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Singapore Telecommunications Limited’s Latest Earnings: Big Trouble in the Mobile World?

The mobile industry in Singapore is in some pain right now.

In 2016, StarHub Ltd’s (SGX: CC3) mobile revenue fell by 2%M1 Ltd (SGX: B2F), meanwhile, also reported a similar percentage drop in revenue for the year. Then, there’s Singapore Telecommunications Limited (SGX: Z74), which experienced a 0.6% year-on-year decline in revenue for its Singapore consumer mobile business in the quarter ended 31 December 2016.

Given the numbers released by the three operational telcos in Singapore, it’s clear that there are a number of challenges in the mobile industry. During a recent earnings briefing, Singtel’s management gave its view of the industry.

Big trouble in the mobile world?

Yuen Kuan Moon, the chief executive officer for Singtel’s Consumer Singapore business, provided some insight on how the industry is evolving:

“I think if you look at the mobile revenue business, the service revenue, it is actually a business in transition.

We continue to see voice to data substitution ongoing, and primarily you look at the decline of the mobile revenue for the whole industry, it is primarily due to international voice, as well as the roaming voice revenue decline. The roaming revenue decline on voice is not able to be mitigated by the data roaming.”

In his comments above, Yuen highlighted the trend of voice-to-data as having a major impact on mobile revenues. At the moment, the increase in data roaming is not enough to mitigate the fall in roaming revenue.

The empire strikes back

It is not like the local telcos are sitting back doing nothing. Yuen also talked about actions that Singtel has taken in the data roaming space:

“That’s why we see the effort in the whole industry, not just ourselves of course, led by us, introducing a lot of different data roaming packs, to encourage our roamers to now pick up data roaming to replace or to substitute their voice, because they no longer call as much as before.”

Meanwhile, Singtel has also offered local consumers the option to increase their data packages. Yuen also touched on this in the earnings briefing:

“While on the domestic front, we are seeing a lot more higher data adoption, and the data usage has been growing very healthily, and with the new introduction of our more generous data allowance packs, add-on packs that we launched in the last one or two quarters, we were encouraged by the finding that customers are actually using more and buying more.

When they buy more they actual use even more. So this is able to mitigate the decline on the local voice revenue.”

Both StarHub and M1 have since responded with similar plans. But Singtel is undeterred. Despite the headwinds, Yuen believes that data consumption will continue to rise and that Singtel will benefit from it:

“So we see this healthy trend continue to play out, and that’s why we affirm our guidance that mobile revenue will be stable.”

Singtel estimated that it had a market share of 48.6% in the Singapore mobile market at the end of 2016. We will have to observe how 2017 plays out for the trio of telcos 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.