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'Unlimited' data is the new front line in telcos' price war

Price per gigabyte takes a tumble with new StarHub add-on on Friday; Singtel and M1 launching their own salvos today

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The unlimited-data skirmish among telcos may be the latest battlefield in a price war, after SIM-only and no-contract plans became what seemed par for the course for contestants.

Singapore

WHERE mobile customers once fretted about busting their monthly caps, they are now bombarded on all sides with telco plans that promise more data for less.

While this does not bode well for the industry's key financial metric of average revenues per user (ARPUs), the crowded market has now forced telcos to undercut on price per gigabyte (GB), observers believe.

As Australia's TPG Telecom rolled into town with the lure of unlimited data in a free trial, StarHub launched a mobile add-on on Friday letting customers top up 50GB of data for S$20 a month - with no activation fees or excess data use charges.

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Not to be outdone, Singtel has cut the price of its two-year contract plan's "Data X Infinity" add-on to S$29.90, from S$39.90 before. And M1, which rolled out an unlimited data plan in 2017 for S$98 a month, unveiled an add-on offering 25GB of data for S$5. Both deals were launched today.

"Unlimited data" has become almost a cliche, in a marketing move fuelled by the mobile virtual network operators (MVNOs) that lease frequency from incumbents.

M1 MVNO partner Circles.Life rebranded its "20GB for S$20" plan as S$20 for unlimited data earlier this month. And fibre broadband operator MyRepublic, which is StarHub's MVNO partner, already bills all of its mobile plans as coming with "boundless data" - no excess use charges.

But, as is often the case, there's a catch in the fine print: Service providers throttle connection speed after a certain amount of extra data is used. MVNO Circles.Life's threshold is 20GB a month, for instance, while Singtel, StarHub and M1 have a 50GB cap, under a so-called fair use policy.

Telcos may be counting on consumers not actually using enough data to notice.

Explaining the business logic for his latest add-on, Johan Buse, chief of StarHub's consumer business group, told The Business Times that he predicts a divergence to emerge between customers who want unlimited data, and conservative data users. He added that the relatively low take-up of smartphone data - StarHub customers averaged 5.6GB for the year to Dec 31, 2018 - "indicates that there is untapped demand when it comes to data" in Singapore.

He said that he does not expect the new add-on to cannibalise subscribers of StarHub's pricier plans - which go up to S$238 for a two-year contract with 100GB of data a month - as there are "different parameters" in each package, such as roaming services and handset redemption.

Mr Buse also asserted that, "increasingly, ARPU will be defined by subscription revenue, not excess charges", as those fees had been identified as a sticking point for customers in a recent strategic review.

Still, when asked whether StarHub is then pursuing a strategy with a higher volume of low-value customers, he would say only that his plan is to "do the best value for the customer... and the rest will follow".

Fitch Solutions analyst Kenny Liew told BT that bigger data packages may in fact not hurt the revenue contributions from excess data fees, which he said are unlikely to make up much of telcos' ARPUs, as users match their data use to what they buy.

Another analyst, who asked not to be named, said: "Since the promotion is an add-on, it theoretically increases ARPU... but it significantly reduces the price per GB."

StarHub had noted in its recent fourth-quarter financial statements that lower excess data revenue - from higher take-up of DataJump add-ons and higher data bundled into base plans - is one factor behind the shrinkage in post-paid mobile ARPUs.

Meanwhile, M1's full-year results showed that the share of tiered data plan customers who bust their primary data caps hovered around the one-third mark each quarter - even as data contributed to 63.9 per cent of mobile service revenue in 2018, from 56.2 per cent the year before.

The unlimited-data skirmish may be the latest battlefield in a price war, after SIM-only and no-contract plans became what seems par for the course for contestants.

Telcos will inevitably have to resort to offering more data per dollar to stand out, said Mr Liew. "We do not believe that there is much that operators can do to mitigate this decline in ARPUs, but, as always, operators will focus on getting subscribers to subscribe to other value-added services."

He added: "They will also look to get subscribers to switch over to their fixed broadband services to extract more value per subscriber, although bundling itself will be ARPU-dilutive overall."

The analyst who declined to be named, meanwhile, called the data goodies "a loyalty or retention promotion to keep subscribers sticky but also to potentially attract subscribers from other operators - if the other operators don't match quickly".

But - is it the blood in the water? - "it seems these days they react quite fast".