It could offer SIM-only plans for the same or lower price with incumbents but with higher quotas.
With its impending launch in Singapore’s telco landscape, newbie TPG is likely to fight it out through aggressive promotions to attract subs and drive up scale, CGS-CIMB said.
The research firm believes that the greenfield operator which will have an inferior network at least until the end of 2021 is likely to offer SIM-only plans for the same price or lower than current offers in the market but with higher quotas.
Additionally, CGS-CIMB thinks that TPG could also lay down a potentially free subscription for the initial 6-12 months. In Mar 2018, TPG revealed plans to offer free mobile data plans (3Gb, local voice) to the elderly for the first 24 months, when it launches.
In a previous report, DBS Equity Research said that TPG could snap up potential telco revenue share of up to 4% by 2022 despite efforts by existing competitors to tie up with Mobile Virtual Network Operators (MVNOs) denting its entry into the Singapore telco market, according to DBS Research.
Meanwhile, CGS-CIMB took into account the possibility for market consolidation which could work well for the incumbents’ share prices.
Singtel has earlier reiterated that it ‘believes that four players cannot survive independently and there will be room for consolidation in the market’.
“However, we believe this is more likely to happen in the medium term (i.e. in 3-5 years), as buyer-seller price expectations are typically more aligned after earnings have come under pressure from intense competition,” CGS-CIMB said.
With the looming, intensified competition ahead for telco players, CGS-CIMB that Singtel will remain to be the most resilient amongst incumbents.
“Singtel’s FY20F EV/OpFCF of 14.8x is trading at a 6% premium over the ASEAN telco average of 13.9x, supported by attractive FY19-21F dividend yields of 5.5% p.a., based on Singtel’s commitment to pay DPS of 17.5 Scts p.a.,” they explained.
However, risks may arise from a more heated competition in Australia, India and Singapore and weaker regional associate currencies against the Singapore dollar.
CGS-CIMB noted that the incumbents have been preparing to crowd out TPG for its kick off in Singapore by putting measures for the past two years including competitive offerings from the four mobile virtual network operators (MVNOs) and the introduction of SIM-only plans and data upsize options which the firm believes will make it harder for TPG to achieve its target of achieving positive EBITDA when it reaches 5-6% market share in a ‘short period of time’.
Amidst speculations whether mobile average revenue per users (ARPU) of telco players on whether it can bounce back should TPG fail to make an major impact, CGS-CIMB thinks that it would be difficult nonetheless for the incumbents to roll back existing offers, as doing so will only provide room for TPG to survive in the market.
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