Company Overview

M1 is Singapore’s most vibrant and dynamic communications company, providing mobile and fixed services to over 2 million customers. Established in 1997, M1 achieved many firsts, including the first operator to offer nationwide 4G service, as well as ultra high-speed fixed broadband, fixed voice and other services on the Next Generation Nationwide Broadband Network (NGNBN). With a continual focus on network quality, customer service, value and innovation, M1’s mission is to link anyone and anything; anytime, anywhere.

The Group holds Facilities-Based Operator and Services-Based Operator licences issued by the Infocomm Development Authority of Singapore (IDA), for the provision of telecommunication systems and services. M1 also has a Telecommunication Dealer’s Class Licence, for the import and sale of telecommunication equipment. M1 also has Internet Access Service Provider and IPTV licences issued by the Media Development Authority, for the provision of our fixed broadband and MiBox Internet TV services.

M1 operates nationwide 4G, 3G/High Speed Packet Access (HSPA) and 2G mobile networks, capable of download speeds of up to 150Mbps and upload speeds of up to 50Mbps. Through these networks, we provide customers with a wide range of voice, data and value-added postpaid and prepaid mobile services. To cater to our customers’ varied needs, we offer service plans with a choice of voice, SMS and data bundles.

M1 makes available to our mobile and fixed-line customers International Direct Dial (IDD) services through the 002 and 021 prefixes, as well as a International Calling Card service using prefix 1818. We also trade wholesale voice minutes with other international and local service providers, as well as provide dark fibre services to carriers and data centres. Since September 2010, M1 has been offering residential customers a range of fibre broadband services with speeds of up to 1Gbps, including fixed voice and other value-added services.

In the enterprise segment, we offer an extensive suite of mobile and fixed services, managed services and data centre services. We also offer enterprise Software as a Service (SaaS) solutions to meet our customers’ business needs in areas such as storage, accounting, and human resources. M1 maintains a dedicated team of enterprise account managers to service the needs of customers, as well as a technical team that provides support on provisioning and technical-related matters.

In the course of our history, M1 has achieved the following milestones:

• Commercial launch of mobile services in April 1997;
• Achieved 10% mobile market share within one month of launch, and profitability in the first full year of operations in 1998;
• Listed on the Singapore Exchange in December 2002; and
• First operator in Singapore to launch:
  • 3G mobile services commercially in February 2005;
  • Nationwide mobile broadband services in December 2006;
  • Fibre broadband services on the NGNBN commercially in September 2010;
  • Mobile broadband service on our 4G network in June 2011;
  • Nationwide 4G service in September 2012.

For FY2013, service revenue grew 6.3% year-on-year to S$819.8 million, driven by growth in postpaid and fixed customers, as well as higher revenue from increased mobile data usage. Contribution from mobile data continued to grow, and revenue from non-voice services rose 4.0 percentage points year-on-year to 41.6% of service revenue. Net profit after tax increased 9.4% year-on-year to S$160.2 million, and margin on service revenue increased 0.5 percentage point to 19.5%. Free cash flow for the full year was S$176.0 million, a 15.5% increase from S$152.3 million the year before.

Our mobile customer base was stable at 2.11 million as at end-2013. During the year, we added 33,000 fibre customers to bring our fibre customer base to 85,000 as at end-2013.

Market Developments

According to published statistics from IDA, Singapore’s mobile penetration rate was 156.0% as at end-2013, a 4.2 percentage point increase compared to a year ago. Out of a total of 8,420,700 mobile subscriptions, 53.8% were postpaid customers and 46.2% were prepaid customers.

For the fixed broadband market, the residential broadband penetration rate, comprising fibre, cable and digital subscriber line subscriptions, increased 1.2 percentage points over the year to 106.0% as at end-2013. Household fibre penetration increased from 23% in 2012 to about 40% as at end-2013. Over the same period, the number of residential and corporate fibre broadband subscriptions grew by 77.6% to 505,600, and the number of cable and digital subscriber line subscriptions fell by 12.7% to 557,400 and 26.8% to 324,500 respectively.

Postpaid Mobile

The postpaid mobile segment, which made up 53.6% of our mobile customer base as at end-2013, contributed 86.7% to mobile telecommunications revenue in FY2013. During the year, we added 35,000 postpaid customers to bring our postpaid base to 1.13 million, for a 25.0% market share.

Driven by the growth in adoption of smartphones, faster networks and proliferation of data-centric applications, mobile data revenue continued to grow. Mobile data revenue accounted for 28.9% of mobile service revenue in 2013, compared to 24.1% in 2012. As at end-2013, 49% of our postpaid customers had migrated to our tiered mobile data bundles for mobile broadband and smartphone plans launched in September 2012.

