The Big Read: Consumers smiling as prices tumble but is that all there is to greater telco competition?
But as companies inevitably bow out amid this war of attrition in the years ahead, there are signs that this era of cheap mobile plans may not last, several experts said.
SINGAPORE: In the current era of cheap mobile data plans, it is hard to imagine ever going back to the days when one had to pay more for less.
In 2016, mobile phone users had to contend with paying above S$5 for every gigabyte of mobile data a month.
Even that was considered a good deal. An add-on data plan offered by Singtel, priced at S$5.35 per gigabyte, for a limited promotional period was touted as one of the most affordable around then.
Today, the average person pays between S$0.20 and S$0.50 per gigabyte for the most basic mobile plans, which is up to 25 times more cost-effective than what it was five years ago.
This steep plunge in prices was not due to any technological marvel that occurred in the past five years.
It did not, for example, become 25 times cheaper for telcos to broadcast 4G signals, which was the dominant technology then, as it is now.
Instead, the authorities had sought to shake up Singapore’s telco industry that was made up of three 800-pound gorillas – Singtel, StarHub and M1 – by introducing a fourth player into the picture.
After more than two decades of the status quo, Australia’s TPG Telecom was granted a licence in December 2016 to become Singapore’s fourth telco. Prices of data plans have fallen ever since.
READ: ‘Fittest will survive’: Singapore’s 4th telco TPG confident of thriving amid growing competition
It has also been a year since TPG launched its paid commercial services in March 2020, kicking off the Infocomm Media Development Authority’s (IMDA) vision of a liberalised and competitive consumer mobile industry.
Mr Richard Tan, TPG Telecom’s chief executive, said in an hour-long interview: “TPG is the first real competitor to enter the market. Real, in the sense that we obtained spectrum, we've built a completely brand new network, we've introduced efficiencies into the business not seen before.
“And as such, we were able to bring products and services which benefited the market.”
Yet, the journey to break into the Singapore market has been fraught with challenges for the newcomer, which in recent months has been hit with complaints about its customer service as well as poor coverage in underground MRT tunnels.
The three big boys had also not been idle in the wake of TPG’s arrival, allowing many smaller firms, known as mobile virtual network operators (MVNOs), to lease network infrastructure from them.
There are now nine MVNOs which are selling mobile plans, slugging it out in a price war to seize market share.
StarHub in 2018 even proclaimed in a bold, self-deprecatory campaign: “People hate telcos. Change is coming.” Even the decade-old logo of orange-coloured M1 was not spared, as the telco went through a facelift in February this year.
But as companies inevitably bow out amid this war of attrition in the years ahead, there are signs that this era of cheap mobile plans may not last, several experts said.
Some also questioned whether market liberalisation had only resulted in a cost-cutting price war that hurt the industry’s ability to innovate.
Associate Professor Nitin Pangarkar, from the National University of Singapore (NUS) Business School, said: “It is very difficult to predict how a market will evolve when you liberalise it. You can’t have affordable low prices and also have innovation and quality customer service. Something has got to give.”
HOW TELCO INDUSTRY OPENED UP OVER 20 YEARS
For consumers like IT systems administrator Andrew Heng, 32, there have never been so many options to choose from that provide generous data caps.
A self-proclaimed heavy data user, Mr Heng said it is “insane” that his MVNO, Giga, bumped up his data cap to 60GB last month without raising prices. He has been paying S$25 per month.
“Before this, I was also paying the same amount to Singtel but the data was measly. Competition is really great,” he said, adding that he has been satisfied with Giga’s services so far and has never once reached his monthly data cap since he switched last year.
When mobile telephones first became popular in Singapore in the 90s, the telecommunications industry was a monopoly held by Singtel, whose unrivalled position propelled it to become one of Singapore’s largest companies.
In that nascent era of telecommunications, the Infocomm Development Authority (IDA), as it was then known, had sought to liberalise the industry.
IDA’s former chief executive officer Yong Ying-I said then that it was Singapore’s ambition to become Asia's largest infocommunications hub that drove it to liberalise the basic telecom services market.
