Four's a crowd: Why the outlook is uninspiring for Singapore telcos' mobile revenue

Average revenue per user could decrease 11-16% over the next five years.

As TPG enters the market and eats up a significant mobile market share, the average revenue per user (ARPU) of telco incumbents are expected to dwindle.

“TPG announced that it expects to incur an additional S$200-300m in capex to achieve nationwide mobile network coverage by Sep CY18. With this timeline, TPG targets to launch mobile services in CY18 and forecasts that it will become EBITDA positive when it reaches a market share of 5-6%, which it believes can be achieved within a short period of time,” said OCBC Investment Research.

Overall, the brokerage firm expects an 11% to 16% decline in ARPU over the next five years. It noted, "Based on the FY16 results, 59% and 84% of Starhub and M1 revenues are derived from Singapore’s mobile segment. Hence, we see further earnings downside for both Starhub and M1, which currently may not be priced-in.”

For Singtel, its effective exposure to Singapore’s mobile segment is only 5% and 4% of its past quarter's total revenue and EBITDA, respectively. OCBC Investment Research believes TPG’s entry has minimal impact on Singtel’s group earnings.

For the past year, the three incumbent telcos cumulatively added 142k in net new postpaid subscribers, and the proportion of 4G users has risen to around 83% of the total 3G and 4G subscriber base as of December.

ARPU continues to be under pressure with the three telcos citing lower roaming revenue (both inbound and outbound) as the main reason for the overall fall in revenue.

"We expect this trend to continue with the increasing adoption of over-the-top services (OTT), as subscribers switch to using data for calls instead of using the traditional call services," said OCBC Investment Research.

More so, the aggressive move by mobile virtual network operator Circles.Life could further worsen ARPU outlook.

"Even Singapore’s only MVNO, Circles.Life, recently stepped up their marketing campaign with aggressive data-focussed plan offerings at prices significantly lower than the incumbents," OCBC Investment Research pointed out.

A monthly subscription for basic plans by Circles.Life is $28, compared to around $42 for the three telcos. Check out below the comparison of basic plans across three telcos and Circles.Life:

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