Following a tariff review in 2013, voice call charging was revised to a minimum one-minute charge, followed by per-second billing thereafter, with calling rates remaining unchanged. Excess data charges were also revised to S$10.70 per GB from S$5.35 per GB previously, capped at S$188.32 per month, and the cap for customers using pay-per-use local mobile data was revised to S$295.32 per month, applicable to new and re-contracting customers. The tariff changes came into effect on 1 January 2014.

We continue to work closely with device manufacturers to make available their new phones, tablets and mobile accessories to our customers in a timely manner. Key models launched in early 2013 included the iPad with Retina Display (128GB) in February 2013, and the Samsung Galaxy S4 (LTE) and HTC One in April 2013. The second half of the year saw the launch of the iPhone 5S and 5C, Samsung Note 3, and the Sony Xperia Z Ultra, in September 2013, and the LG G Flex in December 2013.

We also worked with our content and services partners to further enhance our suite of fixed products and services. These include the extension of the Mobiroo mobile gaming service to mobile customers in November 2013, and the launch of the Deezer Premium+ music service in December 2013.

Prepaid Mobile

As at end-2013, we had 979,000 prepaid customers. This was a marginal decline of 35,000 year-on-year, due to higher termination of expired cards.

Migrant workers form a major segment of our prepaid customer base, as M1’s prepaid service meets their communications needs. Our prepaid service is also used by resident customers such as parents who want to manage their children’s mobile usage, and transient visitors to Singapore such as business travellers and tourists.

To expand our market reach, we conduct regular roadshows at high-traffic areas such as heartland estates, shopping malls, and at migrant worker dormitories. We also organised festive celebrations that cater to our migrant worker customers such as Deepavali and the Bangladeshi New Year.

The segment’s interest in mobile data services has grown, and we make available a range of SunSurf prepaid data plans to enable our prepaid customers to enjoy the full mobile Internet experience, with access to instant messaging applications, social media networks, web surfing, email, and music and video streaming service.

Fixed Services

Fibre services continued to gain traction with customers in 2013. M1 continued to champion fibre, and our sustained efforts to drive take-up of fibre broadband services enabled us to add 33,000 customers in 2013 to bring our fibre customer base to 85,000.

In May 2013, we launched Singapore’s first residential fibre broadband service with symmetric upload and download speeds. This allows customers to enjoy a superior usage experience, such as uploading and sharing large files, play games, and stream HD videos, all at the same time.

We introduced MiBox, an exciting new Internet TV service that offers affordably-priced video-on-demand entertainment and educational titles, games, e-books and applications, in July 2013. The service is targeted at customers who prefer an on-demand, a-la-carte model of TV content consumption. Take-up of the service has been encouraging, and we will continue to add content to the service.

Our suite of fixed services such as fibre broadband, virtual private network, server co-location continued to gain traction with corporate customers during the year. M1 also expanded Wireless@SG coverage to additional public spaces such as schools, hospitals and government ministries.

New Products and Services

We launched a number of innovative and exciting products and services in 2013. These include:

• DBS One Tap: In partnership with DBS, we launched Singapore’s first virtual credit card on a Near Field Communications-enabled (NFC) mobile phone in March 2013. The DBS One Tap, M1’s third NFC service, allows customers to pay for purchases by tapping their NFC-enabled phones at over 30,000 MasterCard® retail acceptance points in Singapore;
• Prepaid 4G: To address the needs of prepaid customers who want high-speed mobile Internet access, M1 launched Singapore’s first prepaid 4G mobile broadband service in March 2013, followed by Singapore’s first prepaid 4G smartphone plans in April 2013;
• Software as a service (SaaS): M1’s cloud-based business SaaS offering was made available in April 2013, delivering access to human resource, accounting, website creation and maintenance applications to customers conveniently via a PC or smartphone. This solution allows business customers to enjoy easily-scalable enterprise-grade solutions at an affordable monthly cost;
• Wi-Fi roaming: Singapore’s first Wi-Fi roaming application was launched in April 2013. The application allows our postpaid mobile customers to access Wi-Fi hotspots in more than 120 countries and territories from S$12 per day using iOS and Android smartphones and tablets;
• MiBox: The MiBox Internet TV service, launched in July 2013, offers customers access to thousands of video-on-demand entertainment and educational titles, games, e-books and applications;
• M1 Mobile Security: The increased use of smartphones for accessing the Internet has heightened the importance of mobile security. The M1 Mobile Security solution was made available in August 2013 to address the needs of security-conscious customers on Android devices;
• Future Lab: The M1 Future Lab, located at our Regional Operating Centre in Aljunied, was opened in October 2013. The laboratory showcases innovative technologies such as cloud services, sensors, surveillance and fleet management, offering our small and medium enterprise (SME) customers a convenient platform to test-bed products and services before going to market;
• Deezer Premium+: Launched in December 2013, our exclusive partnership with global music streaming service Deezer delivers unlimited access to more than 30 million songs from international, Asian and local artistes, to our postpaid customers.

