M1

M1: 3Q10 results. $40m net profit in line with expectations, but underlying performance not particularly impressive. Revenue +30% yoy to $246m, mainly driven by subsidized handset sales rather than service revenue, resulting in some margin compression...

New mobile customer adds were +43k qoq (vs +53k in 2Q10). Post-paid ARPU remained flat due to higher handset subsidies. Stripping out subscriber acquisition costs however, ARPU rose by more than $4 per user to $64.10, driven by more smartphone users which now account for 40% of the subscriber base…

Going forward, capex to rise by additional $10-20m, in view of the additional 3G spectrum. But of more concern is mgt’s plan to build its own OpCo network to target corporate customers, which raises some uncertainty around its future capex requirements and reduces the potential for near-term capital mgt. On these grounds, Deutsche has a Hold rating with $2 target.
This compares with KE’s Buy rating with $2.62 target, on view that capital mgt remains a potential catalyst for the stock.