StarHub Ltd’s Partnership with M1 Ltd: 8 Things Investors Should Know

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.

In a previous article, I had shared four things from M1’s side of the story. In this article, I would like to highlight four comments from StarHub’s management on the MOU during the telco’s latest 2016 fourth quarter earnings briefing.

Reasons for the collaboration

StarHub’s chief executive Tan Tong Hai highlighted two benefits from the memorandum. On the first benefit, Tan referred to the pending arrival of the fourth telco, the Australia-based TPG Telecom:

“I believe that the new operator will have its own challenge of coverage, and the announcement that we have with M1 to have mobile network sharing will ensure that we have the best mobile coverage, right?

Yes, we can keep the OpEx and the CapEx costs low.”

Areas of focus

Both M1 and StarHub have highlighted that their latest deal is an expansion of an existing collaboration. Tan provided more details:

“We are now extending to base stations, so if you look at – each one of us has a few thousand of base stations, and if we were to plan them together, we would have very good coverage, but we would not need so many, so we get savings. These are the things that we are looking towards.

Of course, it will take time, you know, to form the structure and all this, and we certainly want to collaborate, but also discuss with the regulator to make sure it is in compliance.”

Tan’s comment above highlights the meat of the collaboration. It could help M1 and StarHub reduce overlapping network assets and lower expenses for both parties. Tan also said that the collaboration will be for the mobile side alone:

“With regards to the MOU with M1, it’s purely for the mobile side. We have not included enterprise in this collaboration.”

Open collaboration

M1 had also said that the partnership with StarHub is an open collaboration and not a closed one. Tan highlighted that StarHub, M1, and Singapore Telecommunications Limited (SGX: Z74) were already partnering in certain areas. Tan said:

“As to the partnership with the M1 and the question here is that whether are we opening up to other operators, just want to show you that we do have also in building, sharing of network with Singtel.

It’s not that we compete all the way in certain – we have to be smart to share when it makes sense. Take for example the train, the tunnels and all those. We all three operate those. We do share. We don’t try to build on our own.”

Tan also said that the first step was to set the foundation with M1. He left the door open as well for collaboration with TPG Telecom in the future.

Competition is still there

Tan noted that deeper collaboration does not reduce the level of competition between M1 and StarHub. He said that both parties will still have to differentiate themselves in the market:

“We still will run our own customer service, and differentiate with our own separate brands.”

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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.