M1 net profit jumped 8.3% in 1Q 2011

Net profit also increased quarter-on-quarter to $42.6 million, according to OCBC Investment Research's report.

In their report, OCBC Investment Research stated that one reason for the better bottom-line showing came from an improvement in service EBITDA margin, which recovered to 42.2% in 1Q 2011 from 41.4% in 4Q 2010, though still slightly below the 42.4% seen in 1Q 2010. Other notable mentions include a strong improvement in its free cashflow to $46.7m in 1Q 2011, from $21.7m in 1Q 2010 and $17.4m in 4Q 2010.

On the operations front, M1 added another 23k new subscribers, with 14k coming from its post-paid segment
and 9k from its pre-paid segment. As before, M1 continues to benefit fromthe strong demand for smartphones; but because of a slight change in sales mix (probably less iPhone 4s sold), its acquisition cost per postpaid customer dropped 10.6% YoY and 10.3% QoQ to $330. And interestingly, M1 also managed to bring down its monthly churn to 1.2% in 1Q 2011 versus 1.3% in 4Q 2010 and 1.4% in 1Q 2010. But we note two trends that bear a closer watch - post-paid monthly ARPU has dipped to $56.1 (from $58.5 in 4Q 2010 and $59.7 in 1Q 2010) while post-paid monthly MOU (minutes of usage) has eased to 356 mins in 1Q 2011 (down from 364 mins in 4Q2010). OCBC Investment Research believes this is due to a growing preference towards using instant messaging (via generous data plans) to communicate versus voice.

Going forward, M1 continues to guide for earnings growth in 2011, buoyed by continued customer additions and increasing mobile data usage. Management adds that its mobile business remains core, anchored on network quality, customer service, value and innovation; this after recently spending $21.7m to secure 5MHz of 1800MHz spectrum which will expedite its plan to upgrade its network to Long Term Evolution (LTE) and maintain the network quality of service. M1 has also kept its capex unchanged at $100m and a dividend payout ratio of 80%.