Mobile resellers face cost hikes as telco consolidation cuts bargaining power

[SINGAPORE] Mobile virtual network operators (MVNOs) face a shrinking runway as rising wholesale costs threaten to force smaller players out of the market, analysts told The Business Times.

The anticipated Simba-M1 merger is expected to help stabilise prices for consumers in an extremely competitive telco market in Singapore. However, analysts noted that the merger means that MVNOs may risk losing bargaining power as the number of host networks reduces.

MVNOs do not own network infrastructure, and so depend on mobile network operators (MNOs) such as the Simba-M1 entity, StarHub and Singtel.

“Now that the market has consolidated, this reduces options for MVNOs, as fewer hosts mean less bargaining power and wholesale rates may rise,” said Wang Joongshik, EY Asean technology, media & entertainment and telecommunications leader.

The merger means that the cost base of MNOs are further optimised, while smaller MVNOs may get squeezed out, he added.

According to research firm Mordor Intelligence, there are 10 MVNOs operating within Singapore. However, Hussaini Saifee, analyst at Maybank Securities, pointed out that these include Singtel hi! (formerly known as heya), giga!, eight and Gomo which are not considered third-party MVNOs.

Instead, these brands are considered flanker brands of the larger telcos in Singapore, he explained. Flanker brands are lower-priced offerings launched by larger companies to challenge competitors who are attempting to undercut them in prices.

Some notable flanker MVNOs are hi! and Gomo, which operate under the Singtel brand, as well as giga! and eight, which operate under the StarHub brand.

In fact, Saifee said that the rebranding of heya as Singtel hi! in November was essentially a “brand consolidation” that signifies a calibrated push into the lower-end segments.

“I do see potential for a rationalisation in the challenger brands in the market,” he added, pointing out that outside of Circles.Life, there are no prominent MVNOs in Singapore.

Wang concurred, noting that MVNO margins will shrink and that smaller players may exit or merge. He added: “Survivors must stand out from competitors.”

Paul Chew, Phillip Securities head of research, said that MVNOs with select “customer niches” will perform better in Singapore. But he acknowledged that such niches may be “sub-scale” in the Republic.

In fact, tensions between third-party MVNOs and MNOs have already surfaced. Circles.Life’s parent Liberty Wireless took M1 to court in October this year over mobile virtual network arrangements between them under a 2019 contract.

Liberty Wireless alleges that M1 wrongfully refused to enter into good-faith negotiations to amend the contract “to the extent reasonably necessary or appropriate” to address the implications of the framework for the wholesale of mobile services that the Infocomm Media Development Authority (IMDA) issued in January 2020.

Telco incumbents facing their own headwinds

While smaller MVNOs are facing shrinking margins, the established players are facing their own headwinds.

While Singtel reported net profit growth of 176.4 per cent for its six months ended September 2025, its Australian subsidiary Optus is facing reputational pressures.

This is mostly due to the fatal emergency network outage in September this year.

“(Singtel’s) earnings before interest and tax momentum is clouded by a reputational fallout at subsidiary Optus which derailed its turnaround efforts,” noted Bloomberg Intelligence.

Optus’ reputational issues could cause it to lose market share to competitor TPG Telecom, it added. Optus is the second-largest telco in Australia, while TPG Telecom is third.

Optus’ five-year return on invested capital (ROIC) stood at just 1.7 per cent, which has also caused some concern among shareholders.

“Low Optus ROIC has been a concern, and we do expect an improvement from such low levels – especially in light of relative competitive rationality in Australia,” shared Saifee.

However, it would be challenging to raise ROIC significantly, given the higher investment being pumped in to improve infrastructure.

Meanwhile, over at StarHub, stiff competition has eaten into its earnings; it reported a 35.3 per cent fall in net profit for its third quarter ended Sep 30.

To make matters worse, should the Simba-M1 merger go through, StarHub will see its market share fall from second to third, according to Citi Research and joint statements by Simba and M1 to the IMDA.

StarHub was earlier rumoured to be the front runner for the M1 acquisition.

Price stabilisation to come

Analysts said that the era of solely competing on prices is over, with the Simba-M1 merger expected to generate healthier revenue and profits for the industry.

“For 20 years, the mobile operator business model (has been) subsidised phone plans and connectivity,” Chew said. The merger will stabilise prices as there will be fewer price-disrupters in the market, he added.

Saifee, referring to his report released in September, believes that “competitive rationalisation” will prevail, which will support the recovery of average revenue per user from “depressed levels” relative to the developed markets in Asia.

Differentiation and growth

If telcos are not competing on prices, then what will be their differentiating factor?

Analysts believe that the next phase of differentiation and growth in the industry lies within the digital infrastructure and enterprise arms.

“(The Simba-M1) consolidation gives operators more scale to invest in next-generation technologies like nationwide 5G standalone networks and early 6G development,” pointed out Wang.

Bloomberg Intelligence noted that Singtel’s long-term growth is powered by capital raised from asset-recycling and digital-infrastructure expansion.

In what is touted as one of the biggest telco-related news to watch in 2026, Singtel and private-equity firm KKR are reportedly seeking to purchase ST Telemedia Global Data Centres (STT GDC) for about US$5 billion.

In November, Singtel’s wholly owned unit Pastel sold 0.8 per cent of its direct stake in Indian telecommunications company Bharti Airtel for about S$1.5 billion.

Some analysts suggested that the amount raised will be used to fund the purchase of STT GDC.

Singtel, in November, confirmed that talks with STT GDC were ongoing, but did not reveal any additional information.

Currently, KKR owns about 14 per cent of the firm and Singtel owns more than 4 per cent. The rest of the company is held by ST Telemedia, which is wholly owned by Singapore investment company Temasek.

“A larger stake in STT GDC could amplify (Singtel’s) artificial intelligence capabilities and suggest a narrowing of the share-price discount to its sum of the parts,” said Bloomberg Intelligence.

StarHub, on the other hand, is poised to continue its aggressive strategy of targeting the enterprise and digital infrastructure sector.

Just a day after the announcement of the potential Simba-M1 merger, StarHub said that it had bought over the remaining stake of MyRepublic Broadband for S$105.2 million.

However, some analysts remain sceptical of StarHub’s aggressive strategy.

“An aggressive competitive strategy may hurt everyone,” Saifee warned. “Whether it pays over the long term remains to be seen. But it does hurt in the near term.”

Chew described StarHub’s pricing strategy as a “race to the bottom”.

With a high fixed-cost structure, a decline in revenue will result in negative leverage or earnings dropping even more sharply than revenue, he added.

But Bloomberg Intelligence pointed out: “Its enterprise pivot, anchored by long-term contracts for its digital platform, is set to accelerate through mergers and acquisitions, supported by its relatively low leverage.”