Singapore’s telco industry is facing intense competition as aggressive pricing wars continue to erode mobile revenue, leaving industry players scrambling for innovative solutions. While a potential merger between StarHub and M1 could reduce the market to three main players, this consolidation may not deliver the hoped-for recovery in pricing or average revenue per user (ARPU).
The Price Plunge: How Did We Get Here?
The entry of Mobile Virtual Network Operators (MVNOs) like Circles.Life in 2016 disrupted Singapore’s telco landscape. These digital-first players undercut prices, forcing major telcos to lower their rates to stay competitive. Recent moves include StarHub-backed Eight, offering 228GB of data for just S$8 per month, and M1’s Maxx, with 290GB for S$7.90 per month.
While these promotions appeal to data-hungry customers, they have driven ARPUs lower. In Q3 2024, postpaid ARPUs dropped to S$32 for Singtel and S$30 for StarHub, compared to S$33 and S$32, respectively, a year earlier.
Would Consolidation Help?
A merger between StarHub and M1 could, theoretically, reduce cutthroat competition. By reducing the number of players, the newly merged entity might ease off aggressive pricing strategies, allowing ARPUs to stabilize. However, this outlook is complicated by Simba, the fourth player in the market, which has maintained low prices while steadily improving its financials.
Simba’s Quiet Resilience
Simba, which charges S$10 for 200GB, has not followed its competitors into price-slashing territory. Despite its modest pricing, the company grew its ARPU to S$9.68 as of July 2024, up from S$9.37 the previous year. It also narrowed its net loss and achieved a healthy EBITDA margin of 42.4%. Simba’s financial stability allows it to maintain pressure on the market, likely preventing significant price recovery, even post-consolidation.
Challenges Beyond Price Wars
Incumbent telcos also face shifting consumer behaviors. With minimal differences between successive phone models (e.g., iPhone 14 vs. iPhone 16), customers are keeping devices longer, eschewing bundled phone plans for cheaper SIM-only options. This trend will likely drive prices towards a S$10 floor, where Simba remains dominant.
Moreover, 5G, a major focus of telco investment, has yet to unlock compelling use cases for consumers, further limiting differentiation among players.
Looking Beyond Mobile Revenues
To remain competitive, Singapore’s telcos must pivot beyond traditional mobile services:
- Singtel is doubling down on enterprise solutions through its NCS and Digital InfraCo divisions.
- StarHub is advancing its Dare+ initiatives, aiming for S$280 million in cost savings and S$220 million in gross profit growth by FY2026. These efforts include leveraging data partnerships, such as out-of-home advertising collaborations.
However, these initiatives require significant investment, and their success will depend on execution and market acceptance.
What Lies Ahead?
A StarHub-M1 merger might bring some respite, but it won’t solve the broader challenges facing the industry. With Simba standing firm and price-sensitive consumers opting for affordable SIM-only plans, recovery in ARPUs seems unlikely in the near term.
Singapore’s telcos must rethink their strategies, focusing on efficiency, innovation, and diversification. The road to sustainable growth lies not in price wars but in creating value through enterprise solutions and differentiated consumer services.
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