Singapore telcos hike tariffs to boost sluggish revenue growth

Should subscribers expect even higher fees?

Subscribers will soon begin to feel the pinch as Singapore telcos become increasingly reliant on mobile tariff hikes for revenue growth. According to CIMB, mobile penetration is expected to hit 157% in Singapore’s saturated market towards the end of 2015, and tariff hikes will be the main drivers of telcos’ revenue growth.

The three telcos have restructured and raised tariffs thrice within the past two years. CIMB notes that the first re-pricing came in 2H12, when the telcos changed postpaid subscription plans that offered 12Gb/month of data across the board tiered data plans.

Under these tiered plans, subscribers will have to pay excess data usage charges when they exceed their monthly data allowance.

“As of 3Q14, 58.5% of Singapore subscribers were on tiered pricing plans. Out of that, 20.6% exceeded their data bundles,” noted CIMB.

In January 2014, the telcos again hiked tariffs by doubling excess data usage charges per Gb from %5.35 to $10.70. Most recently, in light of the iPhone g’s launch, the telcos again raised postpaid plan charges across the board by $2-5/month and permanently waived 4G fees.

“After the latest round of re-pricing, we believe Singapore telcos are unlikely to further raise tariffs in FY15 and will sit back and watch the positive effects flow through to their toplines. However, this does not rule out Singapore telcos from raising tariffs again further down the road as long as competition remains stable and there is no fourth entrant in the market,” stated the report.

"We maintain our Neutral rating on the Singapore telco sector. Despite the mature market, we expect Singapore telcos to post decent revenue and core net profit growth as subscribers transition into new higher-priced plans and on the back of higher data revenues as usage rises. Market competition is also expected to remain largely stable in the mobile business," CIMB added.

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