The flagship phone released by Apple for their tenth anniversary did not really do well as expected, hurting Singapore telco M1's handset sales.
UOB KayHian analyst Jonathan Koh said the reception for iPhone X turned out to be less enthusiastic than projected, with handset subsidies reaching only S$26.5 million in 4Q17, slightly higher than the previous quarter's S$23.9 million.
Koh said while the telco management did not disclose the contribution of SIM-only plans and M1's mobile virtual network operator Circles.Life, these two could have also played a part in muted handset subsidies.
The telco's handset sales went down by 18.4 percent to S$92 million year-on-year due to the lower volume of handsets.
For the quarter, M1 saw its net profit decline by 2.5 percent to S$31 million, no thanks to its lackluster handset sales, weak international call services, and ballooning operational expenses.
Koh said M1 managed to find strength in its postpaid mobile business.
"M1 benefited from the healthy net addition of 20,000 post-paid subscribers. Post-paid average revenue per user (ARPU) rebounded 5.8 percent quarter-on-quarter but declined 1.2 percent year-on-year to S$56.40. Post-paid mobile revenue increased by a healthy 5.8 percent year-on-year with a seasonal uptick in roaming," Koh explained.
On the other hand, the group's prepaid business continued to suffer setbacks, with segment revenue slipping by 10.5 percent due to a contraction in the prepaid subscriber base of 3.2 percent and an 8.7 percent decline in ARPU.
M1 was also prevented from sinking deeper by its fixed services business, which recorded a revenue growth of 32.7 percent. In 4Q17, the group added 7,000 more subscribers, increasing the ARPU by 4.9 percent to S$45 on a quarterly basis.
OCBC Investment Research analyst Eugene Chua said M1 is expected to deliver multi-year corporate fixed services projects while working to clinch new deals.
"In addition, over the medium to longer-term, M1 will continue to build its foundation to prepare for future 5G network roll-out, as well as continue to explore deeper collaboration, especially with Starhub on network sharing, in order to realize capital expenditure savings progressively," Chua said.
The analyst added, "M1 has also said it will continue to scale up its ICT capabilities and solutions over connectivity to capture opportunities relating IoT and Smart Nation initiatives."
In terms of earnings expectation, Chua said M1's earnings are expected to only bottom-out in 2019.