Singtel’s licence as the sole provider of mobile services in Singapore lapsed 21 years ago on Apr 1, 2000. Licences were granted to rivals M1 in 1997, and StarHub in 2000.
For years, this was to remain the case.
READ: The Big Read: Singapore's big telcos face rude awakening, as the little guys get the last laugh
Associate Professor Lawrence Loh, associate professor of strategy and policy at NUS Business School, described this as an oligopoly consisting solely of three local players.
“The domestic consumer telco market then was quite shielded from international players, almost exclusively closed to foreign competition,” said Assoc Prof Loh.
His colleague, Assoc Prof Pangarkar added: “Typically, the players in oligopolies would not introduce new products and new features and keep prices high. It’s not great, but there isn’t much of an incentive to improve.”
In a saturated market where almost everyone already had a mobile plan, the strategy then was to lock customers into contracts and grow the average revenue per user over time.
There have also been times when all three telcos hiked their prices, citing an increase in network infrastructure spending as a reason. In 2012, some may also remember how all three telcos removed their popular 12GB bundles at the same time.
Said Assoc Prof Pangarkar: “In such a market structure, businesses tend to have a tacit agreement among themselves, which is to make hay while the sun is shining.”
So in 2016, when the authorities wanted to facilitate the entry of a fourth telco to drive greater competition and innovation in the sector, the move was met with protests from the incumbents.
Singtel, for example, warned that the entry of a new operator would drive the focus of the industry competition to price alone.
Former Singtel group CEO Chua Sock Koong said in an interview with Bloomberg: “The only way (a fourth telco) can gain customers will be by way of reducing prices … The existing operators would look at how best to respond. Clearly just leading prices down, it’s not good for the sustainability of the industry.”
Responding to queries, Singtel’s CEO of consumer Singapore Dr Anna Yip reiterated that TPG was not a necessity for the industry to improve.
“We have never required a fourth player in the market to spur us to innovate,” said Dr Yip.
“Regardless of the competition, there’s been no lack of innovation on our part as we focus on what’s important to our customers,” she added.
Despite this, the authorities went ahead and held a new entrant spectrum auction, shortlisting TPG and homegrown favourite MyRepublic as possible awardees.
An IMDA spokesman said in response to queries that it wants to facilitate a vibrant telecommunications landscape in Singapore undergirded by fair competition.
In 2016, it set out an “exceptional arrangement” to lower entry barriers for the new entrant, setting aside preferential spectrum resources only available to new entrants.
The spokesman said in each instance when a new telco is introduced in the past, IMDA has observed benefits to consumers such as lower prices, better value offerings, enhanced service quality and more innovative services.
“Today, the mobile market is highly competitive. To succeed, operators, as commercial businesses, will need to understand market conditions, and offer services that meet consumer needs, while adhering to regulatory requirements that protect consumers’ interests,” said the spokesman.
PRICE AND DATA WAR
At the time of the spectrum auction, MyRepublic was already a disruptor in the consumer broadband segment, and it pledged to offer unlimited data plans at affordable prices if it secured the telco bid.
It also said it would roll out an S$8-for-2GB plan, which would have been the most competitive plan at the time.
In an interview then, MyRepublic CEO Malcolm Rodrigues nevertheless said that his company would have no interest in being the fourth operator if the market was only about a price war.
In response to queries on its failed bid for the fourth telco licence, MyRepublic managing director Lawrence Chan noted the growing demand for mobile data due to the rise of on-the-go streaming, gaming and video conferencing, in line with the rise of the digital economy in 2016.
“With increased reliance on smart mobile devices and mobile data in their day-to-day lives, customers wanted more data, but at a much more accessible price – a gap in the industry we were confident of filling,” said Mr Chan.
Thus, when the opportunity came for it to become Singapore's fourth telco in 2016, MyRepublic leapt at the chance to bridge that gap by building a high tech, low-cost telco network and provide its customers good quality access to unlimited data at an affordable cost.
