Take3 (launched in Feb) allows users to choose a eligible handset within the subscription plan tiers without any upfront cost and exchange it for another handset after 9 months (for a fee) or after 20 months (without a fee). Out of the 5 bill plans, we reckon targeted users are most likely to opt for the $83/month SunMax plan as it includes popular phones (eg HTC Touch Diamond 2 and Blackberry Storm) that are also in the top-end $201 Talk All U Can plan. As phone buyers are more sensitive to the upfront handset cost than the monthly fees, this plan should boost ARPU.
M1’s new SunSurf VAS data plans also offers the most value-for-money. The $10.70/month 100MB Plus plan is the most compelling as it offers 10x more bundled data capacity vs StarHub’s Value plan. As these plans are targeted at high-end users that buy feature-rich smartphones that can download music or stream video, we believe these plans could also motivate users to switch to M1, especially SingTel which has no cap on monthly charges (unlike M1 or StarHub, which are capped at $36.38).
Although M1 lost 11,000 subscribers in 1Q09, the decline was due to a 53,200 fall in 2G subs, where users are being migrated to 3G, and the deactivation of 8,000 prepaid subs. Most notably, M1 gained 50,200 3G subs and we believe Take3 was one major factor. Management indicated that 20% of new subscribers in 1Q09 took up the Take3 plan.
Given these positive driving forces, we reckon margins should improve further and M1 stands a good chance of arresting its postpaid ARPU slide, which has fallen from $62 in 1Q08 to $60 in 1Q09. We maintain our Buy recommendation and target price of $2.01.
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