Speculating About The Future Of The Telecommunications Industry In Singapore

Recent events happening in the telecommunications industry in some parts of the world made me ponder its future.

In Singapore, a fourth telco could soon enter the market, adding more competition into the industry. According to data from the Singapore government, Singapore’s mobile penetration rate is already 149% as of April 2016.

Meanwhile, in the USA, we might possibly see one of the largest deals in the telecommunications and media industries happen after AT&T announced an US$85 billion bid to purchase Time Warner.

I think the two events tell us something about the future of the telecommunications industry.

A blurring of lines

The line between a telecommunications and a media company is already blurring in Singapore. Starhub Ltd (SGX: CC3), Singapore’s second largest telco, had recently invested in film production company mm2 Asia Ltd (SGX: 1B0). Singapore’s largest telco, Singapore Telecommunications Limited (SGX: Z74), has an online video streaming service called HOOQ that was launched together with some of the largest media companies in the world.

The telecommunications and media industries in Singapore may see even more overlap in the future.

A case for a monopoly or duopoly

In the world of capitalism, the free market is the best model to follow. In theory, having many companies fighting for the same pie ensures that consumers get the best services or goods at the cheapest price. So, adding in a fourth telco into the Singapore market should help Singapore consumers, right?

But, some industries have shown that a monopoly or duopoly actually results in a better outcome. These industries include utilities, telecommunications, and even media.

In most countries, there are only a handful of power & water companies, telcos, and media production outfits. Moreover, experimentation in the past on liberalizing these industries have brought more harm to consumers than good.

For instance, the liberalization of the power industry in the state of California in the US led to companies such as the fradulent Enron essentially gaming the whole system by controlling supply and jacking up prices for consumers.

Open questions on the future

We now have two countries moving in two different directions. Singapore is attempting liberalization while the USA is seeing consolidation happening. Given that the US market is more mature than Singapore’s, does it provide a glimpse of what the future holds for the telco and media industries in Singapore?

Will the addition of a forth telco in Singapore led to more competition in the market or consolidation in the future? Will M1 Ltd (SGX: B2F) be merged with either one of its two large peers to ensure its future survival?

Or would even StarHub consider putting itself up for sale given its “soft restriction” to operate only in Singapore while its major shareholder, ST Telemedia, actively invests in the telecommunications and media space overseas?

Or, would Singapore allow foreign investors to take control over a major telco such as Singtel? If the AT&T-Time Warner deal teaches us anything, it is that no company is too big to be merged.

So what is the future of the telecommunications and media space in Singapore? That is anyone’s guess.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own shares in any of the companies mentioned above.