M1 Ltd’s Partnership with StarHub Ltd: 4 Things Investors Should Know from M1 Ltd’s Management

Last month, M1 Ltd (SGX: B2F) and StarHub Ltd (SGX: CC3) signed a memorandum of understanding to deepen their mobile network collaboration.

The rival telcos will study the possibility of sharing certain network elements to improve their network coverage and capacity. By sharing, StarHub and M1 could stand to benefit from lower operational costs and capital expenditure.

M1 gave more insight into the deal during its latest 2016 fourth quarter earnings briefing.

Building on an existing collaboration

M1 and StarHub may be competitors in the telco space, but the pair have been sharing mobile infrastructure for many years. The latest collaboration includes combined antenna systems, in-building fibre, and tunnel cables.

Put another way, the latest MOU simply deepens an existing relationship. As Lee Kok Chew, M1’s chief commercial officer, noted:

“What we are doing is we are just deepening our existing collaboration with StarHub. While we think the collaboration that we have with them will continue, we are starting a more deeper collaboration.”

Being competitive

The reason for the memorandum is to remain competitive. M1’s chief financial officer Nicholas Tan said this:

“We are looking at all the opportunities where we can continue to be as competitive as we can be. And certainly, this level sharing capability, opportunity that we are exploring with StarHub is one of them.”

With the fourth telco – that is, Australia’s TPG Telecom – mentioning that it will be launching its services in Singapore by 2018, both M1 and StarHub could be gearing up for heightened competition in the mobile space.

Meanwhile, M1’s chief executive officer Karen Kooi also said that lower operating costs that will result from the deeper partnership with StarHub will allow M1 to invest into future technologies.

Open collaboration

M1 was also questioned on why it was not partnering with Singapore Telecommunications Limited (SGX: Z74), Singapore’s largest telco. On this matter, Kooi answered:

“I think with regard to choice of partners and who to include or who to exclude, I think we do collaborate all three parties, four parties as a matter of fact, in certain areas like tunnels and MRT stations. This is an open collaboration; it’s not closed. So if there are other parties who are interested to also collaborate or deepen relationships we are open to discussion.”

It appears that the door is open for collaboration with Singtel, or possibly even the fourth telco in the future.

Timeline for this to happen

M1 declined to comment on how much it expects to save from the new venture with StarHub. When pressed on the timeline for implementation, Kooi responded:

“If you look at network rollout, typically to roll out a network to cover Singapore will take 18 months to 24 months. I think that gives you a timeframe of how we can make it happen.”

So, it is still early days for the collaboration between StarHub and M1. But, their efforts may be worth watching, especially if it leads to major expense reductions for both telcos.

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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.