One missed call: M1's mobile service revenue suffers biggest shrinkage since 2009

Subscribers are becoming more watchful of their data usage.

Some analysts are probably shaking their heads right now as M1's 3Q16 results turned out to be worse than expected, crashing 23.4% to $34.4m.

According to RHB, M1 has disappointed for the second consecutive quarter as mobile service revenue surprisingly deepened.

"M1 said the steep decline in mobile service revenue in 3Q16 was due to the more cautious data usage by subscribers," RHB noted, pointing out that the contraction of 6% in the quarter was the largest since FY09.

"A continuation of the underlying trend may signify a structural change in data consumption behaviour and potentially impede effective data monetisation plans, in our view," the firm added.

DBS Group Research took notice of the other factors that led to the decline, which were the mobile roaming and adoption of SIM only plans.

"Accrued handset revenue decreased ~S$7m in 3Q16 versus 2Q16 due to lower iPhone sales," it said.

The brokerage firm noted that this resulted in a $7m adverse impact on earnings which is likely to continue as M1 still has $67m in accrued handset revenue.

Meanwhile, OCBC Investment Research stressed that the increasing adoption over-the-top services has impacted traditional telecommunications services such as international call and roaming.

"Postpaid and prepaid revenue in 3Q16 fell 6.1% and 10.4% YoY, respectively," OCBC stated.