In Focus
TELECOM & INTERNET | Kiersnerr Gerwin Tacadena, Singapore

Singapore doesn't need a fourth mobile telco operator: Singtel

And check out what StarHub and M1 have to say about the potential new telco.

After 15 years of being a triopoly between Singtel, StarHub, and M1, the telco market may soon see one potential player change its game.

The Info-communications Media Development Authority of Singapore has shortlisted potential new telco players to a battle between Australia's TPG Telecom and MyRepublic, leaving the neophyte airYotta out of the game for not meeting the auction requirements. The two will be participating in the New Entrant Spectrum Auction, with 60 MHz of spectrum from the 900 MHz and 2.3 GHz bands up for grabs. The winning telco will be awarded before the end of the year, but should the incumbent telcos be worried?

Not immediately is the answer, according to analysts the Singapore Business Review spoke with. A spokesperson from RHB says the new operator would have to go by a tedious process in order to gain traction in its first few years.

RHB explained that the new operator will have to observe strict rollout obligations such as ensuring street level coverage within 18 months of the license award, which is by end of September 2018, and it has until end of September 2019 to establish tunnel and in-building coverage.

"This is easier said than done when access to buildings and sites are limited and domestic roaming is not mandated by the IMDA," said the firm’s spokesperson.

Eugene Chua of OCBC Investment Research concurs, noting that in the 54 months that it has to build up its network coverage, it would have to incur costs and record large cash burns.

"I think surely they will have to start to try to gain scale right from the start. Telco business is highly dependent on scale mainly due to high fixed costs. It would be ideal if they can gain scale quickly as a result to help offset some of these costs," Chua argues.

Who stands a better chance of becoming Singapore’s next top telco

In terms of experience and financial capabilities, RHB thinks that TPG could give its rival a run for its money, given that it is already listed in the Australian Stock Exchange.

"TPG has evolved via a series of M&As and is financially capable. It is the second largest broadband provider Down Under and owns/runs key infrastructure assets such as fiber," the brokerage firm says. TPG already has the grasp and expertise of being a mobile virtual network operator, being that of Optus and VHA.

"It is also a MVNO (Mobile Virtual Network Operator) of Optus and VHA. TPG does have the expertise (both fixed and mobile) and track record of commercial execution, and could prove to be a credible threat if it gains the fourth license," RHB furthers.

But in terms of being already immersed in Singapore, MyRepublic has the advantage. OCBC's Chua argues that its broadband service coverage in Singapore may come in handy.

"If it should win, I believe it will be able to immediately bundle and offer its existing broadband customers attractive mobile plans, something TPG can’t do yet. Bundling makes customers stickier and usually provide better value to consumers," he cites.

How will the new player affect the telco Goliaths

Should the fourth telco gain enough strength to take on its bigger firms, the two lesser Goliaths will then be the most impacted. Chua cites M1 to be the most vulnerable, since it has 100% exposure to Singapore, with around 85% of its revenues derived from the mobile telecom segment.

"We believe M1 will be the most impacted if a 4th Telco entrance does materialise, especially since it does not have an enterprise business to mitigate such an impact," Chua explains.

M1 had a 24.7% share in the postpaid mobile market and 22.2% in the prepaid mobile market in Q3 with 1.2m and 0.8m postpaid and prepaid subscribers, respectively. Its director for corporate communications Ivan Lim says the group is confident that they can retain their market share, given their lists of feat in the industry. 

He said that it was M1 who launched the first 4G service, SIM-only plans, and unique data passport service. This is where customers can use the local data bundle overseas in 48 countries at $10 per country per month. Singtel and StarHub have launched theirs just recently.

The other telco giant, StarHub, would also have to brace for earnings cuts with its 100% exposure to Singapore. It has a mobile subscriber base of around 2.3m, 60% of which are postpaid customers. Compared to M1, StarHub only has around 50% of its revenues accounted to mobile service.

"While we await results of the new entrant spectrum auction, our focus remains the same, that is on our customers and shareholders. No matter the outcome, we will continue to work hard to provide our customers with quality service and reliable network, and drive returns for our shareholders," StarHub corporate communications senior executive Philemon Foo said.

Why Singtel can shrug off the new competition

Unlike the two incumbents, Singtel is the most comfortable with the added competition. It should not have a problem losing some of its 4.1m customers that reflect 49% of the overall mobile market.

Aside from its wholly-owned subsidiary Optus in Australia, it has shares in different telcos across Asia Pacific including the Philippines, India, Thailand, and Indonesia. It also has shares in telcos spread in African countries. Overall, it has 630m mobile customers - proof that the entry of a fourth telco is nothing but a scratch to the telco giant.

However, a Singtel spokesperson notes that the telco market in Singapore does not need a fourth player.

In an emailed statement, Singtel says, "The competition amongst the current three players is already intense which means we are already innovating to bring the best services to our customers at the best possible prices. We have given our customers more pricing options and higher data allowances and raised the bar when it comes to our customer service, network reliability and quality and innovative services.”

Soon Singapore will find out whether the hometown favourite MyRepublic will win or whether the Aussie giant will get the license. Until then, expect local players to continue to fight hard for customers.

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