Telcos in Singapore have not had the easiest of times in their businesses. According to analyst firm Moody’s, telcos in Singapore will see consolidation in the next two to three years, with competition in a saturated market worsened by the Establishment of four low-cost mobile virtual network operators. Nonetheless, Singtel is said to still maintain its leadership position in Singapore, although the profitability of the domestic business is under threat.
Nidhi Dhruv, Moody’s vice president and senior analyst said that Singtel will retain its market position, although its share of industry revenue and subscriber market share will fall. He added that the company’s higher overall profitability relative to peers which was essentially helped by its overseas operations, has generated around 65% of adjusted EBITDA, and larger revenue scale which will offset stress in its domestic market.
In addition, analysts said that the three big telcos in Singapore, Singtel, StarHub and M1, have introduced a variety of price plans and innovative content to compete effectively. The report added that these telcos will offer flexible wholesale pricing to its mobile virtual network operators in a “defensive” move against Australian telecom TPG. The report also added that pricing pressure will be aggravated by Australia’s TPG Telecom’s commercial launch into Singapore this year.
The Australian telecom however delayed its commercial launch to Q2 2019 as it aims to negotiate agreements with incumbent mobile operators to access its network systems. TPG and Vodafone Hutchison Australia’s potential merger in Australia could also lead to further delay TPG’s launch in Singapore. The analysts said in the report that based on the capital spending to date in Singapore, TPG is likely to rely on partnerships with existing telcos to make a nationwide commercial launch. It also said that TPG might not be a disruptive player in Singapore for atleast over the short term. Although TPG competes with cheaper pricing, it will face challenges by the mobile virtual network operators competitively priced mobile plans and networks of its telco partners, analysts said.
“The telcos would prefer losing revenue share to its respective mobile virtual network operators, rather than to TPG because a large part of an mobile virtual network operators’ revenue is paid to the telco partner. Still, it remains to be seen how much Singtel will benefit from this strategy given that its mobile virtual network operators are lagging those of M1 and StarHub,” analyst said.
“We believe market share in Singapore’s mobile sector continues to shift gradually since the launch of the first mobile virtual network operator, Circles.Life, in May 2016. Circles.Life’s telco partner M1 has increased its mobile revenue market share by three percentage points since then, chipping away postpaid subscribers from competitors. While Singtel has maintained its market leadership in the mobile segment with share of 52%-53%, StarHub’s share contracted about 3% points since May 2016,” the analysts added.