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Inside TPG Telecom Quest to be Singapore’s Fourth Telco

Australian telco TPG Telecom clinched the winning bid to be Singapore’s fourth telco last week.

The idea of the fourth telco has ruffled the feathers of some of the local incumbents, namely, Singapore Telecommunications Limited (SGX: Z74) and StarHub Ltd (SGX: CC3). The duo have reservations that a price war could be on the cards.

In early December this year during TPG Telecom’s annual general meeting (AGM), the Australian telco’s chairman and chief executive, David Teoh, shared some interesting thoughts.

The mobile market is hard, but important

Speaking on the Australian mobile market, Teoh acknowledged that it is a tough business. But the chairman also said:

“If you look at all of you sitting here, you have a mobile phone. If you look at the children and the grandchildren, I think they glue their hands on the mobile phone [laughter]. So, you can see clearly that we cannot avoid that market place.

“I know it’s hard. I know it’s very hard, but we have to do it. We have to do it.”

In short, Teoh believes that mobile is the future and TPG Telecom needs to gain a foothold in the space. This could be one of the reasons why TPG Telecom was keen to grab a spot as Singapore’s fourth telco.

Singapore is easier

According to Teoh, one of the key challenges in Australia’s mobile market is the acquisition of space on telecommunication towers. In contrast, he feels that doing business in Singapore is much easier. He said:

“The Singapore government, they make it so easy to do business there. They make it so easy to setup a mobile network there. They are trying their best to facilitate and help the new operator.”

In contrast to Australia, Teoh said that it is much easier to find space on telecommunication towers in Singapore. According to Teoh, TPG Telecom will be able to place equipment on the roof of HDB buildings.

Beyond that, Teoh also made a reference to the similarities between Australia’s National Broadband Network (NBN) and Singapore’s own Netlink Trust. For a bit of background, NetLink Trust builds, owns, and operates Singapore’s fibre network infrastructure.

This might be another hint on TPG Telecom’s long term plans. Teoh also added that TPG Telecom has a call center in Manila to support customer services.

The right ingredients

When we put it all together, Teoh believes that TPG Telecom has all the ingredients to make its entry into Singapore a success. Teoh said:

“So, we all have the knowledge. So, when we look at something, we look at the risk side. Is there risk to set it up? Which I think it is quite minimal on the Singapore side.

But then the future, the long-term future, is very exciting when we look at how it can contribute to the group in the future. So, Mobile is very important for us.”

The move into Singapore will cost a pretty penny. TPG Telecom plans to spend somewhere between $305 million and $405 million to build nationwide coverage in Singapore. Teoh talked about TPG Telecom’s operating cost and how he views the trade-off between costs and opportunities:

“I think in this company, from day one, we are very cautious with opex [operating expense]. I care about every cent we spend in this company. So, this is one of the key area that we focus at all times.

But look at opex, it’s important but we also have to look forward at the future for the next three, five and ten years time. I can’t sit here everyday looking at cutting cost and not looking into the future.

So, we have to balance, moving forward.”

Growth is in TPG Telecom’s agenda. And Singapore is TPG Telecom’s next stop. That’s something investors and prospective investors in Singapore’s incumbent telcos may want to take note of. If you would like to find out more about TPG Telecom’s business, you can head here.

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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 contributor Chin Hui Leong doesn’t own shares in any companies mentioned.