |
-1.6% |
| Prepaid | 71.6 |
61.6 |
16.2% |
| Total | 601.4 |
600.1 |
0.2% |
| Average revenue per user (ARPU, S$ per month) | |||
| Postpaid* (exclude Data plan) | S$63.9 |
S$65.6 |
-2.6% |
| Data plan | S$28.4 |
S$31.7 |
-10.4% |
| Prepaid* | S$17.3 |
S$19.6 |
-11.7% |
| Non-voice services as % of service revenue | 23.4% |
21.6% |
- |
| * Re-stated to include certain revenue previously omitted. | |||
Mobile telecommunications revenue remained stable at S$601.4m. Postpaid revenue decreased 1.6% mainly due to competitive offerings. Pre-paid revenue grew 16.2% to S$71.6m for the year, driven primarily by growth from an enlarged customer base. With the introduction of full mobile number portability (MNP) in June 2008, the mobile telecommunications market saw an increased level of competitive activities during the year. Postpaid ARPU declined 2.6% to S$63.9 due to an increased take-up of new competitive tariff plans offered, while prepaid ARPU declined 11.7% to S$17.3 as a result of larger bundled plans and lower value-cards introduced during the year. With wider adoption of mass-market data plans across a larger customer base and new competitive offerings, data plan ARPU decreased 10.4% to S$28.4. Nevertheless, non-voice services as a percentage of service revenue increased 1.8% points to 23.4%, due to growth in the broadband customer base. |
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| INTERNATIONAL CALL SERVICES | |||
Year Ended 31 Dec |
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| International call service revenue | 2008 (S$m) |
2007 (S$m) |
YoY Change |
| Retail | 124.0 |
111.6 |
11.1% |
| Wholesale & bilateral revenue | 13.1 |
15.5 |
-15.5% |
| Total | 137.1 |
127.1 |
7.9% |
| Total international retail minutes (in millions) | 526 |
310 |
69.6% |
International revenue increased 7.9% to S$137.1m, as retail traffic minutes grew 69.6%. During the year, we continued to drive sign ups for IDD postpaid and prepaid plans, as well as increased the number of free IDD countries. There were also bundled promotions for our prepaid cards and 1818 International Calling Card. |
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| HANDSET SALES Handset sales were 18.4% lower at S$62.1m for the year due to lower volume of handsets sold and lower average unit selling price. |
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| OPERATING EXPENSES | |||
Year Ended 31 Dec |
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2008 (S$m) |
2007 (S$m) |
YoY Change |
|
| Cost of sales | 300.7 |
296.4 |
1.5% |
| Staff costs | 85.9 |
91.7 |
-6.3% |
| Advertising & promotion | 20.2 |
19.3 |
4.7% |
| Depreciation & amortisation | 123.9 |
116.7 |
6.2% |
| Provision for bad & doubtful debt | 16.9 |
19.0 |
-11.1% |
| Facilities expenses | 38.7 |
38.1 |
1.6% |
| Other general & administrative expenses | 22.6 |
21.0 |
7.6% |
| Total | 608.9 |
602.2 |
1.1% |
Operating expenses increased 1.1% to S$608.9m mainly due to higher depreciation and amortisation expenses and cost of sales, but were partially offset by lower staff costs. |
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| COST OF SALES | |||
Year Ended 31 Dec |
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2008 (S$m) |
2007 (S$m) |
YoY Change |
|
| Handset costs | 127.7 |
133.2 |
-4.1% |
| Traffic expenses | 52.4 |
48.7 |
7.6% |
| Leased circuit costs | 39.5 |
41.5 |
-4.8% |
| Other costs | 81.1 |
73.0 |
11.1% |
| Total | 300.7 |
296.4 |
1.5% |
