Investment thoughts: Singtel

I can understand the IDA’s need to allow a fourth vendor into the Mobile Network Operator MNO scene. As a country committed to the interconnected internet of things future, Singapore can ill afford to allow incumbent infrastructure service providers dictate the level of service or pricing for wireless internet. Lower pricing will increase the level of adoption of future tech, which is what the IDA needs to drive its vision.

This sets the stage for the current telco environment, how does a change in government policy lead to competitive disruption? Who will be the ultimate winners?

Technology as a differentiator

Mobile networks have always offered MNOs a profit in the mid-teens. There was no reason to change the pricing structure, even if some segments were underutilizing it. The advent of MVNOs who developed technology to track data usage and tap into consumer buying patterns to cater to the different segments, changed the game fundamentally.

Right now, MNOs are struggling to keep their existing users while avoiding offering wholesale discounts. I think that the market needs more time to stabilize, as more customers try out the different offerings.

Dwindling sources of revenue for MNOs

MNOs are also struggling as their traditional revenue sources are being rendered obsolete. Non-renewal of landlines and cable TV subscriptions are increasing and it’s not hard to foresee the day where customers would be willing to forgo caller ID, phone calls and SMS for a larger data bundles. That said, MNOs are still able to provide a wider range of solutions to consumers compared to pure mobile only MVNOs, the enterprise solutions market is also likely to remain stable or grow as companies require higher data speeds due to adoption of more cloud computing solutions.

MVNOs are fast replacing MNOs

MVNOs are not new (remember Virgin mobile?) and are unlikely to replace MNOs as they merely borrow infrastructure. The difference lies in the service differentiation and giving customers more choice. MNOs are still needed as they are the ones paying for and upgrading the underlying systems. If anything, this slugfest is only going to weaken all other MNOs other than Singtel, who is not as dependent on sg mobile subscription for revenue. I really can’t see how M1 or Starhub is going to pay full dividends while rolling out the next 5G network.

Too many players?

Despite the rapid growth of MVNOs their ARPU is actually very low. Probably lower than MNOs who sell them their networks, this situation is unhealthy and more important to investors likely temporary. At some point they will start tinkering to see what features they can start charging customers more for without increasing customer turnover.


The elephant in the room is this, data consumption is going up, but the average price of data is also going down rapidly. Who is going to pay for it? I think it’s inevitable that MNOs will one day raise underlying prices for MVNOs and that prices converge more rationally.

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