Do M1’s Acquisitions Make Sense?
- Aug 2016 - SGD3.0M for a 30% stake in Octopus Retail Management, which provides Point-of-Sales (POS) solutions for retailers and Food & Beverages (F&B) outlets.
- Oct 2017 - SGD2.45M additional investment in Kliq, which provides digital mobile remittance service.
- Apr 2018 - SGD3.0M for a 25% stake in Trakomatic, which provides Business-to-Business video analytics solutions to retailers.
Do these acquisitions have synergy with M1's existing businesses? Let us look at them one by one.
Octopus - Point-of-Sales
The POS solution is provided by Octopus Retail Management. This is an independently run business and not marketed together with M1's other services. As such, there is no synergy with M1's existing businesses. In fact, M1 has another mobile POS solution that is developed independently! To be fair, M1's in-house mPOS solution only facilitates payment transactions whereas Octopus' POS solution covers inventory tracking and customer loyalty programmes.
It is a bit difficult to see how this acquisition ties in with M1's overall business strategy. For FY2017, this associate lost $0.29M for M1.
Although users have to be M1 customers, there is no integration with other M1 services. Users cannot pay for their remittance through their M1 monthly bills or their pre-paid stored value accounts. Furthermore, M1's share of the telco market is only 24.0%; by limiting the service to only M1 customers, they are effectively reaching out only to a small group of potential users.
So far, M1 has acquired small stakes in 3 companies for a total of less than $10M. Among these 3 companies, 2 of them do not seem to complement its existing telco businesses very well. The more exciting acquisition is Trakomatic, which complements its data analytics business. M1 should be very careful about acquisitions, as its debts have been steadily climbing from $250M in Dec 2013 to $450M in Dec 2017.
P.S. I am vested in M1.
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