READ: Commentary: The incredible rise of Forrest Li, modest founder of Singapore’s most valuable listed company
In the end, however, MyRepublic’s S$102.5 million bid lost out narrowly to TPG’s S$105 million offer.
Paying more would mean that MyRepublic would not be able stay true to the vision it had as a fourth telco, the company said then.
With MyRepublic’s dreams dashed, it fell upon TPG to take on the behemoths.
Assoc Prof Pangarkar said: “The fourth telco had its own agenda. It didn’t mind rocking the boat, and so that was the thinking behind the liberalisation of the market.”
But before TPG could establish a foothold, the incumbent telcos allowed the entry of MVNOs such as Circles.Life, Zero1 and RedOne, which triggered a price war that continues until today.
These low-cost outfits lease network capacity from Singtel, StarHub and M1, and thus do not have to build or maintain the cell network infrastructure.
They would undercut the prices of the incoming telco, which would have to build a whole new network from scratch.
Assoc Prof Pangarkar said: “The MVNO model essentially lowered the capital requirement so MVNOs had more flexibility to lower prices. It would hurt the (incumbent) telcos, but consumer telco is just one part of their businesses.
Questioning TPG’s decision to “enter such a small consumer market with so many players”, he added: “I would have gone elsewhere, (where) digital telcos were just taking off, like in emerging markets. Not Singapore.”
THE NEWCOMER’S JOURNEY
As the new kid on the telco block, TPG kept its cards close to its chest until Mar 31 last year, when it launched its commercial services for the first time.
Its SIM-only plan offer – S$10 for 50GB – generated headlines when it was announced, and has remained as the best deal on paper despite the competitive pricing from the other telcos and MVNOs.
Mr Richard Tan, TPG’s chief executive, said: “IMDA’s licence that was accorded to TPG was for the build-up of a 4G mobile network. In other words, we only had to support one specific technology at a time when our competitors had to do both 3G and 4G.”
TPG’s chief technology officer Benjamin Tan said the company did not have to support and maintain the older 3G infrastructure, which is due to be “sunsetted” with 5G technology just around the corner.
“It’s the leap-frogging that we were able to do. We think we came in at a good point in the inflection of technology,” he said.
Still, the journey has not been smooth-sailing, said Mr Richard Tan. For the newcomer, it was an uphill climb to build a new network in Singapore, which involved the tedious and complicated matter of installing base stations in underground areas, MRT tunnels and military camps.
It did not help that TPG’s commercial launch coincided with the COVID-19 pandemic that began early last year, which partly affected the mandatory MRT tunnel trials needed to test TPG’s signal underground.
Regulatory hurdles also meant that TPG had not yet fulfilled IMDA’s requirement to complete the works in underground road and rail tunnels by end-2021, said Mr Richard Tan.
“It was a huge challenge getting our signal into the tunnels because it required the cooperation of our competitors who technically own the system. There's a lot of work that was done there.
“If you ask me, it would have been good if we had completed all of our tunnel coverage before the commercial launch,” he added.
In response, an IMDA spokesman said it had been even-handed in its treatment of all licensees and had consistently mediated disputes among the telcos to enable access and share “bottleneck infrastructure” with the new entrant. This expedited deployment in space-limited MRT tunnels, for example.
“Where there are disputes amongst telcos that may affect consumers, IMDA will step in to resolve such disputes in an even-handed manner, to protect consumers’ interests,” said the regulator.
When it receives feedback regarding consumer issues or anti-competitive conduct, IMDA said it will conduct a thorough investigation. Licensees in breach of its competition rules will face enforcement action, it added.
Mr Sam Fenwick, senior analyst at consumer mobile analytics firm Opensignal, said that since TPG’s entry into the Singapore mobile market, there has been a rising number of users changing their mobile operators – known in the industry as churn.
Since the start of 2019, TPG and the MVNOs have gained users from churn at the expense of Singtel, StarHub and M1, according to its report in February this year.
But TPG also started to lose some of its users after its commercial launch, which Opensignal said was due to consumers who ditched their free TPG trial plans and did not continue with the telco.
Mr Fenwick noted that there was a small uptick to its subscribers between September and December last year.
