NEW BLOG: Last week’s news that an SMRT-funding venture is interesting in biding for a fourth mobile licence next year has raised an important question for would-be mobile service providers in the city-state: Can Singapore support a fourth network operator?
The country has a population of 5.6 million and a SIM penetration rate of 145 per cent. More than 70 per cent of mobile users have mobile broadband.
Its main public transport provider SMRT was reported to have an option to invest up to SGD34.5 million ($25.3 million) in upstart OMGTel if the latter is successful in obtaining a licence. OMGTel was incorporated in October by Consistel, a local technology group, to bid for the country’s fourth mobile operator licence next year.
Local regulator IDA has wanted a fourth player since 1998 (when another licence was awarded, but later withdrawn) to encourage competition, since the government’s view is that the operators have high ARPU and margins, notes Ovum principle analyst Nicole McCormick, who covers the service provider market. “We expect concessions for the potential fourth MNO from the government.”
But over the years there has been little interest. Last year’s 4G auction attracted only the three incumbents.
Some consultants have said that the optimal number of operators in a single market is usually three. The lack of takers in a fourth licence in the past is testament to that.
The barriers to entry in Singapore are particularly high. OMGTel estimates that, in addition to the spectrum cost, it will need to invest about $1 billion to roll out a basic network. And besides the network side, a newcomer needs to spend heavily on marketing to attract customers.
“Any new entrant at this stage will face serious challenges with reach,” said Bob Fox, a telecoms consultant and director of Foxcom.
McCormick agreed, saying it will be difficult for a new entrant to make significant inroads into Singapore, unless it can find a way to differentiate itself from the established operators.
Surprisingly, OMGTel is not alone in its interest. MyRepublic announced last year it plans to bid for the licence and has been raising funds. It tried to take the MVNOs path a couple of years back but was unable to negotiate a viable access deal with a particular mobile network operator.
Despite the arguments for the need for additional competition at the service layer, some analysts warn that the entry of a fourth player could actually hurt the market because it would likely need to resort to price cutting to gain market share. That could bring the entire market down. The number 2 and 3 players – StarHub and M1 – would likely be hit the hardest.
The MVNO option
Fox suggests new players consider other options, such as a domestic roaming arrangement, wholesale use of the country’s NBN or an MVNO.
Industry sources say the regulator is now thinking seriously about opening the market to MVNOs and sees a role for them to play in injecting more innovation and competition.
A government consultation on allocating new spectrum and enhancing competition, which opened a year ago and drew in responses from 20 companies, has been under review by the IDA since last June.
An IDA representative told Mobile World Live that it is in the process of assessing the feedback and is expected to release a proposed plan early next year and then ask for feedback from the industry before finalising the new regulations.
Insiders say the final result likely will be that the IDA requires mobile licence holders to give wholesale access to MNVOs. That thinking, of course, is speculation and the future policy won’t be clear until at least next year.
The MVNO route certainly would be less risky.
To its credit, the IDA seems to have responded to rising complaints over the past few years that the three major mobile operators offer a limited selection of data packages compared to other markets.
In its response to the consultation, Liberty Wireless stated that offers in Singapore have converged over time to three to four packages with broadly similar pricing packages. “Such offerings cannot possibly capture the diversity of Singapore’s local and international population.”
Liberty’s detailed response to the IDA noted that markets like Hong Kong and London offer more than eight different packages across multiple operators, with most including unlimited voice, generous data packages, and/or tiered pricing by data usage, and ways to customise plans.
It goes on to say: “Across most of these package there seems to be more flexibility and transparency for the consumer and no charges for ‘expected’ services like caller ID.”
Liberty, a Singapore-based regional MVNO, has plans to offer the fourth mobile service in Singapore with a launch later this year. Liberty, of course, believes MVNOs are a “materially smarter way compared to a new MNO to bring competition to the market and thinks it is important to work on innovation rather than focus on price to win”.
The company’s director, Adeel Najam, told Mobile World Live: “We are working to innovate on the service, application and core network layer and believe in bringing consumer benefit while sustaining long-term value for the industry.”
Singapore’s mobile operators are no doubt content with the status quo. As the market leader with a 51 per cent market share, SingTel is the least incentivised to offer an MVNO access.
But the big three should realise the market is changing, consumers are increasingly demanding and the IDA is likely to mandate at some point that they open up access to stimulate innovation.
Instead of blocking their way until legally required to, they need to see it as an opportunity to start innovating their service offerings to prepare for the inevitable increase in competition that is coming.
The new environment will not only be better for consumers, but operators will be pushed to develop more sustainable business models, rather than replicate what the competition is doing.
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.