Singapore’s three major mobile players have a lot in common these days: they faced falling or weak earnings in Q2 and experienced a drop in mobile subscriber numbers and ARPU compared with Q2 2017.
The three collectively lost nearly 160,000 subs since end-June 2017. While small in terms of percentage (the market has more than 8 million connections), the decline comes after four MVNOs launched services in the city state over the last two years.
Data from GSMA Intelligence showed no change in market share in the past four quarters, with Singtel leading on 49 per cent, followed by StarHub (27 per cent) and M1 (23 per cent). But that could change: the latest MVNO entrant, MyRepublic, introduced three new data plans in late June, with the cheapest offering 7GB of data for SGD35 ($25.43) a month, which is significantly lower than the three major players.
Singtel and StarHub also suffered continued declines in mobile service revenue in the quarter, but recorded strong gains in handset sales (see table right, click to enlarge). Helping their top-lines, the combined increase in device sales (SGD32.5 million) more than offset their declines in mobile service turnover (SGD26.1 million) in Q2.
Despite strong equipment sales, Singtel’s total mobile revenue declined 1.3 per cent year-on-year.
Tellingly, StarHub’s mobile revenue represented 35.7 per cent of total service turnover in Q2, down from 40.3 per cent in the 2017 quarter. For the full year it forecasts service revenue decreasing by 1 per cent to 3 per cent year-on-year.
M1 bucked the downward trend in service revenue with a 3.8 per cent increase, but experienced a near 8 per cent decrease in handset sales.
A key factor in the revenue weakness was falling ARPU, particularly post paid, which accounts for about 60 per cent of Singtel and StarHub’s customers and 70 per cent at M1. All three experienced year-on-year declines in post paid ARPU: M1’s prepaid rate remained flat at SGD10.50; StarHub’s prepaid ARPU fell 13.3 per cent to SGD13; and Singtel’s income of SGD18 was down 0.8 per cent.
Yuen Kuan Moon, CEO of Singtel’s domestic consumer unit, was asked about the impact of price pressure by MVNOs during its Q2 earnings call, but didn’t address the question directly. Instead he pointed to how a reduction in differentiation of new smartphones had resulted in consumers replacing their devices less regularly and driven a rise of SIM-only plans: “Many MVNOs are taking advantage of this shift in behaviour to offer a lot of different options in terms of creating packages to cater to their needs.”
Canalys analyst TuanAnh Nguyen agreed smartphone refresh cycles are increasing, resulting in declines in mobile revenue in some markets: “In Singapore, many customers are turning to SIM-only plans after their two-year device plans expire. The increase in mix of SIM-only plans has been a major decelerator on ARPU.”
He told Mobile World Live the rise of MVNOs including Circles.Life and MyRepublic pose strong challenges to existing operators, which find it hard to match MVNOs’ price competitiveness: “As voice and devices play a less important role than the data bundle, it creates a shift away from the big three towards MVNOs”.
In addition to the new MVNO players, the market will soon see the entry of a fourth mobile operator. In December 2016 Australia-based fixed-line operator TPG beat out MyRepublic to win the fourth mobile licence in a spectrum auction open only to new entrants.
As in most markets, the pressure won’t be limited to revenue or mobile tariffs: data usage continues to soar, with average monthly data usage per smartphone jumping from around 4GB in June 2017 to around 5.5GB (nearly a 40 per cent increase). This strains network resources which eventually need to be upgraded.
Don’t expect the big three to be able to cut back on network capex to offer relief to their beleaguered bottom-lines anytime soon. Prices will gradually come down, investments will need to rise and margins will likely suffer.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.