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StarHub Ltd Discusses the Threat of TPG Telecom: Will There Be a Singapore Broadband War?

The Australia-based TPG Telecom may have won the bid to be Singapore’s fourth telco, but in its home country, the company is better known for its broadband business.

TPG Telecom, which plans to launch a mobile service in Singapore next year, has sounded its intention to capture at least 5% of the mobile market here. But there could be more from TPG Telecom, given its domestic expertise in broadband.

Questions were raised during StarHub Ltd’s (SGX: B2F) latest 2017 first quarter earnings briefing on whether TPG Telecom would introduce more than just mobile services in Singapore.

A competitive market

During StarHub’s earnings briefing, the company’s chief executive officer, Tan Tong Hai, outlined the cost components that goes into providing broadband services:

“With regards to your question on the TPG competition and with regards to the fixed-line broadband, I would say that as of now, you can see that the broadband market is very competitive.

We know what’s the base cost, because each of us has to pay $15 to NetLink Trust, which is really the publicly announced figure that all of us know the costs of the basic fibre.

But you have to add on on top customer service, your Internet service and others, so you look at it as of now, I would say that the market is pretty competitive.”

In effect, what Tan said was that all fiber broadband providers have a minimum cost base to bear. So, there may not be much wiggle room for a company to offer a cheaper broadband service. At the same time, Tan also recognises that the barriers to entry are low. He added:

“But we do expect new players to come in, because it’s quite easy to set up this ISP business, and we will not be surprised to see them [TPG Telecom] coming in to play in the fixed broadband market.”

Despite the possibility, Tan believes that StarHub has a differentiated broadband service. He said:

“And so that’s why when we share that as of now, we have grown our fibre broadband share, it’s actually not easy, considering the fact that it’s highly competitive. But we will continue to make sure that our services, our broadband services, it’s not just fibre. We also have our cable to provide dual broadband services, so that customers can have their always-on services. The team is also looking at smart life services beyond the basic access services.

So we do think that there are other value-added services we can add on top to differentiate our service.”

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 how it would change the telco landscape in Singapore.

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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.