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StarHub Ltd’s Management Points Out TPG Telecom’s Weak Spot and Highlights Its Own Advantage

StarHub Ltd (SGX: CC3) reported a mobile market share of 27.4% in Singapore, as of October 2016. But this share could change in a hurry if Australian telco TPG Telecom has its way.

TPG Telecom, which won the bid to be Singapore’s fourth telco in late 2016, expects to provide competing mobile services here in 2018. Furthermore, the Australian company has not been shy about its intentions in Singapore –  it wants to capture a market share of between 5% and 6% within a short period of launching its services.

If TPG Telecom is successful, this could have an impact on StarHub’s Mobile business. In 2016, StarHub’s Mobile business made up 50.7% of the company’s total revenue, as shown in the table below:

2017-02-03 Starhub Segment Revenue
Source: StarHub’s earnings presentation

With that in mind, what are StarHub’s plans to counter the pending arrival of TPG Telecom? StarHub’s management shared a few thoughts in the company’s recent 2016 fourth quarter earnings briefing.

A big challenge for TPG Telecom

StarHub’s chief executive officer, Tan Tong Hai, said that TPG Telecom could face a challenge:

“I believe that the new operator [referring to TPG Telecom] will have its own challenge of coverage.”

Furthermore, StarHub has its own plans to improve its coverage. Tan believes that StarHub’s new partnership with M1 Ltd (SGX: B2F) could be a key factor.

In essence, StarHub believes that working with M1 could help both parties reduce overlapping network assets and lower expenses. In effect, this will allow both telcos to improve their mobile coverage while sharing costs.

Tan continued:

“… 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.”

To be sure, although TPG Telecom has stated its goals, we do not yet know the details on how the Australian telco plans to compete in the Singapore market. Investors will have to wait and observe if the measures that StarHub outlined will be sufficient or whether the company will need to do more.

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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.