Telcos need to be more creative in tussle for mobile customers
M1'S announcement on Wednesday that it would offer a new mobile postpaid plan which would come bundled with unlimited data indicates that it is ready to protect its market share and, if possible, garner new customers from rivals, as the Singapore telecom market gears up for the entry of the fourth telco, Australian company TPG Telecom, which is expected to start its services from September of next year.
The telco's unlimited data plan comes with a 12-month contract at a rather steep monthly payment of S$98. With no contract, the data is capped at 25GB (gigabytes). The telco also rolled out other plans with the mobile data offering ranging from 5GB to 30GB per month with a one-year contract.
M1's strategy reflects what is considered a kind of Holy Grail in mobile telephony nowadays - unlimited data usage. However, how effective that's going to be in Singapore, as a tool to develop customer loyalty, remains to be seen. But more on that later.
Singapore's other telcos are not far behind M1. StarHub will offer free unlimited data on weekends to customers who sign up for or renew their post-paid plans from Thursday onwards. For weekdays, customers would get data bundles ranging from 3GB to 15GB depending on the plan. Singtel will also announce "attractive offers" over the next few days.
Upsized data plans are a move back to the situation that was prevalent about seven to 10 years ago when such plans were commonplace. However, because of the relatively poorer quality networks then (due to technology constraints), higher data bundles resulted in network congestion. As a result, all three telcos cut back on data bundles and soon the market norm became 2GB-4GB.
This led to a certain amount of customer resentment, especially since over the past few years the network quality and capacity have improved by leaps and bounds. MyRepublic, when it threw its hat into the ring to become Singapore's fourth telco, exploited this resentment by promising unlimited mobile data if it won the right to become Singapore's fourth telco. This gave it a lot of traction and several thousand potential customers signed up on its webpage for a potential launch.
However, that hope was dashed by TPG, which outbid MyRepublic for the spectrum reserved for the new entrant. With MyRepublic changing tack and announcing plans to become an MVNO (mobile virtual network operator), it is expected that upsized data plans will still be one of its key selling points once it starts its service.
Most Singaporeans see the smartphone as the first go-to device to surf online and there is certainly a demand for a smooth and high bandwidth connectivity to the Internet. However, how much of an incentive would upsized and unlimited data plans be to ensure customer stickiness in Singapore once the novelty of such plans wears off, particularly if the price points for such plans are higher than current plans? In other words, how many customers would be willing to fork out extra money for more mobile data?
This may appear at first glance to be a counter-intuitive question. There is a clear appetite for online connectivity via mobile devices and this appetite will only go up going forward. On the other hand, huge mobile data bundles may not be enough to ensure customer stickiness given the dynamics present in Singapore.
In markets where mobile data is often the only avenue to access the Internet, such plans are instant hits - a good example is the Indian market where new entrant Reliance Communications made a huge impact in customer acquisition with its offer of free mobile data bundles.
However, in Singapore, mobile broadband is just only another avenue to Internet access and is often not the fastest or most efficient. With the exception of a few particular cases, in most home environments in Singapore, smartphones log into the broadband network via WiFi as this is usually the default setting in most modern-day smartphones. The same customers, when they go to their place of work, will invariably have office WiFi, where again the mobile phone's default connectivity would be broadband. Add to this the fact that most shopping malls and public buildings in Singapore have public WiFi that is easily accessible. And very soon, thanks to various Smart Nation-related initiatives, WiFi availability will become even more ubiquitous.
The average customer would probably be using mobile data only during travel or when outside in places such as parks which may not have WiFi connectivity. Also given Singapore's small size, average travel times hardly exceed 40 minutes to one hour.
Going by human nature, it's always the more the better. So if an average customer is offered a bigger mobile data bundle, ceteris paribus, they will love it. But when this extra mobile data comes at a substantially higher cost, will most average customers, leaving aside power users, jump for it once the novelty wears off? The jury is out on this since the marginal benefit of more mobile data may not exceed the marginal cost of this data unless there is a drastic price revision.
One likely group which would love upsized and unlimited data plans are younger people who go to school and college, spend a lot of time outdoors and love to use mobile data. However, in most cases, this group has the least purchasing power. Will they be able to afford data plans which cost in the region of S$100 a month?
Despite all this, one can't fault this move by the telcos to reintroduce upsized mobile data bundles as it shows that they are prepared to aggressively protect their market share from impending competition. However, it does appear that they will need to pull out more creative tools from their kit boxes as large data bundles on their own may not do the trick. The more tools they pull out, the better news it is for customers.
