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StarHub, M1 might serve each other better by tying the knot

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StarHub and M1 have signed an exclusive deal to co-operate on a joint bid for a 5G licence. M1 CEO Manjot Singh Mann (left) with his StarHub counterpart Peter Kaliaropoulos.

NEWCOMER TPG Telecom and market leader Singtel were embroiled last week in a public spat that was - at least on the surface - about mobile number porting services.

But the dispute also revives an old debate: whether the Singapore market needs four mobile network operators (MNOs).

If the answer is no, then what sort of consolidation should we expect in the local telecom space?

TPG claimed in a Facebook post last Friday that Singtel had "repeatedly denied all valid porting requests to TPG".

Singtel's rejoinder, on its own Facebook page, was that it - and fellow incumbent telcos StarHub and M1 - will support mobile number porting when TPG launches its commercial services - which, "to our knowledge, they have not launched".

TPG started offering mobile services to consumers here in late 2018, but it has not yet begun charging for them, and is still in free trials.

Competition conundrum

The bleak market landscape may not be what the Info-communications Media Development Authority (IMDA) had in mind when it awarded spectrum to TPG in end-2016 under a New Entrant Spectrum Auction that was meant to facilitate the entry of a new MNO "to enhance innovation and competition in the mobile market".

In submissions ahead of the auction, two of the three local telcos were noticeably vocal in finding the market already competitive enough, because of its size and saturation.

Singtel, for one, said the entry of a new player on the regulator's planned terms would "lead to reduced innovation, economies of scale and investment by the existing three operators".

StarHub, meanwhile, worried that the new entrant would be receiving a subsidy, and pointed out that in other mature markets, consolidation was already taking place with many "converging towards three MNOs".

It now appears that their concerns were valid and that the local market may not be able to support quite so many players - including the thicket of mobile virtual network operators (MVNOs) that has sprouted.

TPG's protracted trial period has led to some price distortion in the mobile services market, which the incumbents seem anxious to end. Its presence may also have pushed StarHub and M1 to submit a joint bid for 5G spectrum, bringing the number of bidders back to three. Singtel and TPG submitted separate bids.

Meanwhile, The Business Times reported last week that fast-expanding but loss-making MVNO Circles.Life, which leases network from M1, has gone through a retrenchment exercise.

Ripe for consolidation?

Singapore is far from alone as a market creaking under the weight of too many wireless operators. Last month, foreign courts separately approved the mergers of TPG and Vodafone in Australia, and T-Mobile and Sprint in the United States.

Will consolidation come to local shores next? The IMDA may be prepared for such an outcome.

When asked last year if the Singapore mobile market has become unsustainably crowded, Aileen Chia, IMDA director-general of telecoms and post, told BT that "market exits are part and parcel of competition in the telecom markets".

But after all the trouble that IMDA took in rolling out the welcome mat for a fourth MNO here, it seems unlikely that TPG will be headed for the exits any time soon.

In any case, the two-tiered 5G regime - which supplements operating licences for nationwide networks with smaller-scale systems that some called a "consolation prize" - could be seen as a sweetener to keep TPG in the game.

And with Singtel amply resourced, that leaves StarHub and M1 as prospects for consolidation.

Mainboard-listed StarHub has been on shaky footing. It saw net profit fall by 7.5 per cent, on a 1.3 per cent drop in revenue, for the year to Dec 31, 2019. Its service revenue, which excludes equipment sales, decreased by 3.7 per cent, missing even management's lowered guidance.

Back in late 2018, when M1 was still shopping around for potential buyers, StarHub CEO Peter Kaliaropoulos told BT: "If and when that option becomes available, no company says you don't want to talk to another company about consolidating and creating a more powerful company."

Indeed, a merged entity might even serve customers better, as there would be enough capital to invest in new technologies and product innovation.

And it might prevent destructive competition - a boon for the telcos' customers and investors alike.