3 things that show how unsustainable M1's mobile business is

These led to its shareholders' abrupt decision to withdraw.

Lower usage, competitive data pricing, and the looming arrival of Australian player TPG have cast doubts on the sustainability of M1 as a Singapore telco. According to BMI Research, its shareholders' abrupt decision to withdraw is the clearest sign yet that the business, in its current form, is not sustainable. 

“As such, we believe new investors would need to be cash-rich, risk-averse and prepared to settle for a modest share of the market,” BMI Research said.

This unsustainability shows in M1’s numbers, particularly in its mobile segment. For one, whilst it continued to add subscribers in the past year, reaching 2.02 million a customer base in the last quarter, full-year revenue fell by 8.3% to $1.061b. 

Also, its handset sales saw a particularly steep decline from $335mn for FY15 to $255mn for FY16, while mobile revenue fell from $668mn to $640mn over the same period. It led to an 8.7% decline in after-tax profit for the said year to $312mn, which it attributed to higher depreciation and interest costs.

Lastly, Monthly minutes of use (MOU) also fell by 5.6% to 203 for postpaid customers and 9.6% to 191 for prepaid users, whilst net ARPU declined by 2.3% for postpaid users to $49.5 and 4.5% for prepaid users to $11.

“M1's blended ARPUs have consistently lagged behind competitors, a trend we attribute to the operator having lesser pricing power due to its smaller market share and also its strategy of targeting the less financially capable market segment,” BMI Research noted.

In the face of greater price competition and uncertainty over the company's future strategy, M1's owners welcome a sale, which would allow Axiata to avoid the risk of adding more to its existing debt pile, Keppel T&T to divest a non-core business, and SPH to focus on its core media business which is challenged as content consumption migrates online.

In the end, M1 could benefit from a clearer strategy with a single shareholder, rather than three, to compete with TPG's strong strategy for the Singapore market.