SingTel - The Shy Regional Champion
By Steve Wallage, Tue Jun 18 00:00:00 GMT 2002
SingTel faces a difficult home market but a strong data heritage and international acquisitions will see it become an influential regional player.
Analysing the mobile operations of SingTel, the incumbent provider in tiny Singapore (population around four million), you see many of the same challenges that face other mobile operators. Yet a mixture of conservatism and longer-term thinking makes SingTel an interesting casestudy and a strong long-term player.
SingTel Mobile faces three competitors in M1, Starhub and Virgin Mobile (although this is a joint venture between SingTel and Virgin). It has around 50% of the local market with 1.49m subscribers. M1 is the closest competitor, and has just reached its millionth customer. It has fought to avoid the growth of pre-paid, and contract customers still account for around 70% of its customer base. This has been helped by the termination of 321,000 prepaid customers in the year to November 2001 as they had no activity for six months.
Yet SingTel faces a very tough mobile market in Singapore. Churn is still 1.8% a month (although down from 2.5% a month last financial year). ARPU for contract customers fell 15% in the first half of the financial year, and by 10% in the second half. Pre-paid customers have an ARPU of under $10 a month, less than a quarter of the contract customers. SingTel has been weakest in the youth market, losing out to the marketing and targetting of new entrants such as M1. The current economic conditions in Singapore has been described as the 'worst for decades'.
Financial analysts, Nomura Singapore believe that ARPU will continue to fall and contract customers will comprise only 60% of the customer base in the 2004/05 financial year.
SingTel seems likely to retain its dominant position within Singapore, yet the small size and competitiveness of the Singaporean market will drive its desire to be a regional player.
The Acquisition Strategy
Mobile revenues comprise 28% of the SingTel group total, and mobile has been the driving force behind many of its acquisitions. SingTel now has five regional investments with a mobile element. These are:
· Australia – Optus – 100%
· India – Bharti – 31.6%
· Indonesia – Telkomsel – 35%
· Philippines – Globe Telecom – 29.1%
· Thailand – AIS – 21.5%
The major acquisition was that of Optus in Australia which has around a third of the mobile market, and also provides fixed and data services. The associated companies have over 20 million mobile customers.
SingTel has overcome great political and regulatory obstacles in its acquisitions. It has also been a pioneer – being, for example, the largest international telecoms investor in India. The acquisitions did not come cheap – Optus alone cost close to $8bn.
Yet, while European mobile operators have sought to take majority stakes and re-brand, SingTel has been happier with a much more conservative strategy. They have no plans to re-brand any of the five companies, or increase their stakes in the short-term. They are focussing on the integration of what they have, particularly Optus, rather than seeking new acquisitions. Specifically, they have no interest in investing in Hong Kong and Malaysia to build up a stronger local presence.
The acquisition strategy of SingTel has been based on assessing the merits of each deal, and in companies where they can have a 'direct say'. There is also a nice synergy between the different companies, with three distinct tiers. In tier one, Australia and Singapore are strongly developed mobile markets. In tier two, Thailand and the Philippines are showing strong growth. In tier three, Indonesia and India are still in the early phase of mobile usage. CEOs from all five companies meet with SingTel monthly to discuss ideas and initiatives. Common services and roaming initiatives are likely to be announced in the next year.
Although no one from SingTel likes to publicly criticize Vodafone, there is a feeling within the company that they have been highly ambitious in paying so heavily to gain such a small stake in China Mobile. The Asian-Pacific market is also far more diverse than the European market. The idea of a pan-region brand is a long way away. SingTel has found this to their cost with their Virgin joint venture, which has attracted just 20,000 subscribers in Singapore.
The influence of SingTel in the five Asian markets will grow, and SingTel will use Virgin Mobile to reach other markets. This will see a strong push for data services, that will be tempered by the natural conservatism of SingTel.
The Move to Data
SingTel is also fairly cautious over migrating its customers to data. For the last financial year, data comprised just 6% of mobile revenues. In Singapore, the company does not expect to offer 3G services until 2004 (despite a first successful 3G voice call in November 2001), and sees 3G as more of a complementary offering, than a substitute, for its existing services. Thus, early 3G services are believed to be multimedia and real-time monitoring. PDAs are still fairly rare, and are considered necessary to access some of the 3G functionality.
But SingTel does have one secret weapon – the average Singaporean mobile users sends five SMS a day. This is not a great revenue earner as the average contract users gets 360 SMS bundled into their monthly usage. SingTel Mobile also offers a monthly contract with 700 SMS included in a monthly contract. Even additional SMS will cost under $0.03.
For the consumer audience, SingTel uses SMS for information provision. Users can send an SMS message to get a host of information. For example, *300 provides the latest sports info, and *600 provides location-based information such as the nearest restaurant. These texts cost under $0.06.
For the business user, SingTel offers free Personal Information Management (PIM) services. SMS alerts cost under $0.03.
Singaporeans have become used to mobile data – it doesn't yet provide much revenue to SingTel, but this strategy will pay long-term dividends.
SingTel offers mobile e-mail through both WAP and SMS. The services are familiar to users in other countries, but the SMS service is particularly interesting.
The SMS e-mail was launched back in 2000, making it one of the first mobile operators in the world to launch mobile e-mail. It carries no subscription fees but a usage charge of around $0.06 per message. The free e-mail account is based on the users' mobile number – for example, firstname.lastname@example.org where 9xxxxxxx is the mobile number. It also offers such services, for an additional cost, as forwarding from other e-mails and international access. The service also allows some customization.
The service is interesting as SingTel has pushed it hard to both business and consumer users. For business users, it can be a 'quick and dirty' way of checking e-mails. The WAP e-mail service is marketed as part of the PIM services. The service is very competitively priced – for example, the UK service from O2 costs three times as much. It is also clearly packaged as a way to access e-mails. Many mobile operators see mobile e-mail as still a niche service, and worry about issues such as form factor and user demand. SingTel is promoting mobile e-mail as a key part of its service offering. The move to GPRS handsets will, SingTel believe, lead to a dramatic increase in mobile e-mail usage.
The Future Positioning
Looking at SingTel, its not that different from many European mobile operators. It faces many of the same challenges and competitive threats. It is not particularly innovative, although it has been a pioneer in its promotion and penetration of mobile e-mail and SMS. It has been slower in reaching out to the youth market, and removing its 'incumbent operator' image.
Yet, SingTel will prove to be a winner in Asia-Pacific. It has acquired stakes carefully with long-term but realistic ambitions. It has positioned its users ready to use data and m-commerce services, but is avoiding over-promising or promoting 3G as the answer to every mobile deficiency. Companies such as Vodafone would do well to learn from the strategy of SingTel in Asia-Pacific, rather than think they can easily become a regional brand.
The growing influence of SingTel will help Asian markets such as India and Indonesia to prosper – good news for everyone in the mobile industry. It will not be the regional cheerleader for 3G, but will still be a strong proponent of mobile data services.
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Steve Wallage works and writes for the451. Steve has more than 13 years of experience as a technology analyst specializing in telecommunications.