“TPG performed strongly for a relatively new entrant in terms of 4G availability and 4G coverage experience … but TPG users observed much slower average download and upload speeds than users on M1, Singtel and StarHub's networks,” he said.
Opensignal also found that Singapore users who changed their mobile operators, on average, had a better mobile experience after they switched.
Ultimately, Mr Fenwick said operators should focus on improving their mobile network experience in order to retain customers.
In an investors’ call last year, TPG’s Australian executives said that the group had set a target of 400,000 Singapore customers who pay an average of S$10 per user in order for it to break even.
Asked about this, Mr Richard Tan said he is not able to reveal any figures about subscriber counts.
“We are working hard to achieve it,” he said.
SERVICE QUALITY AND INNOVATION
One thing that the newcomer telco and the MVNOs have in common is a lean digital business model, which allows them to save on rental and staff costs, and thus offer cheaper mobile plans.
To the customer, getting a mobile plan from any one of these operators can involve downloading a phone application, keying in some personal details and payment information, and the SIM card will be sent to his or her doorstep as soon as the following day.
MyRepublic’s Mr Chan said the competition has been healthy as it has forced operators to relook their services and push for more innovation and efficiency in order to thrive.
“Telcos are much more driven now to seek automated solutions to maintain margins,” said Mr Chan.
M1’s CEO Manjot Singh Mann said that in February, his telco announced its digital transformation plans as part of its goal to become Singapore’s first digital network operator.
“Beyond this, we’ve also enhanced customer experiences across all touchpoints. This includes updating our in-store digital experience with an interactive store layout and an in-store virtual ambassador, Megan, who can provide walk-in customers with assistance and personalised recommendations,” he said.
With M1’s new digital platform and artificial intelligence, customers can easily access self-service options and solve problems with a click of a button, said Mr Mann.
Mr Johan Buse, StarHub’s chief of consumer business, said that his telco has also worked to provide a digital-first approach for service.
But when it comes to the automated aspect of customer service, some experts said that certain cost-saving measures may have gone a bit too far.
Assoc Prof Pangarkar said: “People like low prices, but they also expect to have some level of personal service from their telcos.
“Personally, I think chatbots and online forums are highly frustrating, and it’s concerning that telcos are increasingly turning to them as a primitive form of artificial intelligence.”
Other mobile users interviewed also gave similar gripes about this new way of doing things.
Service-related complaints have plagued the crowded industry of telcos and MVNOs in recent years.
Among the many MVNOs that have appeared so far, only one – Zero Mobile – had largely exited the scene due to disputes with its customers.
READ: IMDA blacklists virtual telco Zero Mobile, suspends its licence over failure to address billing disputes
Its licence was suspended by the IMDA in March last year following its inability to address billing disputes, such as unwarranted charges and continued billing even after the customer had terminated the account.
TPG had also come under fire last year for poor customer service. Up until it received a bevy of complaints from users, the telco did not have a hotline that its customers, especially elderly users on its seniors SIM-only plan, could turn to for technical support.
TPG executives said the telco now has an in-house customer service team to respond to feedback, on top of its website of frequently asked questions and email support.
Mr Richard Tan said: “Any issue that involves our customers gets flagged to us in a report daily, and we see to it that these issues get resolved. We want to ensure that the customer feels assured we're working hard for them.”
This growing reliance on digital solutions as a cost-saving measure may irk some and may not be what IMDA had in mind when it embarked on market liberalisation, experts and industry players said.
These solutions are only considered as a form of innovation if they improve customer experiences.
For example, the unmanned self-service kiosks that are increasingly employed by telcos can help reduce queue times or replace the need for queueing altogether.
On the flip side, having these kiosks as the only form of service will alienate those who are not able to use them.
In its response, IMDA said it requires all operators including new entrants to expeditiously resolve any issues relating to consumer protection, such as those regarding customer service quality.
“Our objective is to safeguard consumers’ interests,” said the regulator.
However, with telcos reducing retail staff counts in order to endure longer in this vicious price war, experts said these automated and unmanned services could become the de facto form of service.
