Circles.Life's $0 plan could slowly erase telcos' wireless revenue

It launched a plan with 1GB of monthly data allocation, 30 minutes of voice, and 10 SMS.

Unlisted Circles.Life has launched a free wireless plan with 1GB of monthly data allocation, 30 minutes of voice, and 10 SMS. It claimed that there are no “hidden fees” or contracts.

Maybank Kim Eng noted that its base case of gradual wireless revenue erosion for the incumbents could be at risk, depending on how all competitors react. Analyst Luis Hilado added, "Our sensitivity analysis suggests that every 1% change in wireless revenue could affect their core profits and trading prices by 1-3%."

Circles’ market segmentation that commenced with its maiden $28/month 6GB plans and later $20/month for an additional 20GB and $3/day of unlimited data options has coalesced into a plan for a new segment: less-wireless-data-savvy consumers.

"We think its pricing structure can help Circles avoid cannibalisation and preserve its existing subscriber revenue, as its customers on the 6GB plan are not likely to migrate to its zero plan. This is because they would have to shell out $32 rather than $28. However, it may not preclude them from getting new SIMs," Hilado said.

Maybank KE also noted that Circles.Life is tracking a few years ahead of its 3-5% market-share target. "We think the branding impact from its zero-cost plan can sustain or build Circles’ market grab momentum, unless the other MVNOs or MNO incumbents start to act aggressively to counteract it. To date, the incumbents have generally left the competition in the price-sensitive segment to their MVNO partners," Hilado observed.

However, with Circles.Life addressing even more segments, one wonders what TPG would have to resort to in order to carve its niche during launch in H2.

Hilado noted that Circles.Life’s traction has helped its MVNO partner M1 post wireless-revenue growth of 3% YoY against declines for its competitors. "However, we doubt that anyone is insulated from the opportunity costs of subscribers getting 1GB for free," he concluded.

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