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Telco Price Wars In Singapore - At What Cost Though?

Earlier last week, one of the biggest news was the news of how MyRepublic sparked a price war among telcos in Singapore. The issue was widely discussed in Singapore, with major publications talking about it on social media.

Screen Shot 2016-03-13 at 10.44.13 pm
Data from Parrot (http://prrt.co)

In case you have not been following the news, here are the various updates in chronological order:

9th March 2016

MyRepublic, the fourth telco hopeful in Singapore, announced publicly that should they be successful in its bid to be the fourth telco, they will be offering an unlimited data plan at S$80 per month. There is also the option of 2GB for only S$8 monthly.

This price point (S$4 per gb) has never been offered before and was unheard of in Singapore.

Just hours after MyRepublic announced its mobile price plans, Singtel announced the launch of its new add-on DataX2–which will double its post-paid customers mobile data plan for a flat fee of S$5.90 (US$4.20) per month. That brings down the price per GB of mobile data to S$12.20 (Combo 2).

Here’s a detailed look at the new price plan by Singtel:

10th March 2016

A day after Singtel announced the price drop, M1 also announced the same pricing plan: customers are now able to upsize their new line sign-up or re-contract their mobile data at a fixed additional cost of S$5.90 per month. The price per GB of mobile data is now S$9.58 (i/Lite+).

Similarly, for StarHub, it also announced that new and recontracting customers can add 3GB of mobile data to existing bundles when they top up S$3 a month now, or S$6 a month from April. The new plan is called the 3GB-for-$3 option, though the website was no longer accessible when we tried to access it.

Full Blown Price War

If there’s something that we can learn from the price war, it would be that all the three telcos, M1, Starhub and Singtel had been charging a very high premium on additional mobile data.

If you are wondering which of the companies offer the best value data plan, here’s a table created by MustShareNews:

From the looks of it, Starhub seems to offer better deals than the other two service providers for the lower tiered data plans.

However, this is done at what cost though? Lower margins? In its latest earnings report (4th quarter 2015), Starhub announced that their net profit fell 14% due to lower revenue from services and equipment sales plus higher costs of services and traffic expenses. With its move to push down prices even more, Starhub would now have to resort to new revenue sources.

In an interview with Bloomberg TV last month, Singtel Group CEO Chua Sock Koong had also shared that a fourth telco’s entry would drive the focus of the competition to pricing only and hurt the industry.

“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,” she had said.

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MyRepublic’s CEO Malcolm Rodrigues also told Channel News Asia that “if the market was only about a price war, we would have no interest in being the fourth operator. We’ve never competed on price in any market we’ve entered.” Mr Malcolm also added that innovation would be the focus of MyRepublic.

“We believe in bringing innovation to the table and providing users with what they want and need at prices they can afford. The world is changing. Meaningful data services are everything. Today’s services in Singapore are not fit for purpose. The incumbents’ networks are not ready for the future. There is a desperate need for innovation in Singapore. We intend to bring it.”

Of course, innovation comes at a very heavy cost and requires a lot of resources to back it up. For MyRepublic, we certainly do not hope that they try to do too much, and end up not making enough profit and will be forced to exit the telco battle before it even started.

No matter the case, it looks like MyRepublic has already sparked off a full blown telco price war in Singapore, and no matter who the winner is, the ultimate winner will still be the consumers.

 

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