Is there room for a fourth telco?

STARHUB'S shock retrenchment of about 10 per cent of its workforce, hot on the heels of Keppel Corp's surprise plan to buy out the rest of M1 shares it does not own, has resurrected concerns over whether Singapore has room for a fourth mobile operator.

Singapore's three major telcos - Singtel, StarHub and M1 - have long been grappling with disruption caused by technology and regulatory changes. They have seen the entry of virtual mobile telcos like Circles.Life, MyRepublic and Zero1. These virtual telcos do not build their own physical mobile networks, but lease them wholesale from existing telcos.

But the pace has quickened. Digitisation, the Internet and near ubiquitous bandwidth are creating fertile ground for new players which also do not have to have to cough up high initial costs for infrastructure. These days, giants like Google, Apple and Amazon are able to offer new services that go over the top (OTT) of existing networks using data connections.

Three years since the then-Info-communications Development Authority of Singapore (IDA) consulted on its plans to the release of additional spectrum for mobile services here, the market remains divided over whether the city-state has room for a fourth mobile player.

Incumbent telcos still insist that Singapore is a small and mature mobile market, with extremely high penetration rates. Latest available figures show the mobile population penetration rate around 150 per cent and wireless broadband population penetration rate above 190 per cent.

Other mature markets like the United Kingdom, Germany and Denmark have seen consolidation towards three mobile network operator (MNO) providers.

Regionally, Indonesia, which has a population of 250 million people compared to Singapore's 5 million- odd, appears to favour consolidation.

Decreased revenues in the mobile sector arising from greater competition will not encourage the service innovation and investments the regulator is hoping for.

On the other hand, IDA - now the Infocomm Media Development Authority (IMDA) following a restructuring of IDA and the Media Development Authority (MDA) on Oct 1, 2016 - believes there is scope for greater competition and service innovation in the market.

It cited examples of jurisdictions with new MNO entry experiencing decreases in average mobile price plans by up to 40 per cent, and the introduction of new service offerings such as simplified pricing packages, innovative bundles and specialised plans for targeted customers. The entry of a new MNO may also incentivise the MNOs to invest in their mobile networks to maintain their competitive advantage.

Australia's TPG Telecom - Singapore's fourth and newest mobile operator after it won the spectrum on offer for S$105 million in 2016 - has made its presence felt in the city-state. It announced a free mobile plan targeted at seniors aged 65 and above - a segment largely ignored by the incumbents.

The plan, which includes a SIM card, 3GB of monthly data and unlimited calls to mobile numbers in Singapore, starts trial operations this quarter.

Make-or-break moment

TPG's entry has been described as a wake-up call for telcos to accelerate their transformation strategies. But the writing has been on the wall for sometime now.

The entire industry is driven by innovation and competition, where speed to market and agility are the norm. This can create a make-or-break moment for players as they develop new strategies to protect customers and drive new revenue streams.

It is well-known the advent of OTT voice, text and messaging solutions is becoming very troublesome for traditional telcos. As one expert pointed out: after years of sitting on fat, dependable revenue streams from infrastructure, bandwidth and subscription plans, they are facing a new age where they see zero revenue and network usage from OTT apps that give consumers the ability to call anyone, anywhere as long as they have a VoIP app and a Wi-Fi connection.

Some analysts estimate Skype, WhatsApp and other OTT apps will result in the loss of almost US$400 billion in revenue by end-2018.

Here lies the dilemma of legacy telcos which have spent millions of dollars on infrastructure: how to future-proof their business and pump more investments into new services for lower returns, or risk shrinking into redundancy?

It's not whether Singapore has room for the fourth telco, but what is being done by existing players to stay relevant in this data-driven age, where rivals are no longer typical telcos, but strange bedfellows.