Here's why a new telco can't sit with the big three
Fourth telco may face higher capex as it tries to catch up.
The three telecommunications company in the city-state -- Singtel, StarHub, and M1 -- seemed to have felt the pressure to defend their market share as a threat of a new entrant looms over the industry.
According to DBS analyst Sachin Mittal, the telcos are willing to settle for a lower revenue to meet their subscribers mobile data needs than to lose market to a new player.
To recall, fourth telco hopeful My Republic announced in March plans to launch unlimited data plan for its fixed broadband consumers for $60 per month and 2GB plan for $8 per month.
To counter this, M1 introduced $15 and $20 SIM-only plans targeted at the lower-end users.
"New plans indicate that the company is willing to accept lower revenue than lose market share to a new player. Besides, all mobile players have slashed mobile data prices for postpaid users whereby effective monthly pricing for higher-end data subscribers (5GB plus) will decrease by 25%-50%," Mittal said.
Just recently, Starhub revived its 12GB mobile data bundle plan at $96.56 on a 24-month contract. Singtel is also offering the same data bundle at $239.90. On the other hand, that of M1 costs $228.
"The three telcos had ended their 12GB data bundles back in 2012, but have in recent times expanded their offerings to entice mobile data-hungry consumers," she noted
Aside from these efforts posed by its would-be competitors, the fourth telco hopeful would have to face competing with the already mature 4G infrastructure of its rivals.
The analyst noted that while it may be easy to roll out network in Singapore, high network coverage requirements by the regulator may lead to a much higher capital expenditures, as the fourth telco may have to meet increasing 4G coverage requirement in buildings, tunnels, and other outdoor areas.
"New entrants may get some relaxation initially but will have to comply ultimately. Attracting meaningful market share, with a patchy 4G network and no fallback network, is definitely a herculean task," the analyst said.
And with the possibility of 5G network launch in the next four to five years, the new entrant may have to brace for a much higher capex trying to catch up.