TPG's launch delay brings reprieve to rattled telco incumbents

Players have more time to prepare themselves for fierce competition.

Telco heavyweights are breathing a sigh of relief as TPG’s widely expected launch by Q4 comes 4-6 months delayed compared to the initial expectations of UOB Kay Hian, giving them more leeway to prepare for stiffer competition. 

The hold-up was reportedly caused by extensive delays when negotiating with incumbent mobile operators to access their jointly-built common antenna systems (CAS) at commercial buildings and MRT stations, according to UOBKH. TPG was also held back by the time-consuming process it took to integrate and test its network without engaging contractors as the firm does not outsource these tasks but does all the integration and testing processes themselves unlike typical telcos. 

TPG is expected to launch trial for its 4G mobile network by Q4 and mobile services to be available on a commercial basis in Q2 2019. “From TPG’s perspective, the delay affords it more time to test sub-systems and better integrate different components of its mobile network,” Jonathan Koh, UOB analyst said in a statement.

The latest telco entrant has rattled incumbents amidst expectations that TPG could easily snap up potential telco revenue share of up to 4% by 2022, according to a report by DBS Equity Research, on the back of aggressive pricing strategies designed to lure and wrestle customers away from incumbents

"We believe that TPG will likely adopt a similar strategy of offering free services at the initial stages of its entry in Singapore as well, possibly leading to price wars between operators," DBS analyst Sachin Mittal said in an earlier report. 

One possible scenario envisions TPG wiping out almost a quarter of the industry topline if it mimics the approach of Reliance Jio in India and drives MVNOs completely out of the market, leading the mobile industry to contract at an annual rate of 6%.

Also read: StarHub caves under pressure of fierce competition

The delay, however, brings positive news to telco incumbents to prepare their service offerings in light of the new kid on the block.

“The delay encountered by TPG Singapore affords incumbents more time to further saturate the market and to prepare themselves for more intense competition by cutting expenses and streamlining their cost structure,” added Koh.

Also read: Price competition looms as TPG rolls out trial for unli-data plan

This has prompted incumbents to forge partnerships with MVNO to take the latest entrant out of the picture. Singtel, for instance, has joined hands with two operators, taking the total number of mobile service providers in the country from three as of 2015 to seven in a span of two years.

By partnering with MVNOs, incumbents hope to muscle TPG out of the scene in the SIM-only segments and generate wholesale revenues whilst offsetting any negative impact on low-end segments that TPG will target, added Mittal.

Compared to Singtel who is best placed to weather the storm due to overseas contributions, StarHub is most likely to emerge as the most affected in the medium term due to a contracting Pay-TV business and heavy competition from M1 in the broadband segment.