M1

OCBC on 12 Sept 2012

M1 Ltd will launch its nationwide 4G LTE network in Singapore on 15 Sep, where it will offer 95% coverage for indoor and outdoor areas. M1 is also pricing its 4G services at a premium to its 3G bundles. While the 4G premiums could be a minor stumbling block (but unlikely to deter early adopters), the bigger stumbling block is likely to come from limited 4G handsets that are available. Hence, we believe that 4G LTE is still more of a 2013 story, as the mass market may still take some time to convert their 3G handsets to 4G. As such, we have not factored in any significant contribution from LTE until 2014 in our model. We continue to like M1 for its defensive earnings and relatively attractive dividend yield of 5.3%. Maintain BUY with an unchanged DCF-based fair value of S$2.80.

Launches nationwide 4G LTE Network
M1 Ltd will launch its nationwide 4G LTE network in Singapore on 15 Sep, where it will offer 95% coverage for indoor and outdoor areas (but not in the MRT tunnels yet). Although SingTel introduced its 4G LTE services in Jun, it will be looking to achieve 80% coverage by end-2012, and over 95% by 1Q13. StarHub also just announced that it will offer its 4G LTE services in key business areas from 19 Sep and achieve nationwide coverage by 2013.

4G plans at a premium
M1 has also announced new pricing plans for its 4G LTE and 3G bundles, which now start with just 2G of data (versus 12G data previously). More interestingly, M1 has decided to price its 4G at a premium to its 3G plans, costing subscribers some S$10.70 more per month (StarHub is doing the same). The plans are also slightly more expensive (S$3 to S$10 more) than similar plans from SingTel (which has same prices for its 4G and 3G plans).

Limited 4G handsets
While the 4G premiums could be a minor stumbling block (but unlikely to deter early adopters), the bigger stumbling block is likely to come from the limited 4G handsets that are available. Currently, there are only four phones and two tablets that work on Singapore’s LTE network. However, this could change with the launch of the new iPhone 5, which is widely touted to be LTE-enabled.

LTE still a 2013 story at best
In any case, we believe that 4G LTE is still more of a 2013 story at best, as the mass market may still take some time to convert their 3G handsets to 4G. As such, we have not factored in any significant contribution from LTE until 2014 in our model. We continue to like M1 for its defensive earnings and relatively attractive dividend yield of 5.3%. Maintain BUY with an unchanged DCF-based fair value of S$2.80.