DATA PLAY
What happens next depends on many factors, not least trends in revenue and margins, and the Infocomm Media Development Authority’s (IMDA) take on competition.
The reality on the ground is that providing telephony services has become commoditised. Today it is largely a data play. When was the last time anyone connected with anyone else without using WhatsApp or other data services platforms to make a call or send a message?
In the Singapore context, the shift to data services by retail users has meant falling average revenue per user (ARPU), while hyper competition for new customers has led to extreme margin compression.
In response, all three of the bigger players or incumbents have been shifting increasingly towards corporate clients via the provision of enterprise and infrastructure solutions. This requires investments in data centres and digital infrastructure.
Both M1 and StarHub appear to be the worst hit by falling ARPU. M1 is still the smallest of the three incumbents in data streaming and network services, while StarHub was slugging it out against better resources and bigger Singtel for dominance in broadband.
MyRepublic and Simba were simply the newest spoilers coming into this market where the scramble for customers was already intensifying.
As Singtel’s latest results show – it posted a 320 per cent gain in first-quarter profit to S$2.88 billion largely on one-off gains – size matters in this business.
Even for this giant, which controls 45 per cent of the Singapore market, operating revenue during the April to June quarter slipped 0.6 per cent. This is despite the fact that Singtel has significant offshore assets, like Optus, contributing to both its topline and bottom line.
Given the circumstances, including the fact that Singapore is still a smallish market, consolidation was inevitable and overdue.
But analysts like Nirgunan Tiruchelvam of Alethea Capital argue that user fees in Singapore are still relatively high despite there being multiple players.
“We pay far more for services than in many other countries,” he told me, referring to the fact that most households pay in excess of S$100 per month for broadband, telco and data-related services.
