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SINGAPORE : Singapore's telcos could see business costs go up if proposed guidelines by the Infocomm Development Authority (IDA) are implemented.
The IDA is suggesting shorter contracts for mobile and internet broadband services, and lower termination costs for consumers who want to exit from current contracts.
Consumers have welcomed the idea of shorter mobile and broadband services contracts.
One consumer said: "I think it would give more flexibility to consumers, it would give us more options in terms of using different providers as well. We feel pretty locked in by most of the contracts."
Another commented : "Shorter contracts should be helpful for the consumers because they do not have to wait to upgrade to a new plan."
IDA has proposed that the maximum contract term for mobile, fixed-line telephone and broadband service plans should not exceed 24 months. Currently contracts range from one month up to a maximum of 36 months.
But for telcos, the proposed guidelines could ring a different tune.
Analysts said the impact of the proposed measures, combined with Mobile Number Portability (MNP) introduced earlier this year, could hit the margins of Singapore's three telcos - SingTel, StarHub, and M1 - as telcos may have to spend more to attract and retain customers.
MNP allows consumers to change provider without having to change their mobile number. This has increased the telcos' churn rate, or the number of customers changing provider.
Terence Wong, senior vice president, Research, DMG & Partners Securities, said: "If you look at the MNP period, two of the three telcos - SingTel as well as StarHub - saw relatively stable churn rates, and only M1 exhibited higher-than-expected churn rates. Shorter telco deals per se will not lead to a higher churn rate, but I think coupled with MNP, we will see churn rates heading up."
Experts said implementing measures such as lowering early termination charges and contract period would increase the number of consumers changing providers, resulting in increased customer acquisition and retention costs.
As for getting telcos to cut down on using freebies - such as laptops - to entice consumers to lock in their contracts, analysts said telcos will have to change tack by offering other deals.
Mr Wong said: "I think the telcos will have to work a lot smarter right now, improve on service and probably give out a lot more bundled deals. For that, I believe SingTel and StarHub are already doing (so), and M1 will be able to join in the fray when the national broadband comes into effect."
IDA said it is timely to review industry practices to ensure that they remain fair and reasonable to operators and consumers.
The IDA is currently seeking feedback and comments on the proposed guidelines, which should be submitted to the IDA by January 13. - CNA/ms
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