When it comes to the quality of mobile services, Opensignal’s Mr Fenwick noted that TPG’s 2016 entrance “has not significantly disrupted the Singaporean mobile market as far as the user experience is concerned”.
Assoc Prof Loh said: “Liberalising a market increases competition which normally leads to more innovation. However, it is not always the case that a competitive market structure provides better incentives for innovation."
While telcos may have resorted to price competition as a “sure-fire” way to seize customers and gain market share, “cut-throat price competition is not sustainable”, he added.
“If this leads to the lessening of surviving telcos, consumers will be worse off in the long run.
“The best way to retain consumers is through value-for-money offerings that marry reasonable prices with better reliability, service and innovative offerings,” said Assoc Prof Loh.
StarHub’s Mr Buse agreed, adding that there has to be a balance between outcomes for customers and the ability to continue making strategic investments in infrastructure and innovation, such as 5G and its applications.
“We believe that a greater degree of sustainable competition will allow more investment to promote innovation that will benefit the industry and customers.
“A singular focus on price competition will adversely impact such innovation and investments,” he said.
Dr Yip from Singtel put it in more direct terms, stating that having a fourth player in Singapore’s telco industry is not sustainable.
“We do not believe it’s sustainable to have a fourth player in any market, let alone a small market like Singapore,” said Dr Yip, adding that other markets with more than three players often result in price competition that diminishes the industry’s ability to make necessary network investments.
“If the return on invested capital in our industry continues to decline, we are concerned that this will affect the industry’s ability to invest in building foundational infrastructure to support Singapore’s Smart Nation goals, which underpin the development of the country in the coming years,” she said.
WHAT DOES THE FUTURE HOLD?
TPG’s disruptive appearance in the Singapore market may have come at the inflection point of 4G-powered telecommunications, but the industry could soon see the increasing use of 5G networks as they become the next frontier in telephony.
Last year, IMDA awarded the rollout of 5G network infrastructure to Singtel and a joint venture corporation consisting of StarHub and M1.
TPG lost the bid, and will only be able to lease 5G capacity from the two operators. It is also eligible to install localised 5G stations using 800 MHz of mmWave spectrum, which is far more limited than a nationwide licence.
The two chosen operators have to provide coverage for half of Singapore by the end of 2022, and provide nationwide coverage by end-2025.
READ: Singapore on track to roll out 5G by 2025; Singtel, StarHub-M1 joint venture issued final awards
But the loss of the 5G infrastructure to the incumbent telcos has led some to question TPG’s long-term survival – leasing from the incumbents could mean that the fourth telco’s future mobile prices would be at the mercy of the other three.
DBS’ analyst Sachin Mittal said that without a nationwide 5G licence, TPG’s network will not be future-proof.
“As such, we cannot identify a reason for TPG to stay in a loss-making business with bleaker prospects in a 5G world, beyond financial year 2022,” he wrote in a DBS report.
TPG’s Mr Richard Tan said the loss of its 5G bid is disappointing and the telco is mulling its options.
Part of the disappointment arose from the fact that as TPG’s 4G network is newer, it is easily upgradable to 5G as part of its initial vision.
“While we are working on the options, I think the consumers will be deprived of a very affordable 5G plan that could have been brought to the market sooner,” he said.
From the users’ point of view, the arrival of 5G would most likely “reset” the ongoing price competition, said analysts. MVNOs, as well as TPG if it leases from the 5G operators, could be forced to renegotiate their 5G wholesale pricing terms too.
That means that the price war that has benefited consumers all this while will probably come to an end, with prices expected to rise again when 5G plans offered by the incumbent telcos become prevalent.
Already, there are initial signs of price hikes. As of last November, the 5G version of Singtel’s 5GB a month plan cost 21 per cent more than the same in 4G. StarHub’s 5G plans also had similar increases.
Despite the difficulties in its first year, Mr Richard Tan stressed that TPG is in the Singapore market for the long haul.
“The point is that we will never give up. We are here for the long term and whatever we do, we want to make sure that we're here to run a sustainable business,” said Mr Tan.
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