M1’s net profit falls by 7% to $83.5 in 2Q

On back of its cascading handset sales.

The incumbent telco suffered a blow in its bottomline after its handset sales was slashed by half in the second quarter, with revenue falling by 13% to $240.4m.

According to a report by OCBC, its core mobile business also dropped by 2% due to the 7% slide in prepaid revenue, while its postpaid revenue was also down by 2%.

“While EBITDA only saw a smaller 2% YoY (-1% QoQ) fall to S$82.2m, higher depreciation expenses (+9% YoY, +3% QoQ) resulted in net profit slipping by a larger 7% YoY (-4% QoQ) to S$41.0,” the report noted.

Meanwhile, a report by Maybank Kim Eng said fixed services remained the best performing but revenue growth was outstripped by the rise in cost of providing the service.

“Contributions from Circles Asia helped wholesale revenue to grow 30% YoY but it was within expectations. M1 lowered its guidance for FY16 net profit to “single-digit decline” as it expects higher depreciation to hinder the previous guidance of a “stable” performance,” Maybank Kim Eng noted

“As capex guidance is still at SGD140m, the only thing that has changed is growth expectations for the corporate solutions business that the bulk of the capex is focused on. M1’s tone for this business has become more cautious, and it now expects revenue to be meaningful only when scale is achieved,” the report added.