Sales and Distribution

As at end-2013, we had 15 M1 Shop outlets located islandwide, which provide customers convenient access to our products and services. To further enhance our reach and accessibility, M1’s products and services are also distributed through a number of exclusive distributor outlets. We also conduct regular roadshows in high-traffic locations, such as shopping malls and migrant worker dormitories, and actively participate in major computer and consumer electronics roadshows.

In April 2013, we commenced revamping our M1 Shop outlets to deliver a refreshed, more personable shopping experience to customers. The revamp also sought to improve staff productivity and reduce customer waiting time. As at end-2013, our Change Alley, Suntec City and NEX outlets had been revamped, and we target to complete revamping the remaining outlets by end-2014.

A new M1 website, which leverages on the latest technologies and capabilities to deliver an enhanced online shopping experience to the increasing number of consumers who access the Internet via smartphones and tablets, was launched in November 2013. The new website sports a clean and clear interface, streamlined to help customers navigate and find that information easily. A new section featuring business solutions that cater to the needs of enterprise customers has also been included.

Brand

A new brand campaign, with the theme “M1. For Every One.”, was launched in August 2013. The campaign emphasised our commitment to deliver solutions that truly meet our customers’ needs, and give them the best experience. The campaign, which won the Silver Award for Film Advertising Craft (Best Editing) at the GONG 2013 Creative Circle Awards, was carried on TV, newspapers, outdoor and new media such as online and social media. Facebook and Instagram were also used to engage customers and showcase the positive experiences they had with M1.

Customer Experience

M1 continued to focus on customer service excellence in 2013.

In recognition of our adoption of a holistic and systematic approach to provide service excellence, M1 Shop achieved the Singapore Service Class (S-Class) certification from SPRING Singapore in March 2013. In January 2013, our Changi Airport Terminal 3 M1 Shop received the Changi Airport Group’s Outstanding Outlet Award for exemplary customer service.

We also won the Frost & Sullivan Singapore Best Customer Experience in Telecommunications award, with M1 being rated highly for our service offerings, in-store experience and customer support channels.

At the EXSA (Excellent Service) Awards in October 2013, M1 staff received one Star, eight Gold and 32 Silver awards, for delivering outstanding service to our customers. The EXSA is a national award managed by seven industry organisations including the Association of Singapore Attractions and the Singapore Retailers Association.

Network

M1 continually invests in upgrading and modernising our networks to further enhance the performance and reliability of mobile and fixed services delivered to customers. In 2013, we committed $120 million to upgrade our networks including:

• Microwave radio backhaul links: Expansion work on the Ericsson microwave radio backhaul links was started in first quarter of 2013 and is expected to be completed by first quarter of 2014;
• 900MHz nationwide 3G radio network: Nokia Solutions and Networks was selected in April 2013 to deploy an additional 3G radio network, complementing our existing 3G network on the 2100MHz frequency band. Work on this additional network began in May 2013 and is expected to be completed by first quarter of 2014;
• Network modernisation: A contract was also awarded to Nokia Solutions and Networks in April 2013 to upgrade M1’s core infrastructure to an all-IP network with mobile switching centre and media gateway pooling, to enable dynamic allocation of network resources. With its completion in December 2013, M1 now has the most advanced core network in Singapore;
• Small cell solution: Alcatel Lucent was appointed in May 2013 to deploy a small cell solution to further enhance our 3G radio coverage and capacity in indoor premises. This solution is being progressively deployed;
• 3G network expansion: Huawei was appointed to expand and upgrade M1’s existing 3G network on the 2100MHz frequency band in May 2013. The contract delivered additional base stations and further optimised our 3G network to improve call connectivity and support data usage growth;
• 4G small cell trials: In collaboration with Alcatel-Lucent, we conducted two successful trials of 4G small cell technology in 2013. The trials, at the Singapore Grand Prix in September 2013 and at the Marina Bay area during the New Year countdown, delivered enhanced mobile data coverage to our customers in those sites.

Financial Review

Operating cash flow increased 9.9% to S$302.0 million for 2013 and free cash flow was 15.5% higher at S$176.0 million.

Financial leverage

As at 31 December 2013, gearing ratio was 49.5% compared to 74.8% as at 31 December 2012. Interest coverage ratio (EBITDA/Interest) was 70.1x for 2013, higher than 54.4x for 2012.