StarHub Ltd Discusses the Threat of TPG Telecom: The Mobile Battlelines Are Drawn

StarHub Ltd (SGX: CC3) has a market share of 27.5% in Singapore’s mobile services market, as of January 2017.

But StarHub could lose some of its share soon – if TPG Telecom has its way. The Australian telco, which won the bid to become Singapore’s fourth telco in late 2016, has plans to launch a competing mobile service in Singapore in 2018 and capture a market share of at least 5% in short order. This could have a major impact on StarHub’s mobile business.

Battle lines drawn

In StarHub’s 2016 fourth quarter earnings briefing, the telco’s chief executive officer, Tan Tong Hai, said that providing good coverage will be a big challenge for TPG Telecom to overcome:

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

During StarHub’s 2017 first quarter earnings briefing, Tan provided deeper insight on why TPG Telecom might find it difficult. He said:

“Certainly in terms of access to infrastructure, in building and all those, there’s no mandate from the regulator that we must share.

They [referring to TPG Telecom] can come and approach. In certain buildings where there’s certain common access to infrastructure, they need to approach the three parties who were sharing, for example, the MRT tunnels and all those, those are common areas that we share.

So that is actually something that is a really pretty open market and TPG is free to approach any of the players to buy the backhaul business from the existing players.”

It would appear that the battle lines are being drawn in Singapore’s mobile market. StarHub has made its own move by signing a memorandum of understanding (MOU) with its rival M1 Ltd (SGX: B2F) to explore the sharing of infrastructure. The goal is to lower costs for both companies.

But Tan has made it clear that StarHub and M1 are under no obligation to expand this agreement to include TPG Telecom. He said:

“ … whatever we are discussing with the MOU with M1, that is between StarHub and M1 discussion. We are not mandated that we must open this up to the fourth operator.”

What now?

TPG Telecom has stated its goals, but we do not 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 StarHub 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.