Cost of sales increased 1.5% to S$300.7m, mainly due to higher acquisition and retention costs incurred to acquire and retain customers during the period of increased competitive activities in the second and third quarters of 2008. STAFF COSTS Staff costs fell 6.3% to S$85.9m mainly due to lower bonus payment. ADVERTISING & PROMOTION EXPENSES Advertising and promotion expenses increased 4.7% to S$20.2m, as a result of the new brand campaign in the run up to full MNP in the second quarter of 2008. DEPRECIATION & AMORTISATION Depreciation and amortisation expenses were 6.2% higher at S$123.9m due to the higher asset base. PROVISION FOR BAD & DOUBTFUL DEBT Provision for bad and doubtful debt expense decreased 11.1% to S$16.9m mainly due to the write- back of over provision. FACILITIES EXPENSES Facilities expenses increased 1.6% to S$38.7m. OTHER GENERAL AND ADMINISTRATIVE EXPENSES Other general and administrative expenses increased 7.6% to S$22.7m, mainly due to expenses incurred for new initiatives to support future revenue growth. FINANCE COSTS Finance costs decreased 20.0% to S$7.6m due to lower interest rates. TAXATION Provision for taxation increased 53.7% to S$34.9m, as 2007 benefited from tax adjustments for the reduction in corporate tax rate and over provision in prior years. |
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| NET PROFIT | |||
Year Ended 31 Dec |
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2008 (S$m) |
2007 (S$m) |
YoY Change |
|
| Net profit | 150.1 |
171.8 |
-12.6% |
| Net profit margin (on service revenue) (%) | 20.3 |
23.6 |
- |
| Excluding Tax Adjustment | |||
| Net profit | 150.1 |
157.2 |
-4.5% |
| Net profit margin (on service revenue) (%) | 20.3 |
21.6 |
- |
Net profit was 12.6% lower at S$150.1m mainly due to higher acquisition and retention costs and as 2007 benefited from tax adjustments. Net profit margin was 20.3% for the year. Excluding the tax adjustments, net profit for the year fell 4.5% and net profit margin decreased by 1.3% points compared to 2007. |
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| EBITDA | |||
Year Ended 31 Dec |
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2008 (S$m) |
2007 (S$m) |
YoY Change |
|
| EBITDA | 316.5 |
320.7 |
-1.3% |
| EBITDA margin (on service revenue) (%) | 42.9% |
44.1% |
- |
EBITDA decreased by 1.3% to S$316.5m. As a result corresponding EBITDA margin as a percentage of service revenue declined 1.2% points to 42.9% for the year, compared to 44.1% for 2007. |
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CAPITAL EXPENDITURE AND COMMITMENTS Capital expenditure incurred in 2008 was S$94.1m, compared to S$56.3m for 2007, mainly due to the completion of our 3G/HSPA network upgrade and rollout of the backhaul transmission network. Capital commitment as at 31 Dec 08 was S$17.1m. |
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| LIQUIDITY AND CAPITAL RESOURCES | |||
Year Ended 31 Dec |
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2008 (S$m) |
2007 (S$m) |
YoY Change |
|
| Profit before tax | 185.0 |
194.5 |
-4.9% |
| Non-cash item and net interest expense adjustments | 77.9 |
30.8 |
152.9% |
| Net change in working capital | (8.4) |
3.8 |
@ |
| Net cash provided by operating activities | 254.5 |
229.0 |
11.1% |
| Net cash used in investing activities | (96.8) |
(56.3) |
71.9% |
| Net cash used in financing activities | (163.0) |
(318.2) |
-48.8% |
| Net change in cash and cash equivalents | (5.3) |
(145.5) |
-96.4% |
| Cash and cash equivalents at beginning of financial period |
23.1 |
168.6 |
-86.3% |
| Cash and cash equivalents at end of financial period |
17.8 |
23.1 |
-22.9% |
| Free cash flow1 | 157.6 |
172.7 |
-8.7% |
@ denotes more than +/- 300% 1 Free cash flow refers to net cash flow from operating activities less current year capital expenditure Operating cash flow increased 11.1% to S$254.5m, due mainly to lower tax payment. Free cash flow decreased 8.7% to S$157.6m for the year. |
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| FINANCIAL LEVERAGE As at 31 December 2008, M1’s net-debt-to-equity ratio was 104.0% compared to 129.7% a year ago, mainly due to repayment of term loans. Interest coverage ratio (EBITDA / Interest) improved from 33.9x in 2007 to 41.8x in 2008, mainly due to lower finance cost. |
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