M1 (M1 SP)
3Q16: Another Rude Awakening
- M1 experienced a steep fall in post-paid ARPU of 7.7% yoy to S$56.50. Management attributed the decline to a reduction in excess charges for data and lower contribution from roaming. Only 17% of subscribers exceeded their data bundles (2Q16: 21%). We also see increased competition in data with all three incumbents offering attractive data upsize options. The lower contribution from roaming was due to cannibalisation by OTT messaging and calling apps, such as Whatsapp, WeChat, Line and Viper.
- The steep fall in post-paid ARPU and post-paid revenue is likely to give investors a negative surprise.
- We also did not see any visible rationalization of expenses.
- Prospects for an operational turnaround or a reversal to positive news flow are dim.
- Maintain SELL. We have further lowered our target price to S$1.76.
