'Vibrant' 5G retail scene for Singapore looks a long way off

THE telecoms regulator has promised a vibrant retail market for 5G in Singapore - and it believes that the key to that will be mandatory wholesaling arrangements.

Only Singtel and a StarHub-M1 joint venture have been awarded licences to build and run nationwide 5G networks. So the Infocomm Media Development Authority (IMDA) has touted its 5G wholesaling requirement as a way to "promote retail competition" and add "vibrancy to the competitive mobile landscape".

But, while you can lead a horse to water, you cannot make it drink. Whether the other network operators will be interested in such arrangements is uncertain, as some are facing business or financial difficulties.

Including mobile virtual network operators (MVNOs) that lease spectrum wholesale, Singapore's 4G market is already crammed with about a dozen players that are locked in fierce competition for consumers.

It is these same consumers who are expected to make up the bulk of telcos' immediate 5G strategy. Reaching out to enterprises is likely to be harder because of a lag in investment and because they may opt for site-specific, smaller-scale networks rather than nationwide systems.

Market watchers are hopeful that 5G will bring price resilience to mobile service providers, chiefly from the premium that consumers would cough up for the ultra-fast wireless technology. Hardware vendor Ericsson suggested last year that mobile customers here would be agreeable to paying 52 per cent more for 5G than their current plans.

But some of that expected strength in prices will also come from higher barriers to 5G entry for MVNOs and new Australian entrant TPG Telecom, which will all need to lease 5G capacity on a wholesale basis.

Both Citi and OCBC Investment Research said in separate stock reports that they anticipate industry price repair. OCBC analysts said that the need for Singtel, StarHub and M1's rivals to access 5G capacity on a wholesale basis "could make undercutting much more difficult" in the market.

While the IMDA has affirmed that 5G spectrum must be wholesaled out "at reasonable terms and conditions", similar to the model for 4G, the eye-watering ramp-up in capex at a challenging time for the industry means that telcos are unlikely to concede their upper hand in negotiations.

"The commercial model has to take into account the massive upfront cost," StarHub chief executive Peter Kaliaropoulos said last week. "It can't be (that) some operator doesn't pay anything for a fixed cost and from day one they might get a variable cost."

His statement bore out an earlier prediction from Citi that "operators would seek to price their wholesale services to sufficiently cover for the heavier 5G investments".

And analysts have also expressed uncertainty over which local players would be keen to pay for 5G access.

When asked if TPG would pursue a wholesale lease, country manager Richard Tan would only say that the mobile network operator "will continue to explore all options for the potential delivery of 5G services in the future".

In an earlier report, Citi had argued: "TPG will not enjoy pricing power as a full network operator as it cannot price below wholesale costs. Otherwise, it would stand to lose money for every MB sold."

DBS analyst Sachin Mittal said: "TPG is unprofitable and left without a nationwide 5G licence now. TPG needs to decide to put more capex in an unprofitable business or exit."

Meanwhile, MVNO Circles.Life is currently loss making and has been laying off staff since late last year.

There are other players around, of course, and there will likely be some takers for wholesale 5G capacity.

"You're going to see the wholesale market evolving," said StarHub's Mr Kaliaropoulos. "Wholesale has been competitive and will continue to be competitive... and will stay alive and well in the future."

But, depending on how negotiations with 5G licence holders pan out, even the top newcomers could struggle to afford wholesale charges.

Unless the IMDA can pull another rabbit out of its hat, vibrant 5G retail competition is still a long way off.