Subscriber-hungry telcos suffer 17% drop in data yield as price war ensues

Within one year, data yields fell from US$5.7/GB to US$4.8/GB.

Telcos' desperation to lock in subscribers dragged their data yields by 17% YoY from US$5.7/GB to US$4.8/GB, adding to their headaches ever since the news of new industry players broke out.

In a report, DBS Equity Research pointed fingers to M1's cheaper mySIM data plans, which currently offer a 20% discount to current subscribers.

Rivals Singtel and StarHub previously attempted to stabilise their declining postpaid average revenue per user (ARPU) by offering more bundled data but with higher prices.

StarHub tried to sate data-hungry Singaporeans by allowing unlimited data on weekends and increasing package prices by $2-6. Singtel offered unlimited data plans for its higher-end postpaid packages, starting from $68.9/month, as an add-on for $39.9.

It's too bad for StarHub and Singtel. DBS Equity Research's team found out the uptake of M1's MySIM plans has been positive, which could allow M1 to extend its revenue share gain of 60 bps accumulated since 3Q2016.

Analysts are now waiting on a response from Singtel and StarHub in Q1 to prevent further loss of revenue share to M1.

DBS analyst Sachin Mittal said, "We believe data yields will continue to fall through 2018 with the entry of two new service providers, whose focus is likely to be on acquisition of data-heavy subscribers."

This, coupled with the entry of MyRepublic in the first quarter 2018, toughen conditions for mobile operators.

OCBC Investment Research already saw in a November report that the telcos' underlying objectives are the same -- to protect or even gain market share.

These unlimited data plans may not be the best way to monetize data usage, but they are "necessary," as the landscape only grows competitive, said OCBC analyst Eugene Chua.

Still, if telcos want long-term growth, Chua said they must continue utilising data monetisation.

From 4Q2016 to 3Q2017, M1's data usage saw an increase from 3.6GB to 4.2GB. Starhub recorded an increase from 3.7GB to 4.5GB, whilst Singtel posted an increase from 3.2GB to 3.6GB.

Data usage has been on an upward trend, and telcos are expected to use the trend to their advantage.

"Without a doubt, it remains unclear at this point in time on how best to monetize data usage given the impending entry of TPG as well as the announced intention of MR to launch mobile services as well," Chua said.

MyRepublic, known for its aggressive pricing strategies and generous data allowances, has a strong footing after securing $70m in funding from Singapore-based Makara Capital and is likely to cause further woes in the already heated data market.

TPG will also start commercial operations by the end of 2018 as the telco is required to provide outdoor mobile coverage by the end of 2018 according to the IMDA and has earmarked $200-$300m for the deployment of its network in Singapore.

"Whilst Singapore is unlikely to witness such drastic drops, we believe data pricing will come under pressure in 2018 and likely record a high single digit to low double digit contraction," Mittal said.