The Motley Fool

Are Singapore’s Mobile Services Headed for an All Out Price War?

Three new companies are vying to be Singapore’s fourth telco.

The new entry may have ruffled a few feathers of Singapore’s incumbent mobile operators, namely Singapore Telecommunications Limited (SGX: Z74), StarHub Ltd (SGX: CC3) and M1 Ltd (SGX: B2F). Earlier this year, Singtel’s chief executive Chua Sock Koong expressed concerns over a possible price war. She said:

The only way (a new operator) can gain customers will be by way of reducing prices … Clearly just leading prices down, it’s not good for the sustainability of the industry.

The Singtel boss is not alone. StarHub’s chief financial officer Dennis Chia expressed similar doubt in an interview published in May this year. He said:

Whether you want to label it a price war or not – certainly it is an unpleasant term – the value-add is through accretive pricing at the onset. As the new kid on the block, it [referring to the fourth telco] will not be able to offer anything better in terms of network quality.

Chia’s argued that Singapore’s market could be saturated, citing Singapore’s mobile penetration rate of 148%. This is the second highest in Asia, according to World Bank Data, after Hong Kong’s own mobile penetration rate of over 220%.

Saturated markets

Singtel might share the same concern as StarHub about market saturation. Jeann Low, Singtel’s chief corporate officer, said this in another interview:

Around the world, I think you will be hard-pressed to find a profitable fourth player in markets that are already quite well-penetrated.

But saturated market might not lead to price competition, according to MyRepublic, one of the companies vying for the fourth telco spot.   

Healthy competition

Malcolm Rodrigues, MyRepublic’s chief executive had fighting words about the suggestion of a future price war:

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.

Then, Rodrigues fired back with this statement:

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.

Low might not agree with Rodrigues’ assessment of the Singapore’s mobile services. In her interview, she said:

All three players are listed companies [referring to the incumbents], and are subject to market discipline. If you look at the network quality, pricing packages and handset subsidies available, one cannot argue this is not a competitive market.

No red carpet for the competition

To be sure, Singtel chief, Chua, clarified it later on that her comments of a possible price war was not because Singtel did not welcome competition:

I’m encouraged to hear that MyRepublic shares my view that a price war would make the whole industry suffer and customer experience, poorer.

She said that Singtel will continue to offer the best services at the most competitive prices. The myriad of statements above might amount to posturing among future competitors over a mobile pie that has its limits.

As investors, we will have to see what happens, when the fourth telco rolls out it pricing plans.   

To keep up to date on the latest financial and stock market news, sign up now for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.